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'I have nothing to declare but my genius': a consideration of special contributions in Robertson v Robertson - are such arguments dead, disguised or revived?

'I have nothing to declare but my genius': a consideration of special contributions in Robertson v Robertson - are such arguments dead, disguised or revived?
Darren Hark, Solicitor, Irwin Mitchell

Practitioners will be well-versed in hearing contentions from husbands and wives in divorce proceedings as to what contributions they have each made during the course of the marriage, and therefore why they should receive their fair shares.

Broadly speaking, contributions fall into two categories for consideration: first, matrimonial and non-matrimonial assets; and secondly, whether one of the parties has made an unmatched special contribution. In the recently reported case of Robertson v Robertson [2016] EWHC 613, the husband owned shares valued at £141m which had been acquired pre-marriage but had increased in value exponentially during the course of the marriage. Holman J was hearing the matter and had to determine how and to what extent the wife should share in the value of the husband's shares.

Holman J heard Robertson hot on the heels of Gray v Work (Phase II: Contribution and Distribution) [2016] EWHC 834, where he had rejected the husband's special contributions case. However, it has recently been confirmed that the husband in that case has been granted permission to appeal.

Following a brief summary as to the law on special contributions, this article will focus on the judgment in Robertson, and discuss whether the concept of special contributions is effectively dead and buried or whether it lives and, if so, does it do so in disguise. Consideration will then turn to the appeal in Gray v Work and whether we may see the introduction of a threshold.

Special contributions

Under the Matrimonial Causes Act 1973 (MCA 1973), s 25(1)(f), the court must have regard to:

'the contributions which each of the parties has made or is likely in the foreseeable future to make the welfare of the family, including any contribution by looking after the home or caring for the family.'
With there being no further guidance in the statute, the concept of special contribution has been developed through the courts.

White v White [2000] 2 FLR 981 established the concept of the yardstick of equality and a universal acknowledgement that the roles of the breadwinner and homemaker are to be considered as equal. However, shortly after that decision, the Court of Appeal emphasised in Cowan v Cowan [2001] EWCA Civ 679, [2001] 2 FLR 192 that there was still a place for special contributions which would still be considered in certain circumstances. Those circumstances were, in short, where an acquisition of wealth owing to the 'genius' of one party deserved recognition.

The decision in Cowan led to a number of cases in which one party, usually the husband, argued that the wealth generated by his entrepreneurial skill meant that it was fair to depart from equality. However, the following year in Lambert v Lambert [2002] EWCA Civ 1685, [2003] 1 FLR 139, the Court of Appeal limited the application of special contributions and made it clear that departures such as that seen in Cowan were only appropriate in truly exceptional cases.

The courts were keen to avoid falling foul of discrimination by the back door by virtue of their distinguishing between the contributions made by the breadwinner and the homemaker. In Lambert, Thorpe LJ commented that 'if all that is required is the scale of the breadwinner's success then discrimination is almost bound to follow since there is no equal opportunity for the homemaker to demonstrate the scale of her comparable success'. In that case, the Court of Appeal found that Mr Lambert was not a genius and that the wife's contribution as homemaker ought to be given equal recognition, and accordingly Mrs Lambert received 50%.

In Miller v Miller; McFarlane v McFarlane [2006] UKHL 24, [2006] 1 FLR 1186, the House of Lords held that contributions should only be recognised in circumstances where it would be inequitable to disregard them; thus raising the bar as to what it takes to be a 'genius'.

Following Miller, there have been very few reported cases where the court made an unequal award in order to reflect a special contribution. One of those cases was Charman v Charman (No 4) [2007] EWCA Civ 503, [2007] 1 FLR 1246, where the wife's appeal against a departure in the husband's favour was dismissed. The Court of Appeal concluded that the case was a rare one in which Mr Charman's generation of wealth compelled a substantial departure from equality. Mr Charman received 63.5% of the assets. In Charman, notwithstanding their decision in respect of the award, the Court of Appeal confirmed that the special contribution can be non-financial as well as financial (although the author cannot find any subsequent cases where non-financial contributions have passed the 'special' threshold), and that a finding of special contributions would generally result in a departure from equality within a range between 55/45% and the 66.6/33.3%.

In Cooper-Hohn v Hohn [2014] EWHC 4122, [2015] 1 FLR 745, the parties built up a wealth of $6 billion. The husband was a highly successful hedge fund manager who managed him own investment fund, and the wife was the CEO of the parties' principle charitable foundation and main carer for the children. Roberts J described the husband as a 'financial genius' and awarded him 64% of the overall assets. The judge justified a significant departure from equality by referring to the husband's genius and the truly vast wealth he had generated which could not be ignored.

