Matrimonial Property

Matrimonial verses Non-Matrimonial Property

Supreme Court upholds decision on Matrimonial verses Non-Matrimonial Property

We recently reported in a previous divorce rates on the UK Supreme Court case of Standish v Standish.  This case was set to test the boundaries of the law on financial settlements on divorce and what can be classed as matrimonial property and non-matrimonial property.

A retired banker Clive Standish (age 72) gave his wife Anna Standish (age 57) £80 million to avoid inheritance tax and now argues that he should not have to split those funds equally after divorcing her. Mr Standish made the transfer to his wife in 2017, expecting her to place the money in a trust “primarily for the benefit” of their two children. When she issued divorce proceedings in 2020, after 15 years of marriage, she still held the assets in her name. In 2022, High Court judge Mr Justice Moor split the family’s total wealth of £132 million by awarding Mr Standish £87 million and Mrs Standish £45 million. Mr Standish, who became a sheep farmer after retiring from banking in 2007, appealed against this decision, arguing that the majority of the money, including the £80 million of assets that he transferred, was earned before the marriage. Court of Appeal judges ruled last year that Mrs Standish’s share should be reduced to £25 million.

The hearing before the Supreme Court listening to Mrs Standish’s appeal was made in front of the Supreme Court president Lord Reed, Lord Lloyd-Jones, Lord Burrows, Lord Stephens and Lady Simler and concluded at the end of May, Judgment was finally published on 2 July. The Supreme Court unanimously dismissed the wife’s appeal.  The judges were mindful that Section 25 of the Matrimonial Causes Act 1973 grants the court a wide discretion in the exercise of their powers and provides that they must take account of all the circumstances of the case The overall aim of a court in making a financial order on divorce is to achieve a fair outcome.

In this particular case, the focus was on the sharing principle.  Lord Burrows and Lord Stephens in their written judgements set out the following five principles that are relevant to the application of the sharing principle.

• First, there is a conceptual distinction between Non-Matrimonial Property (“NMP”) which is typically pre-marital property brought into the marriage by one of the parties, or property acquired by one party by external gift or inheritance, and Matrimonial property (“MP”) which is property the spouses acquired during the course of the marriage as part of their common endeavours.
• Secondly, though courts have been reluctant previously to say so, the time has come to recognise that the sharing principle applies only to MP and not to NMP
• Thirdly, the starting point is that MP should be shared on an equal basis (though there may be justified departures from that position)
• Fourthly, and at the heart of the reasoning, what starts as NMP may become MP through a process that was given the label in an earlier case of “matrimonialisation”. Although it may be new to the English language, the Supreme Court accepts that that is a useful shorthand term to describe the process by which NMP may become MP. Even if the specific term is not used, the important question on any facts is whether that transformation has occurred. Although this has not previously been clearly spelt out, what is important (leaving aside MP resting on contributions from each party) is to consider how the parties have been dealing with the asset and whether this shows that, over time, they have been treating the asset as shared between them. That is, matrimonialisation rests on the parties, over time, treating the asset as shared
• Finally, a transfer of an asset between spouses in a scheme designed to save tax, irrespective of the time period involved, will not normally show that the asset is being treated as shared between the spouses. Therefore, such a transfer will not normally constitute matrimonialisation.

Lord Burrows and Lord Stephens then apply those principles to the facts of the present case. Applying the first two principles, there is no reason to interfere with the Court of Appeal’s assessment that (prior to any matrimonialisation) 25% of the 2017 Assets was MP and 75% was NMP. Applying the third principle, the 25% that was MP should be shared equally. The question is then whether, applying the fourth principle, the 75% that was NMP had been matrimonialised. It had not. There is nothing to show that, over time, the parties were treating the 2017 Assets as shared between them. Applying the fifth principle, the transfer of the 2017 Assets to the wife was to save tax and it was for the benefit of the children, by saving inheritance tax, not for the benefit of the wife. Therefore, the 75% of the 2017 Assets that was NMP had not been matrimonialised. The Court of Appeal therefore correctly decided the case.

Although this was a big money case, the principles applied by the Court will be applied to every case that comes before it, regardless of asset size. These cases help guide the advice and support family lawyers provide to their clients, with many striving to keep cases away from the court system altogether given the length of delay that can be seen and the high legal fees involved.

At Kerseys Solicitors our experienced family law solicitors will use all forms of non-court dispute resolution to try and find a better way to resolve matters between divorcing couples or those dissolving a civil partnership. Contact our team today to find out more about our initial consultation process.

Kerseys Solicitors in Ipswich at [email protected] or telephone 01473 213311, Kerseys Solicitors in Felixstowe at [email protected] or telephone 01394 834557, Kerseys Solicitors in Woodbridge at [email protected] or telephone 01394 813732, Kerseys Solicitors in Colchester at [email protected] or telephone 01206 584584.