Standish v Standish [2024] EWCA Civ 567
What was the background;
This was a second marriage for both parties. The relationship began in 2003, the parties married in 2005 and had two children together, to add to the three children each party had from their previous relationships. The husband had been born in the UK but moved to Australia in the 1970s. The wife was born in Australia. When the husband retired in 2007, the family returned to live in Australia, but returned to the UK in 2008. The marriage came to an end in 2020.
The case involved assets totalling £132 million. At first instance Moor J determined that £112 million of the total was matrimonial property and £20 million was nonmatrimonial (a farm in Australia, “Ardenside”). Within the sum of £112 million were investment funds totalling £80 million which H had transferred from his sole name into W’s sole name in 2017 (“the 2017 Assets”) and a farming business valued at £8.6 million (“Ardenside Angus”) in which W had been given shares in the same year. The transfers were part of tax planning schemes. The judge determined that an unequal division of the £112 million of matrimonial assets was justified because the 2017 Assets and Ardenside Angus were pre-marital and had only been “matrimonialised” towards the end of the marriage. He awarded W 40% of the matrimonial property. Overall therefore H received 66% and W received 34% of the parties’ total wealth. W appealed and H cross appealed – both contending, for different reasons, that the judge had failed properly to apply the sharing principle to the asset division.
W’s case;
The judge had been wrong to decide that the 2017 Assets and Ardenside Angus had become matrimonial property or been “matrimonialised”; he should have treated them as the wife’s separate property. W’s case was that title or ownership is the critical factor, and not provenance of an asset. This would, she argued, give proper effect to the parties’ autonomy. The effect of one spouse transferring an asset into the legal and beneficial ownership of the other spouse is to transform that property into the other spouse’s separate property. It was then not subject to the sharing principle.
The judge should have found that Ardenside was a matrimonial asset because, although it had been owned by H before the marriage, the parties had holidayed there, and it had been improved and added to during the marriage and thus its value had increased.
H’s case;
H contended that the judge should not have applied the sharing principle at all to the 2017 Assets or Ardenside Angus. This was because they were not matrimonial property, but, both before and after the transfers into W’s name, represented H’s pre-marital wealth. He challenged W’s primary case that title is the critical factor in the determination of financial remedy claims, arguing title is not a significant factor because it does not reflect whether an asset is or is not the product of the parties’ respective endeavours. The focus should be on the substance of the parties’ contributions. This did not mean that there was always a clear dividing line between matrimonial and non matrimonial property because the extent to which this was possible or necessary to achieve fairness would depend on the facts of the case. H’s counsel addressed the concept of “matrimonialisation”, accepting it could occur and property which was not the product of the parties’ joint endeavours could nonetheless be treated as such and fall within the scope of the sharing principle. However, he suggested there may be an argument for dispensing with this concept – or at least applying it cautiously and conservatively because it derogates from the critical significance of actual contribution and endeavour. Further, even if there has been matrimonialisation of an asset, that did not mean it must be divided equally and the court must decide “what award of such lesser percentage than 50% makes fair allowance for [that asset or assets] in part comprising or reflecting the product of non-marital endeavour.”
H argued that the majority of the wealth in this case was not the product of joint endeavour but of his pre-marital endeavour. That should have been the determinative factor. The 2017 asset transfer did not convert this wealth into matrimonial assets and did not change the source of this wealth. The 2017 assets had not been mixed with matrimonial property and there was no evidence to suggest H accepted that they should be treated as matrimonial property. There was no merit in the argument that thetransfers in 2017 had converted the assets into W’s separate property or a contribution by her.
H’s counsel suggested various methods by which the sharing principle could be applied and which provided a fairer and more intellectually rigorous approach than Moor J’s. The matrimonial home (£20 million) and the assets of £3.5 million would be divided equally (£11.75 million). Ardenside would be excluded in accordance with the judge’s determination. The 2017 Assets of £80 million and Ardenside Angus (£8.6 million) would be shared in a manner which gave “fair allowance” for the fact that they comprised or reflected the product of non-marital endeavour. This gave various amounts from £34.2 million to £23.9 million, although the figure ultimately proposed was £25 million which would be fair and meet W’s needs.