One word that appears regularly in these cases is 'genius', which lends the obvious question: what is a genius? Holman J discusses this in his judgment in Gray v Work, and notes the term to be a difficult one and rather unhelpful. He suggests that the word is generally overused. In the context of special contributions, Holman J quotes from Charman in his judgment and defines genius (in this context) as being an 'exceptional quality which deserves special treatment'. What appears clear is that it is only in very exceptional circumstances that a court will consider a party to be a genius and that a claim for special contribution may succeed.

It is therefore perhaps no surprise that, following Cooper-Hohn v Hohn, there have been no further reported cases in which a departure from equality owing to one party's unmatched special contribution has been reported.

The argument was raised in Gray v Work. Mr Work had generated a wealth of $300m from scratch in just 8 years when he moved from the USA and opened an office in Japan for the private equity firm he worked for. Holman J heard the case and determined that Mr Work's efforts were 'not wholly exceptional in nature', and he ordered an equal division of the assets. In the court's opinion, Mr Work was not a genius; he was just very good at his job. Note, however, that Mr Work has recently been granted permission to appeal.

So are special contributions arguments effectively dead and buried?

Robertson v Robertson

Holman J’s judgment in Robertson is an interesting one in which he considers and discusses special contributions as well as matrimonial and non-matrimonial property, including the wife’s formulaic approach thereto by reference to passive and active growth.

The facts of the case may be summarised as follows. Mr Robertson was 48 and Mrs Robertson was 43. They began living together in 2002 when they were aged 34 and 29 respectively. At that time, Mrs Robertson was of negligible means whereas Mr Robertson was the chief executive of the online fashion retailer ASOS and owned company shares worth £1.2m. Mr Robertson had set up a company called Entertainment Marketing (EM) in 1996 and he argued, and the Court accepted, that EM and ASOS were effectively ‘folded into one’, the effect of which was that Mr Robertson acquired his shares in the company in 1996, some 6 years before the parties met.

The parties married in 2004 and Mrs Robertson adopted the role of homemaker and was a full-time mother to their two children. Mr Robertson continued to develop his company, which began to grow substantially in 2010, considerably increasing the value of his shareholding. He sold some of his shares for £73m, which he and the wife mostly invested in property and other assets while using some for the family to enjoy a higher standard of living.

In 2013 the parties separated. Their combined assets then totalled £219.5m, of which £140.8m represented the value of Mr Robertson’s remaining shares in ASOS. It was agreed that all other assets aside from the ASOS shares would be shared equally.

Mr Robertson considered the shares were a non-matrimonial asset as he had owned them long before he met his wife, and in the alternative that the value of the shares was down to his special contribution.

Mrs Robertson submitted that, adopting the approach of Jones v Jones [2001] EWCA Civ 41 and the concept of passive and active growth, the current value of the husband's shares was a result of active growth made possible by him being free to develop the company while she was the homemaker, and should be shared equally as a matrimonial asset. She submitted that only £4.8m should be deemed non-matrimonial, being the value of the shares as at the time they started cohabiting, with a modest increase to reflect passive growth.

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First, Holman J considered Mrs Robertson’s argument that the active growth of the shares represented matrimonial property which should be divided equally, relying on the approach in Jones. The effect of this approach was that Mrs Robertson would receive £107mn (49%) and Mr Robertson would receive £112 m (51%). Holman J rejected the formulaic approach as the outcome was ‘so unfair to the husband on the facts and in the circumstances of the case, and so overgenerous to the wife’. Holman J noted that the methodology in Jones was merely ‘a tool and note a rule’ and that he would consider the case by reference to all the s 25 factors.

In response to Mr Robertson’s argument that the ASOS shares were acquired in 1996, some 8 years before the marriage, Holman J did not accept this but did not go into detail as to why save for stating that he considered the debate as ‘ultimately sterile’. The court's overarching duty was to apply the s 25 factors and its wide discretionary powers in a way that was fair to both parties given the facts and circumstances.

So we turn to special contributions. Was Mr Robertson a genius? Holman J accepted that ASOS was a highly successful company, having been confirmed as the best performing share in the 20 year life of the AIM of the London Stock Exchange. Mr Robertson has been honoured by Her Majesty the Queen with the award of an OBE, and has won a long list of awards including ‘Entrepreneur of the Year’ and was apparently described by the Daily Telegraph as ‘one of the greatest entrepreneurs of the 20th century’.

So did Mr Robertson’s make a special contribution? The court held that whilst there was no doubting what he had achieved with his company, ‘Mr Robertson was not, with respect to him, a genius’, and he had not demonstrated the exceptional and individual quality that the authorities required for a finding of special contribution.

Holman J also confirmed that it was also fundamental that a special contribution be unmatched, and that the court had to avoid discriminating against the homemaker. The court noted that Mrs Robertson had been an excellent homemaker and mother and that the parties had contributed equally to the welfare of the family. His conclusion was therefore that there should be no adjustment to the award to reflect an imbalance in the contributions of the kind contemplated by s 25(2)(f). Mr Robertson’s special contribution argument was rejected.

