Earlier this year, the Supreme Court in England and Wales published its landmark decision in the case of Standish and Standish. This decision which will be undoubtedly followed by the courts in Jersey has far reaching implications for many divorcing couples and it also brings some much needed clarity to this area of family law.
The case involved the questions of what can be treated in a divorce as matrimonial and non-matrimonial property. Standish involved the eye watering sum of £80m where prior to the divorce the husband made a transfer to the wife of these assets to avoid tax, by taking advantage of the wife’s non-domicile status to set up trusts in order to benefit the children of the family. In fact, the wife never set these trusts up and at the time of the divorce the £80m was still retained by her. The question for the Supreme Court on appeal was whether the £80m had led to ‘matrimonialisation’ of that asset.
It is also important to note that this case was the first time that the Supreme Court has considered what is called the ‘sharing principle’ for some 20 years. It was clearly an opportunity by the court to take a modern approach to the distinction between matrimonial and non-matrimonial assets.
It remains the case that the court will consider ‘all the circumstances’ of the case and that the overall objective is to arrive at a fair outcome. Most cases will still be governed by what is called ‘the needs principle’ where assets must be divided according to the reasonable needs of the parties. There is still room for what is also called the ‘compensation principle’ where one spouse has given up a valuable opportunity, often with his/her career, due to the marriage and in addition there cannot be discrimination between the spouses in favour of the principal wage earner. These all remain important issues for the court to consider in appropriate cases. None of this was changed by Standish. However, what has been clarified is the ‘sharing principle’. This applies to ‘big money’ cases where reasonable needs can be met without sharing non-matrimonial property.
In many cases, there are arguments about inherited assets, for example or other non-matrimonial assets such as investments, shares etc. Matrimonial assets are those acquired through the joint endeavours of the couple.
Standish confirms for the first time that non-matrimonial assets are NOT subject to the sharing principle. A complicating factor, however, is when does such property become matrimonial and this is discussed by the Supreme Court. What are examples where this can happen: –
- Where the non-matrimonial assets have grown as a result of matrimonial contributions and the non-matrimonial component becomes insignificant.
- Where non-matrimonial assets have been mixed (mingled) with matrimonial property for the benefit of the family (perhaps the purchase of a holiday home) using non-matrimonial assets.
- The matrimonial home will always be matrimonial property even if non-matrimonial funds were used to acquire it.
The key question is how each party has been dealing with the asset in question and whether this shows that in reality they have been treating it as shared between them. In Standish this was not the case. The intention was to set up trusts for the children not for the £80m to be retained by the wife.
Standish is a landmark ruling but of course there is still plenty of room for the court to use its very wide powers of discretion in every case. The vast majority of cases are not ‘big money’ cases and will be decided on need. It remains essential for clear legal advice to be given on the benefit of arguing about non-matrimonial assets where the asset pot is not sufficient to effectively ring fence some assets.
As will always be the case in family law uncertainty will remain even after this clarification in Standish and it highlights the importance of careful handling of wealth within marriage and the growing importance of pre and post nuptial agreements.
