Supreme Court clarifies what is matrimonial property, to be shared between the parties
When a couple divorce the law will determine how the matrimonial property is to be shared between them (whether equally or not).
But note the term ‘matrimonial property’. The law considers that it is fair that only property that is ‘matrimonial’ in nature is shared – one spouse is not therefore entitled to a share of property belonging to the other spouse that is not related to the marriage (subject to the exception mentioned below).
Matrimonial property is defined as property that was acquired during the marriage, through the joint efforts of the parties to the marriage. Accordingly, property that was acquired by one party before the marriage, or after the parties separated, is non-matrimonial, as are such things as gifts to one party or inheritances received by one party, as these are not acquired through the joint efforts of the parties.
The exception to the rule that non-matrimonial property is not shared is that the court can award it to the non-owning spouse if it considers it is required to meet that spouse’s needs, or in order to compensate that spouse for any financial disadvantage they have suffered by marrying, for example in giving up a career to bring up the family.
It is easy to imagine that there can often be considerable argument between divorcing spouses as to whether property is matrimonial or not. It is therefore welcome that the Supreme Court has given some clarification to the matter in a recent judgment.
The case concerned a couple who were married in 2005 and had two children together. The marriage broke down in 2020.
The husband had a very successful career in the financial services industry. He earned very large sums of money, acquiring very considerable wealth before the parties began living together in 2004. He retired in October 2007.
In 2017 the husband transferred a portfolio of investments from his sole name into his wife’s sole name, as part of a tax planning scheme. The husband’s intention was for the wife to place the investments in trusts for the children, thereby negating inheritance tax. In the event, however, the wife did not set up the trusts, and she continued to hold the investments in her sole name.
By the time the divorce case went to court the investments were worth approximately £80 million.
At the first hearing the judge found that prior to the transfer the investments had been the husband’s non-matrimonial property. However, he also found that the transfer of the investments caused them to become matrimonial property (although he did decide that the husband was entitled to 60%, rather than 50%, because the husband originally acquired them).
As a result of these findings, the judge awarded the wife the sum of £45 million.
The husband appealed, claiming the judge had been wrong to find that the transfer had caused the investments to become matrimonial property. The Court of Appeal found in his favour, reducing the wife’s award to £25 million (taking some other matters into account). This is said to be the largest reduction of a matrimonial award ever ordered by the English courts.
The wife appealed against this decision, to the Supreme Court.
The Supreme Court unanimously dismissed the wife’s appeal, and upheld the decision of the Court of Appeal.
The Supreme Court confirmed that non-matrimonial property can be transformed into matrimonial property in the course of the marriage, but whether this has happened will in most cases depend upon the intentions of the parties, i.e. whether they had been treating the property as shared between them.
In this case, the parties had not treated the investments as shared between them – the intention of the transfer was to save tax, for the ultimate benefit of the children, not for the benefit of the wife.
This decision provides some clarification as to what is or is not matrimonial property, although no doubt there will still be arguments on the subject. The best advice, therefore, must be for couples to make it clear whether property is intended to be matrimonial or not, perhaps by them entering into a pre- or post-nuptial agreement.
You can read the full Supreme Court judgment, here.
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