Determination;
Lord Justice Moylan gave the lead judgment with which the other 2 judges agreed. He identified the issue at the heart of the appeal as the classification of property for the purposes of the application of the sharing principle; in particular, how and when property can change from being non-matrimonial property, to which it does not apply, and become matrimonial property, to which it does apply. He undertook a review of the development of the law in order to properly address the breadth of the submissions made by W’s counsel. He traced the development in the judicial treatment of matrimonial and non-matrimonial property in the context of the sharing principle from White v White via numerous other Court of Appeal decisions up to XW v XH [2019] EWCA Civ 2262.
In his determination of the appeal, Moylan LJ made the following points:
- In the application of the sharing principle, the source of an asset is the critical factor and not title – to base an award on title would be discriminatory and undermine the sharing principle.
- The sharing principle is founded on each party, in accordance with the objectives of fairness, equality and non-discrimination, being entitled to an equal share of their matrimonial property which is the wealth built up by the parties’ endeavours during the marriage.
- Fairness may require or justify treating property, which was not purely the product of the parties’ joint endeavours, as matrimonial property and therefore within the scope of the sharing principle.
- The concept of “matrimonialisation” should be applied narrowly, reflecting that the “importance of the [non-marital] source of [an asset or assets] may diminish over time” (per Wilson LJ in K v L).
- If fairness requires that non-matrimonial property should be shared, the court will need to decide what award makes fair allowance for the fact that some of the parties’ wealth is non-matrimonial – this may well be less than 50% (W’s argument that it must be shared equally was rejected by Moylan LJ).
Moylan LJ disagreed with the trial judge’s view that the 2017 Assets “became matrimonial property”. He said that there was nothing which nothing which justified the conclusion that the importance and relevance of the source of the 2017 Assets being non-matrimonial was in any way diminished as a result of their transfer to the wife. The transfer of the 2017 Assets into the wife’s sole name did not change their characterisation. It did not transform them into matrimonial property.
In respect of the Ardenside Angus shares, he did not consider that the judge was wrong to determine that the business had become matrimonial by the transfer of the A shares into W’s name. This might have been a generous decision in W’s favour but it was tempered by Moor J’s further conclusion that the source of the business, namely a pre-marital asset, was relevant. Moylan LJ found it fair to treat 20% of the value of the asset as non-matrimonial. This meant that 80% (£6.88 million) would be matrimonial.
Moylan LH upheld the judge’s decision to classify Ardenside (£20 million) as non-matrimonial. The judge was entitled to conclude, for the reasons he gave, that it had not become matrimonial property and there was no justification for sharing its value. That decision was supported by his factual conclusions.
Moylan LJ did not agree with Moor J’s handling of the 2017 Assets of £80 million. Moor J had determined that most of the £80 million was pre-marital and only an element was not. However the actual division he ordered was 36% or £29 million to W. Moylan LJ held the view that Moor J should have approached the division of those assets having regard the fact that the source of the funds had not changed as a result of their transfer to W and that was the critical factor. If he had adopted that approach, he could not have concluded other than at least 75% was non-marital, leaving the balance of 25% (£20 million) to be added to the other matrimonial property of £30.48 million, giving a total of £50.48 million.
In this case there was a clear path which the judge should have adopted and, indeed, might well have done but for his decision that the 2017 Assets “became matrimonial property”. Moylan LJ determined that a fair outcome would provide the wife with approximately £25 million (half of £50.48 million) and the husband with approximately £107 million. Thus the wife’s appeal was dismissed and the husband’s appeal allowed. However, there remained the difficulty that the judge did not undertake a needs assessment because he simply concluded that his award of £45 million would comfortably meet the wife’s needs. Having reduced the award to £25 million, a judge may decide that her needs could be met by that sum, but they might not. Thus the matter was remitted for determination by application of the needs principle.
