In Standish v Standish, the Supreme Court has held that the sharing principle does not apply to “non-matrimonial property” when considering how the matrimonial finances should be shared upon divorce.
The Supreme Court unanimously dismissed the wife’s appeal in this long running case, confirming that the sharing principle does not apply to non-matrimonial property. The parties’ treatment of the assets during the marriage is crucial in determining whether non-matrimonial property has become matrimonial property (a process known as ‘matrimonialisation’).
Background
- The appellant (wife) and respondent (husband) lived in Switzerland where the husband was working and were married on 19 December 2005. They moved to England in 2010 and divorced in 2020.
- The husband had accumulated substantial wealth prior to the marriage. In 2017, the husband transferred assets worth £77.8 million from his sole name into the wife’s sole name as part of a tax planning exercise to mitigate inheritance tax by leveraging the wife’s non-domicile status (the 2017 assets). The intention was for those assets to be placed in discretionary trusts in Jersey for the benefit of their children, but the wife in fact retained the assets in her sole name.
- The lower court ruled that the 2017 assets had been ‘matrimonialised’ because of the transfer to the wife and ordered a 40% share to be given to the wife. The judge held that the sharing principle applied but as the husband was the primary source of the assets, they should not be divided equally, but rather according to a 60/40 split in favour of the husband
- The Court of Appeal allowed the husband’s appeal, holding that 75% of the 2017 assets remained non-matrimonial property and only 25% were matrimonial and thus subject to the sharing principle. The wife was awarded £20 million in place of the judge’s award of £45 million as the source of the 2017 assets, rather than the title to them, was the deciding factor.
- The wife appealed to the Supreme Court, arguing that the transfer of the 2017 assets was a gift and should be treated as matrimonial property.
The Supreme Court’s rationale
The Supreme Court upheld the Court of Appeal’s decision and confirmed that:
- There is a clear distinction between matrimonial and non-matrimonial property, which is based on the source of the assets.
- The sharing principle only applies to matrimonial property. Non-matrimonial property is not subject to equal division.
- Equal division is the default position for matrimonial property, though departures may be justified in certain cases.
- Non-matrimonial property can become matrimonial (known as ‘matrimonialisation’) if treated as a shared asset during the marriage. The court held that matrimonialisation should not be applied narrowly and emphasised that the main factor is how the parties treated the asset over time.
- The purpose of the transfer is crucial. The 2017 assets were transferred to the wife for solely tax-saving purposes and for the benefit of the children, not as a gift for the wife’s own personal benefit. This was determinative of the finding that the assets were not matrimonialised, and the fact that the trust was never actually set up did not alter the original intention behind the transfer.
- The 2017 assets included the husband’s pre-marital wealth, which was held to be non-matrimonial, and his earnings during the marriage (2004 – 2007) to which the wife contributed as homemaker and which were thus matrimonial.
- The matrimonial portion should be shared equally as per the general principle. However, the majority of the 2017 assets (75%) remained non-matrimonial as the source was exclusively the husband’s pre-marital assets, the transfer to the wife was for tax-saving purposes and was intended to benefit the children, not to be a gift for her own benefit, and there was no conduct over time suggesting that the couple treated the assets as shared.
The Decision
The Supreme Court dismissed the wife’s appeal, upholding the Court of Appeal’s decision that 75% of the assets remained non-matrimonial property, so they were not subject to the sharing principle. Only 25% of the assets were found to be matrimonial property, which should be shared equally between the parties.
The decision provides clarity on the application of the sharing principle in financial remedy proceedings, confirming that not all assets brought into or acquired during a marriage will be equally divided. The court stressed the importance of two factors: the original source of the asset and the parties’ conduct in relation to the asset over time.
Commentary
The decision emphasises the need for parties to consider how they want pre-acquired or inherited assets to be treated both prior to and during the marriage. A well-considered and properly drafted pre or post nuptial agreement can go a long way to ensuring that non-matrimonial assets remain non-matrimonial and do not become “matrimonialised” and therefore are subject to the sharing principle on divorce.
If you have any queries regarding financial remedy proceedings or any aspects of family law, then please contact a member of our Family & Matrimonial team.
