Non – matrimonial assets, where are we now?

We recently attended an instructive seminar hosted by Camini Kumar from 14 Square Chambers discussing how the law on non – matrimonial assets is one of the most uncertain and problematic areas of matrimonial law.

The decisions are made on a case by case basis, which is why it is difficult for practitioners to advise clients as to the likely outcome of a case.

There is no distinction drawn between matrimonial and non – matrimonial assets in the statute. The distinction falls within the case law; ‘all the circumstances of the case’ aspect of section 25(1) and ‘contributions which each of the party has made’ (section 25(2)(f).

In the case of White v White [2001] 1 AC 596 the concept of the ‘yardstick of equality’ is introduced. Previously awards were made with reference to reasonable needs whereas this case stated that property owned by one spouse before the marriage, and inherited property whenever acquired, stand on a different footing from what may be called matrimonial property.

According to this case, in an event of a breakdown of a marriage these two classes of property should not necessarily be treated in the same way. The fact that the property acquired before marriage and inherited property acquired during the marriage come from a source wholly external to the marriage and in fairness where this property still exists the spouse who acquired the property should be allowed to keep it.

As a result of this the other party would have a weaker claim to such property as compared to matrimonial property. However, this factor can be expected to carry little weight in a case where the claimant’s financial needs cannot be met without recourse to the property.[43] per Lord Nicholls.

In the case of Miller/McFarlane it was said that “The source of the assets may be taken into account, but its importance will diminish over time”.[152] per Baroness Hale. In other words, the court is expressly required to take in to account the duration of the marriage: section 25(2)(d). If the assets are not ‘family assets’, or if they are not jointly obtained then the duration of the marriage may justify a withdrawal from the yardstick of equality concept.

There were further developments of principles in regard to non – matrimonial assets which had derived from case law. One of these principles were that non – matrimonial assets are not to be ‘quarantined’.

Non – matrimonial assets are not to be ignored. This can be property or financial resources which a party has, and the court is required to have regard to them in accordance with section 25 (2), so all assets should be available to the courts for assessment. This can be seen in the case of Norris v Norris [2002] EWHC 2996 (Fam) at 64 and Charman v Charman (No 4) [2007] EWCA Civ 503 at 66

In contrast to this there were two cases that had a different view when it came to non – matrimonial assets. In the cases of Re G [2004] EWHC (Fam) 88 (2004) 1 FLR 997 at 41 and S v S [2006] EWHC 2793 (Fam) at 69 it was stated ‘that the non – matrimonial property should be excluded, and only brought into consideration if needs dictate’.

The nature and source of an asset is particularly relevant in these cases.

For instance a family heirloom or property passed through generations are more likely to be retained if the needs could otherwise be met.

Another factor that is considered in these cases is when the non – matrimonial property has been merged with other property then it is likely to be treated as matrimonial property, as seen in the case of Rossi v Rossi [2006] EWHC 1482 (Fam) at 24.

If the property has been kept entirely separate during the course of a marriage then it would be easier to identify it as non – matrimonial. The manner in which the parties treated an asset over a period of time shows the intention of use, whether they would like to use the asset for the benefit of the family or to exclude it altogether.

In addition to this pre – nuptial agreements are being highly recognised as they explicitly set out the intentions of the parties and are used to signify the intention in non – matrimonial assets.

The length of the marriage is also a factor that is taken into consideration when it comes to non – matrimonial assets as stated by Lord Nicholls in Miller/McFarlane.

‘The significance of the source of an asset diminishes over time although a long marriage does not exclude preferential treatment of non – matrimonial assets.’

When it comes to a case of a short marriage it would only be fair to say that the claimant should not be entitled to a share of the other’s non – matrimonial property.

In cases of longer marriages the position is not so straightforward.

A case which shows that the duration of a marriage does not always diminish the significance of an asset is the case of K v L [2011] EWCA Civ 550. In this particular case the husband was not entitled to a share in his wife’s inherited wealth which remained completely separate throughout their marriage of 21 years. Wilson LJ had stated that ‘the importance of the resource may (but not necessary will) diminish over time.’

