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Family Law

The leading authority on all aspects of family law

17 JUL 2017

The division of assets in short marriages

The division of assets in short marriages

Philip Hunter
Hunter & Uro



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The dust has perhaps settled on the recent Court of Appeal case of Sharp v  Sharp [2017] EWCA Civ 408  and provided us with the opportunity to reflect on the impact of the decision on those separating after a short marriage.

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Facts

The parties were in their early 40s, crucially without children and came from what was described by Sir Peter Singer in the earlier High Court hearing as a ‘modest financial background’.

The parties began living together in late 2007 and in the early years of the cohabitation, both parties were earning in the region of £100,000 per annum. The parties became engaged in August 2008, before marrying in the summer of 2009. Divorce proceedings were initiated by the wife in December 2013, although a physical separation did not occur until July 2014. The period of pre-marital cohabitation ran from the end of 2007 until the marriage in June 2009 (approximately 18 months) and the marriage effectively lasted until the divorce petition in December 2013 (approximately six years), which was described at the hearing as ‘not so desperately short…as some, but still by no means lengthy’.

Both parties worked throughout the cohabitation and marriage until October 2012, when the husband took voluntary redundancy, coinciding with the purchase and redevelopment of one of the couple’s properties.

At the time of the High Court hearing, the total assets of the parties amounted to £6.9m, primarily held in three assets. One property held equity in the region of £1.5m, another property holding just over £1m and in the region of £4.2m held in the wife’s bank accounts. The figure for ‘matrimonial assets’ of £5.45m was calculated by allowing for pre-marital assets to be deducted, which included the second property and some other pre-acquired assets worth in the region of £350,000.

The wealth that had been accumulated throughout cohabitation and the parties’ marriage was sourced from bonuses received by the wife, as part of her role as a wholesale fuel trader. For the central five years of their relationship, the wife’s bonuses totalled £10.5m, whereas any bonuses received by the husband during the course of his employment were described as ‘comparatively trivial’.

Proceedings

In May 2015, the wife initiated financial remedy proceedings in the High Court. At para 59 of his judgment, Sir Peter Singer stated:

‘No sufficient reason has been identified in this case for departing from equality of division.’

At first instance, in order to provide a clean break, a capitalised award of £2.725m was made to the husband, representing 50% of the total matrimonial assets. The wife subsequently appealed and on appeal, the husband’s settlement was reduced to £2m.

The law

Amongst the other factors set out in s 25 of the Matrimonial Causes Act 1973, s 25(2)(d) requires the court to consider:

‘The age of each party to the marriage and the duration of the marriage.’

In his judgment, Lord Justice McFarlane reiterated Lord Nicholls comments in White v White [2001] 1 AC 596, [2000] 2 FLR 981, describing the target of achieving fairness, which is to be measured against the yardstick of equality. McFarlane LJ recognised that the wife’s appeal related to a ‘possible relaxation’ of the sharing principle, although there was no direct challenge to the existence of that principle itself.

McFarlane LJ went on to state:

‘[N]othing…is intended in any manner to unsettle the clear understanding that has been reached post-White on the approach that is to be taken to the vast majority of cases. The focus [on this case]…is very narrow…whether there is a fringe of cases that may lie outside the equal sharing principle.’

More questions than answers

In his judgment, McFarlane LJ cited widely from earlier judgments in Foster v  Foster [2003] EWCA Civ 565, [2003] 2 FLR 299 and White, from Baroness Hale and Lord Nicholls respectively. Both identify fairness, equality and non-discrimination as key principles and both highlight the same three strands of ‘needs’, ‘compensation’ and ‘sharing’, which Lord Nicholls describes as the ‘equal sharing’ principle when combined.

As ever, each individual case will always turn on its unique facts. In identifying a classification of ‘fringe’ cases that might generate a departure from the ‘equal sharing” principle, the courts have presented a fresh challenge to practitioners.

The definition of a short marriage remains unclear. The impact of the accumulation of wealth from a personal or business source remains a factor of further uncertainty. What impact will extended periods of cohabitation have on parties? In short marriages, how important a factor is keeping some financial separation between spouses?

Conclusion

The majority of cases remain governed by the long standing principles of needs and equal sharing. The fringe classification that may emanate from Sharp are likely to be few and far between.

Inevitably, there will be some impact on the use of pre and post nuptial agreements moving forward. If Mrs Sharp had wanted to protect her bonus payments and assets, she clearly would have been well-served securing a pre nuptial agreement.

Some ‘fringe’ couples may feel that they can take a more relaxed approach to nuptial agreements in light of the judgment, affording them some comfort that a departure from the equal division would be anticipated in their case. Others may feel that the greater uncertainty can only be satisfactorily addressed by a nuptial agreement.