So what is needed for one to qualify as a genius and justify a departure based on special contribution? Consider also the rhetorical question Holman J asks in his judgment – what more could the wife have done to contribute to the welfare of the family? This highlights the need for any special contribution to be unmatched and perhaps suggests the judiciary are closing the door on special contribution arguments. It seems, in theory at least, the only way one might get over the hurdle of their special contribution being unmatched would be to successfully pursue the rather distasteful argument that the weaker financial party was a bad homemaker who could have done more. 

So are special contribution arguments dead ... or do they live on, perhaps in disguise?

In Robertson, having dealt with those factors considered above, it was still necessary under s 25(1) for Holman J to consider all the circumstances of the case. Mr Robertson had already owned the shares before the cohabitation. At the time of the marriage they were worth £1.2m but their value had greatly increased during the marriage. The court noted that Mr Robertson had tapped into the potential of online shopping very early on and made many key company decisions before he met Mrs Robertson. Accordingly, Holman J opined that a much greater allowance than the £4.8m suggested by Mrs Robertson was necessary to fairly reflect that.

On the other hand, Holman J does not leave the ASOS shares out altogether. They had been part of the family economy that Mr Robertson had been happy to draw on to invest in assets and spend for the family as a whole.

Holman J concludes that the fair solution was to give half the value of the ASOS shares to the husband as being personal, non-matrimonial property. The other half was to be treated as matrimonial property to be evenly shared, thereby giving Mrs Robertson a quarter of the ASOS shares’ value. All other marital assets were divided equally. Accordingly, the overall division was 31.6% to the wife and 68.4% to the husband. Mr Robertson therefore received more than two thirds of the overall assets when the court had rejected his arguments that the shares were non matrimonial and/or accrued by his special contribution. 

The central issue the court had to determine was how and to what extent Mrs Robertson should share in the value of Mr Robertson’s shares. Having rejected special contribution arguments in their normal form, the court concluded that an adjustment should be made to account for Mr Robertson’s business endeavours before the marriage. The value of the shares at the start of the marriage was £1.2m, and Mrs Robertson had actually conceded more on the grounds of passive growth and offered to carve out £4.8m as being Mr Robertson’s premarital property. The court was not content with that and believed Mr Robertson deserved considerably more.

What is apparent is that Mr Robertson was rewarded for his business endeavours and the financial provision he brought to the table. The court did not label its reasons for doing so as being down to non-matrimonial property or indeed any special contribution by Mr Robertson, but nevertheless a significant departure from equality was ordered by the court. What is also notable is that the award sits very close to the upper limit of the range suggested in Charman as to the outcome a court might award in cases involving special contributions.

The conclusion practitioners should draw is that they should not be put off from raising special contribution arguments where the case permits. It seems that such cases are still the sole preserve of the ultra-wealthy. Whilst a court might not accept that one party has made an unmatched special contribution as prescribed by s 25(2)(f) owing to the extremely high bar that has been set by case law, contributions will in any event be in the judge’s mind when they determine a case having regard to all the circumstances.

It seems that special contribution lives to fight another day, but perhaps its days are numbered.

Work v Gray

Or perhaps they are not. Mr Work’s recent application for permission to appeal against Holman J’s order which rejected his claim that he had made a special contribution was successful and permission was granted by King LJ. By way of reminder, Mr Work had generated a wealth of $300m from scratch in just 8 years but his special contribution argument was rejected.

At first instance, Holman J had said in his judgment that, ‘absent some exceptional individual quality in the generation of the wealth, a special contribution would be hard to establish’. In doing so, Mr Work argued, the judge had not considered whether the sheer quantum of wealth accrued by him in itself amounted to a special contribution. He argued that $300m is an extraordinary amount for one man to generate, through his energy and skill, so that it must be easier for the party which generates it to claim exceptional and individual qualities deserving special treatment.

King LJ accepted that it was arguable that the judge erred in his approach to the test, in particular in not sufficiently considering the sheer quantum of the product and whether that should have made it easier on the facts to have concluded that this husband's contribution had been exceptional.

What is interesting to note is that, when hearing the application, King LJ challenged Mr Cusworth QC, who appeared on behalf of Mr Work, as to whether the issue of special contributions really is a problem in the ‘real’ world as opposed to in a vanishingly small number of cases which come before the court. Mr Cusworth QC responded that the matter arises routinely in cases where the assets exceed £50m.

So, will we soon see the introduction of a quantum threshold in respect of special contributions? Doing so would bring more certainty to the issue and go some way to defining a ‘genius’ in the matrimonial finance context, but does it raise some difficult moral dilemmas? For instance, would we then be in danger of pre-White discrimination between the breadwinner and the homemaker if the price is right? Or, is it right that the successful banker who owns more than £’X’ million is a genius, but the professor who finds a cure to a disease and owns less than £’X’ million is not?

The appeal hearing of Work v Gray is eagerly anticipated.
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