Legal Update: Standish v Standish [2024] EWCA Civ 567

The decision in the case of Standish v Standish, Court of Appeal, England & Wales, concerns a high-profile divorce settlement and primarily concerns pre-marital contributions to the asset pool. In an unprecedented move, the Court of Appeal reduced the award to the Wife by GBP20 million because the Court of First Instance had not adequately reflected the pre-marital contributions of the Husband.  The decision sheds light on the intricacies of asset division and the significance of pre-marital wealth in high-net-worth divorce cases.  

Background

The was the Appellant’s (“Wife”) appeal and the Respondent’s (“Husband”) cross-appeal from a financial remedy order (“the Order”) made on 27 October 2022 (ARQ v YAQ[2022] EWFC 128, [2022] 4 WLR 112).

The Husband and Wife began their relationship in 2003 and married in 2005. The marriage ended in 2020. When the parties married, the Husband had accumulated significant (pre-marital) wealth through financial rewards from his employment in the form of investments and properties before retiring in 2007.

The Wife’s resources at the start of the marriage comprised a property, some funds in bank accounts and an inheritance amount. Compared to the Husband’s pre-marital wealth scale, the Wife’s assets were modest.

This decision relates most specifically to two financial events in 2017 that were part of tax reduction schemes. The first involved a transfer from the Husband’s sole name into the Wife’s sole name of investment funds worth approximately £77 million (“the 2017 Assets”). The second involved the Wife being issued shares in a farming business, namely Ardenside Angus.

The Judge, at First Instance, found that the total wealth of the couple was £132 million, of which he determined that £112 million was matrimonial property, including the 2017 Assets and Ardenside Angus. As a result of these transactions, the Order states that these assets had been matrimonialised and were, accordingly, subject to the sharing principle.

The Judge decided there should be an unequal division of the matrimonial property because the 2017 Assets had only been matrimonialised towards the end of the marriage. Accordingly, the Judge awarded the Husband £87 million (66%) and the Wife £45 million (34%) of the parties’ total wealth.

The appeals concern the appropriate application of the sharing principle and how the court identifies assets to which it applies.

Grounds of Appeal     

For different reasons, both parties contended that the effect of the division by the Judge failed to apply the sharing principle correctly.

The Wife advanced two grounds of appeal. According to the Wife, the Judge had been wrong to decide that the 2017 Assets had been matrimonialised. Title was the critical factor and the Judge should have decided that the 2017 Assets (and the Wife’s shares in Ardenside Angus) were her separate or non-marital property. They were not, therefore, subject to the sharing principle save for the Wife conceding that they, with the balance of the marital property, should be divided equally between parties because this was a ‘partnership marriage’. The Court of Appeal disregarded the latter argument.

The Husband, by cross-appeal, also contended that the Judge should not have applied the sharing principle to the 2017 Assets or to the Ardenside Angus. This was because they were not matrimonial property, but both before and after the transfers into the Wife’s name, they represented the Husband’s pre-marital wealth.

The majority of the parties’ wealth, according to the Husband, including the 2017 Assets, continued to be the product of the Husband’s pre-martial endeavour rather than the product of the marital endeavour and therefore was not subject to the sharing principle, which applies only to the latter.

Findings

The Court of Appeal (“CA”) concluded that the source of an asset is the critical factor and not the title. The sharing principle is founded or based on each party, in accordance with the objectives of fairness, equality and non-discrimination, being entitled to an equal share of their matrimonial property.

With regards to the sharing principle, the CA referred to Miller v Miller [2006] UKHL 24, which indicated the importance of the difference of source between “(1) property acquired during the marriage otherwise than by inheritance or gift (matrimonial property) and (2) other property. The former is the financial product of the parties’ common endeavour; the latter is not”. Lady Hale noted at [148], however, that the “importance of the source of the assets will diminish over time” (also followed in K v L (Ancillary Relief: Inherited Wealth) [2011] EWCA Civ 550.

When counsel for the Wife was asked to explain the relationship between the source of an asset and ownership for the application of the sharing principle, they failed to provide a clear answer. They argued that a balance must be struck but submitted that ownership is ‘determinative’ because this indicates the source of the asset. The CA rejected the submission that the 2017 Assets and Arendenside Angus became the Wife’s non-marital property as discriminatory and unfair. The CA concluded that the source reflects when and how an asset was generated and not the title. The Wife’s title, therefore, did not prevent the CA from classifying those assets as pre-marital wealth.

The CA quoted a passage from Hart v Hart [2017] EWCA Civ 1306 that provides a distinction between matrimonial and non-matrimonial property:

“Non-matrimonial property can, therefore, be broadly defined in the negative, namely as being assets (or that part of the value of an asset) which are not the financial product of or generated by the parties’ endeavours during the marriage. Examples usually given are assets owned by one spouse before the marriage and assets which have been inherited or otherwise given to a spouse from, typically, a relative of theirs during the marriage.”

Both parties raised the issue of the applicability of matrimonialisation. The CA stated that it should only be narrowly applied to prevent parties from misusing it in a manner that undermines the sharing of property generated by parties’ endeavours during the marriage. It would be incorrect to state, however, that property which has a non-marital source can never be subject to the sharing principle, as there may be situations when fairness justifies this. This also reflects Lady Hale’s statement in Miller that “the importance of the non-marital source of the assets will diminish over time”.  Referring to Hart, when a clear dividing line between matrimonial and non-matrimonial property is absent, the court’s discretionary powers become applicable.

The Wife’s appeal was dismissed, and the Husband’s appeal was allowed. The Judge’s application of the sharing principle was flawed and had resulted in an “unjustified division of the family’s wealth in the Wife’s favour.”

The CA considered a careful analysis of the various assets and concluded that the martial property was £50.48 million. It went on to finally concluded that a fair application of the sharing principle would have therefore resulted in the Wife receiving wealth of approximately £25 million in place of the Judge’s award of £45 million.

The CA concluded that the matter be remitted for reconsideration. The Judge below did not undertake the needs assessment as it was clear that the Wife “can live very well on a sum of £45 million” (ARQ v YAQat [85]). As to whether the Wife will proceed with a cross-check against her needs assessment, this remains to be seen.

The case highlights the complexities of determining the appropriate award in high-net-worth divorces and the importance of properly accounting for pre-marital wealth. The judgment can be found here Anna Catherine Standish v Clive Thomas Standish – Find case law – The National Archives

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Disclaimer: This publication is general in nature and is not intended to constitute legal advice. You should seek professional advice before taking any action in relation to the matters dealt with in this publication. This article was last updated on 07 June 2024.