In most cases ‘needs’ are the leading factor to determine whether non – matrimonial assets are to be considered alongside matrimonial assets. The case law is very clear on this point hence non – matrimonial wealth is available to meet the needs.

In more modern cases the courts have been reluctant to accept arguments that non – matrimonial assets should be ring fenced.

In contrast to this we can see in the case of S v AG where Mostyn J had awarded the husband a very limited needs based award despite the fact that the lottery win was used to invest in the family home.

In the case of N v F Mostyn had suggested that needs may be restricted when it comes to meeting them from non – matrimonial assets, this is the same approach used by the courts when a needs based award arises in the circumstances of a valid pre – nuptial agreement.

The difficulty arises when assessing what constitutes as a need and at what point the assets exceed the needs so that an argument for exclusion can be made.

There are two approaches used to establish when a non – matrimonial aspect of an asset should be applied in the final award.

One of these is known as the Impressionistic approach – This approach adopts a strict valuation and separation of the non – matrimonial asset to the matrimonial asset and instead applies judicial discretion which results in a straight 50:50 division. This approach has been criticised on the basis that it gives too much discretion and the risk of administering palm-tree justice.

The second approach that is used is called the Arithmetic approach – This approach first seeks to identify and value the non – matrimonial asset, and then share the matrimonial asset whilst retaining the non – matrimonial asset for the party who contributed towards it unless the other party requires it to meet needs. This approach has been criticised on the basis that it invites parties to hugely inflate the costs when they enter into extensive valuation exercises which themselves can give rise to arbitrary figures.

Both of these approaches have been used in case law with different judges favouring one approach over the other.

The arithmetic approach was preferred in the case of Jones v Jones [2011] EWCA Civ 41 where Wilson LJ had stated that although both approaches were highly arbitrary and used the impressionistic approach as a crosscheck, the arithmetic approach seemed more valid as it carried more weight in fact specific scenarios.

The case of Jones involved a business that had been sold and as this case was fact specific it gave more weight to the arithmetic approach rather than the impressionistic approach. However, in other cases it would be artificial to draw a sharp dividing line between both methods.

There are many cases which state that either of the above methods are permissible when coming to a decision about non – matrimonial assets and that both methods should be cross examined.

This can be seen in the case of Hart v Hart [2017] EWCA Civ 1306 [86] and Versteegh v Versteegh [2018] EWCA Civ 1050

In the case of Versteegh, King LJ states that he doubts that the two approaches are in fact different schools of thought but rather that they are examples of the same principle being applied, but applied in a different manner depending on the circumstances of the case, concluding that ‘The outcome will be the same, namely, when justified, an unequal division of the parties’ property.’

If you require assistance from a family law solicitor, we have solicitors located in Oxford, Buckinghamshire and are conducting free 20 minute telephone appointments, even during covid-19.

By Tauyyaba Mohammed

Paralegal

 

References:

Non – Matrimonial Assets – Where Are We Now? Handout by barrister, Camini Kumar, 14 Square Chambers

Matrimonial Causes Act 1973

White v White [2001] 1 AC 596

Miller v Miller; McFarlane v McFarlane [2006] UKHL 24

Norris v Norris [2002] EWHC 2996 (Fam) at 64

Charman v Charman (No 4) [2007] EWCA Civ 503 at 66

Re G [2004] EWHC (Fam) 88 (2004) 1 FLR 997 at 41

S v S [2006] EWHC 2793 (Fam) at 69

Rossi v Rossi [2006] EWHC 1482 (Fam) at 24

K v L [2011] EWCA Civ 550

S v AG (Financial Orders: Lottery Prize)

N v F

Jones v Jones [2011] EWCA Civ 41

Hart v Hart [2017] EWCA Civ 1306 [86]

Versteegh v Versteegh [2018] EWCA Civ 1050

 

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