Broad flexible approach adopted when applying the sharing principle to non-matrimonial property.
The husband (’H’) (aged 80) and wife (’W’) (aged 59) had been married for 23 years and had two adult children. At the start of the marriage, H had substantial wealth, having built up his own businesses. W had no assets except a Porsche. By the time they divorced, the parties’ combined capital resources were £9.4 million comprising:
At the final hearing of W’s financial remedy application, HHJ Wildblood concluded that an equal division of the assets would be unfair because of H’s pre-marital wealth. In considering how that wealth should be reflected in W’s award, he sought to apply the formulaic approach taken in Jones v Jones  1 FLR 1723. However, he was unable to apply the approach with any degree of precision because there was no reliable evidence of H’s pre-marital worth. In part, that was because of H had taken an obstructive approach to the proceedings and had provided incomplete disclosure.
HHJ Wildblood therefore took a ’’multi-faceted’ approach which provided him with a ’bracket’. This involved four alternative analyses of the basis for W’s award:
HHJ Wildblood found that the conventional needs analysis was both the most scientific and principled approach and he based his award on it, with W receiving £3.56 million, including maintenance arrears of £92,000. He found that the ’needs’ figure and the one obtained using the ’mingled’ approach were, in reality, no different. However, he was clear that the figure coming out of the ’non-matrimonial’ calculation was ’thoroughly unreliable’ because it presumed a figure of £2.6million for H’s pre-marital wealth and that ’equal sharing’ was also on a ’shaky foundation’ because it ignored the origins of the wealth that it included.
W appealed. She argued that to justify an unequal division, the court had to undertake a detailed evidential inquiry, clearly identifying H’s pre-marital assets, assessing their value at the start of the relationship, and determining whether they had become matrimonial in character. She argued that because H’s litigation misconduct had made such an inquiry impossible, their assets should be treated as matrimonial property and she should receive half. Further, she argued that the judge had erred in basing the award on the needs analysis when that had produced the lowest figure. His decision to adopt that approach had been arbitrary and, moreover, incorrect, denying her a greater award. She sought £5.1million being half of the assets plus her own non-matrimonial property. This left H with £4.3 million.
H argued that the award had been justified by the agreed fact that H had been wealthy at the start of the parties’ relationship and it had not been necessary for the judge to undertake a full accounting exercise. The approach adopted had reflected his conclusion that a sum calculated by reference to W’s needs was fair.
In the Court of Appeal, Moylan LJ gave the leading judgment and dismissed W’s appeal. In doing so, he endorsed a broad, flexible approach to determining the application of the sharing principle to cases involving non-matrimonial property.
HHJ Wildblood’s inability to use the formulaic approach did not mean that he should have awarded W a half share of the assets. Litigation misconduct or evidential deficiencies do not mandate a particular outcome. The judge had had to use the available evidence to make findings about the scale of the resources, drawing inferences where appropriate.
The judge had been entitled to find that H had substantial wealth at the start of the relationship, and that an equal division would be unfair to him. His inability to make findings about the value of H’s pre-marital wealth, the course of his businesses during the marriage and the extent of any mingling, did not prevent him concluding that an unequal division was fair. Moreover, he had not erred by basing the award on a needs analysis. He considered the alternative calculations to be unreliable, and he had performed the exercise of cross-checking for overall fairness endorsed in Jones. The judge had been entitled to conclude that anything higher than a needs-based award would not be fair. That decision was within the bounds of his discretion.
And that, of course, was the issue to be decided in this case. How do you reflect the existence of non-matrimonial property in the overall award?
Should the court always adopt a formulaic approach or should it always take a broader view?
In his considerations, Moylan LJ highlighted that it was necessary in all sharing cases to work out what is and what is not matrimonial property otherwise the sharing principle cannot be properly applied. Here it had been necessary to determine what element of the parties’ assets had its origins in pre-marital wealth, what was the product of active and passive management, and whether the pre-marital wealth had become matrimonial in character. However, this inquiry could have varying degrees of specificity and a detailed evidential inquiry is not always required. The formulaic approach does not have to be followed in every case.
Moylan LJ went on to say that it was not always clear whether property was matrimonial or non-matrimonial, and in some cases it could result partly from marital endeavour and partly from a source external to the marriage. In these cases, it would be artificial to seek to identify a sharp dividing line, and the costs could quickly become disproportionate.
Practitioners may now be left with questions about how to advise clients as to the court’s likely approach, beyond a broad assessment to achieve overall fairness. Moylan LJ advocated the following approach when faced with arguments over non-matrimonial property: