In Standish v Standish [2024] EWCA Civ 567 the Court of Appeal recently provided further guidance on the treatment of non-matrimonial property. It was a difficult case with unusual facts and perhaps confirms the truism that hard cases make bad law.
In Standish, by the date of the final hearing the parties’ total assets were £132m, much of which the husband had accumulated before the marriage. Three years before the marriage ended he transferred funds worth about £80m into the wife’s name and the central issue in the case was whether or not, by the mere fact of this transfer, those assets had been matrimonialised. Moor J found that they had, although he also found that fairness required the provenance of the assets to be reflected in an unequal division of the matrimonial assets, accordingly the total matrimonial assets were divided 60/40 in the husband’s favour, leaving the wife with a total of £45m.
The husband stated that he would not appeal unless the wife did. She did, he cross-appealed, the appeal was dismissed, the cross-appeal was allowed and the wife’s sharing award was reduced to £25m. The case is returning to a High Court Judge (not Moor J, who has retired) for an assessment of whether or not such an award will meet her needs.
The headline points from the unanimous judgment of the Court of Appeal delivered by Moylan LJ were as follows:-
• In the application of the sharing principle the source of the asset is the critical factor and not title or ownership.
– An approach based on title or ownership would undermine the foundation of the sharing principle namely that each party has an entitlement to an equal division of the wealth built up by the parties during the marriage. Furthermore, an approach based on title or ownership would be discriminatory and unfair; it has long been clear that you cannot benefit from keeping assets in your sole name.
– The argument that basing the award on title would give proper effect to the parties’ autonomy on Radmacher principles was rejected. In every case the parties could be said to have chosen how to regulate their affairs and the underlying policy of s.25 is to disturb the parties’ autonomy to achieve a fair outcome. Where there is no pre-nuptial agreement the absence of the same is of no relevance.
• Fairness may justify treating property which is not purely the product of the parties’ joint endeavours as matrimonial property falling within the sharing principle. However, the concept of matrimonialisation should be applied narrowly.
– In a reformulation of the guidance given in K v L [2012] 1 WLR 306 by Wilson LJ, the situations in which the importance of the non-marital source of an asset may diminish over time were stated in Standish by Moylan LJ to be where:-
(a) The percentage of the assets said to be non-matrimonial is not sufficiently significant to justify an evidential investigation and/or an other than equal division of the wealth;
(b) The extent to which and the manner in which non-matrimonial property has been mixed with matrimonial property means that, in fairness, it should be included in the sharing principle;
(c) Non-marital property has been used in the purchase of the former matrimonial home, an asset which typically stands in a category of its own.
The situation of (a) will lead to the application of the sharing principle in the conventional form. In situation (c) the Court will typically conclude that the former matrimonial home should be shared equally although this is not inevitable and the judgment includes a composite review of the case law regarding when an unequal contribution to the family home may lead to an unequal division; Vaughan v Vaughan [2008] 1 FLR 1108; S v AG [2012] 1 FLR 651, FB v PS [2016] 2 FLR 697.
Moylan LJ said that situation (b) ‘requires a more nuanced approach similar to that referred to in Hart, at [96], when the evidence does not establish a clear dividing line between matrimonial and non-matrimonial property’. The underlying question is whether a mixed asset should have the same character as those built up during the marriage such that fairness requires it to be brought within the sharing principle. The conclusion that it does, however, does not mean that it must be shared equally. The non-matrimonial source of the asset may remain a relevant consideration which may justify an other than equal division.
Any departure from equality in the division of assets falling within (b) is the reflection of the non-matrimonial source of a matrimonialised asset. It is important to recognise that assets may still be mingled without the question of matrimonialisation arising. Where it is still possible, with the degree of particularity or generality appropriate in the case, to identify the non-matrimonial property, as Moylan LJ identified 75% of the £80m of investment funds to be in Standish, then that property can simply be ringfenced and the residue shared by application of the sharing principle.
The application of Standish so far
Since the judgment in Standish was published it has been quoted vociferously by those representing parties seeking to advance non-matrimonial property arguments. The writers would observe the result to be a greater willingness on the part of Judges to ringfence assets with a non-matrimonial source.
Prior to Standish practitioners and Judges routinely worked on the basis that an asset with a non-matrimonial origin being placed into joint names was itself evidence of matrimonialisation such as to justify the asset falling within the sharing principle. However, the emphasis in Standish on source rather than title has undermined this approach. The question then arises, if putting an asset into joint names is not sufficient to matrimonialise it, what is? We know from cases such as MCJ v MAJ [2016] EWHC 1672 and ND v GD [2021] EWFC 51 that, in the ordinary course of events, the attribution of rental income from a non-matrimonial asset to the domestic economy will not convert the underlying character of the asset from non-matrimonial to matrimonial. Similarly, WX v HX [2021] EWHC 241 shows us that the party from whom the asset did not originate having a low level of involvement with a non-matrimonial asset will not ordinarily change its character. On a literal interpretation of the headlines from Standish, it is difficult to see how assets such as a rental property derived by one of the parties from a non-matrimonial source, will be capable of becoming matrimonialised. Perhaps only through significant expenditure upon it from matrimonial funds?
In the view of the writers, the application of Standish requires Judges and practitioners to carefully consider the need for what Moylan LJ described as ‘a more nuanced approach’ in relation to the mixing of assets, by reference to para 96 of the judgment in Hart v Hart [2017] EWCA Civ 1306 as directed by Moylan LJ in Standish. At para 96 of the judgment in Hart Moylan LJ emphasised the Court’s ability to ‘apply a broad assessment of the division which would affect “overall fairness”’. In Standish it was stated that the ultimate question regarding the extent to which and the manner in which non-matrimonial property has been mixed with matrimonial property is, per Moylan LJ:-
‘Does fairness require or justify the asset being included within the sharing principle?’.
In the view of the writers there may well be cases, particularly cases involving long marriages, in which fairness requires assets to be brought into the sharing principle because of the manner in which they have been mixed with matrimonial property where Standish could be interpreted as suggesting they should not. Title may still be relevant to this issue. It is important to be mindful of the facts of Standish when considering why the transfer of £80m of investment funds into the wife’s name had no bearing upon the ultimate outcome; the reason for the transfer was a tax scheme and at the time there was an understanding between the parties that the funds would be transferred on to a trust. The situation might be different, in the example of a long marriage, if a party decided to use an inheritance to purchase a property in the joint names of the parties which was used for a business venture between them.
If it is now harder for assets to be matrimonialised sharing cases will be harder to win and more cases will be determined by reference to needs. Needs are an “elastic concept” and a licence to be generous or mean to the receiving party, usually the wife, at the whim of the Judge. In the hands of some Judges needs are indistinguishable from the pre-White world of “reasonable requirements” and Standish may therefore mark a significant backwards step for many divorcing women.
It seems unlikely that this was the intention of the Court of Appeal. Far more likely the intention was that in the typical case, certainly one involving a long marriage, assets will be regarded as matrimonial other than those which have been gifted, inherited or pre-acquired and formed no part of the marriage. If a significant proportion of the matrimonial assets originated from an external source and the size of the assets permits, the matrimonial assets will probably be divided unequally, probably not far off 60/40. This would accord with Moylan LJ’s long-held view that the family court should paint with a broad brush.
