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You are here: BAILII >> Databases >> England and Wales High Court (Family Division) Decisions >> JL v SL [2015] EWHC 360 (Fam) (18 February 2015) URL: http://www.bailii.org/ew/cases/EWHC/Fam/2015/360.html Cite as: [2015] EWHC 360 (Fam) |
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FAMILY
DIVISION
Strand, London, WC2A ![]() | ||
![]() |
B e f o r e :
____________________
![]() | Applicant |
|
- and - |
||
![]() | Respondent |
____________________
Family
Law in Partnership) for the Applicant
Richard Bates (instructed by Kidd Rapinet) for the Respondent
Hearing date: 12 February 2015
____________________
VERSION
OF JUDGMENT
Crown Copyright ©
Mr Justice Mostyn :
Fairness
""Features which are important when assessing fairness differ in each case. And, sometimes, different minds can reach different conclusions on what fairness requires. Then fairness, like beauty, lies in the eye of the beholder.""
""Fairness is an elusive concept. It is an instinctive response to a given set of facts. Ultimately it is grounded in social and moralvalues.
These
values,
or attitudes, can be stated. But they cannot be justified, or refuted, by any objective process of logical reasoning. Moreover, they change from one generation to the next. It is not surprising therefore that in the present context there can be different
views
on the requirements of fairness in any particular case.""
""What does fairness require in the present case? My Lords, I think it unnecessary to refer by name or to quote from, any of the often-cited authorities in which the courts have explained what is essentially an intuitive judgment. They are far too well known. From them, I derive that: … (2)
The standards of fairness are not immutable. They may change with the passage of time, both in the general and in their application to decisions of a particular type. (3) The principles of fairness are not to be applied by rote identically in every situation. What fairness demands is dependent on the context of the decision, and this is to be taken into account in all its aspects. …""
""But an important aspect of fairness is that like cases should be treated alike. So, perforce, if there is to be an acceptable degree of consistency of decision from one case to the next, the courts must themselves articulate, if only in the broadest fashion, what are the applicable if unspoken principles guiding the court''s approach.""
“"It is plainly important that, conformably with the ideal of justice in the individual case, there be general consistency from one case to another of underlying notions of what is just and appropriate in particular circumstances. Otherwise, the law would, in truth, be but the ""lawless science"" of ""a codeless myriad of precedent"" and ""a wilderness of single instances"" of which Lord Tennyson wrote in his poem ""Aylmers Field""”"
Matrimonial and non-matrimonial
property.
""This ''equal sharing'' principle derives from the basic concept of equality permeating a marriage as understood today. Marriage, it is often said, is a partnership of equals. In 1992 Lord Keith of Kinkel approved Lord Emslie''s observation that ''husband and wife are now for all practical purposes equal partners in marriage'': Rv
R [1992] 1 AC 599, 617. This is now recognised widely, if not universally. The parties commit themselves to sharing their lives. They live and work together. When their partnership ends each is entitled to an equal share of the assets of the partnership, unless there is a good reason to the contrary. Fairness requires no less. But I emphasise the qualifying phrase: ''unless there is good reason to the contrary''. The yardstick of equality is to be applied as an aid, not a rule.""
""Therefore, the law is now reasonably clear. In the application of the sharing principle (as opposed to the needs principle) matrimonialproperty
will normally be divided equally (see para 14(iii) of my judgment in N
v
F). By contrast, it will be a rare case where the sharing principle will lead to any distribution to the claimant of
non-matrimonial
![]()
property.
Of course an award from
non-matrimonial
![]()
property
to meet needs is a commonplace, but as Wilson LJ has pointed out we await the first decision where the sharing principle has led to an award from
non-matrimonial
![]()
property
in excess of needs.""
""Where it is decided that the existence of [non-matrimonial]
![]()
property
should be reflected, there are two schools of thought as to how its expression should be worked out. The first is the technique of simply adjusting the percentage from 50%. …
The alternative technique is to identify the scale of thenon-matrimonial
![]()
property
to be excluded, leaving the matrimonial
property
alone to be divided in accordance with the equal sharing principle. …""
""Thus a special contribution arises in circumstances in which a spouse''s contribution, direct or indirect, to the creation of matrimonialproperty
has been so extraordinary as to dictate a departure within the sharing principle from the ordinary consequence of its equal division. It is therefore no accident that this court''s reference, [in Charman] at [90], to the unlikelihood of departure from equality further than to 66.6% - 33.3% was of ""division of matrimonial
property"".
By contrast, although
non-matrimonial
![]()
property
also falls within the sharing principle, equal division is not the ordinary consequence of its application. The consequences of the application to
non-matrimonial
![]()
property
of the two other principles of need and of compensation are likely to be
very
different; but the ordinary consequence of the application to it of the sharing principle is extensive departure from equal division, often (so it would appear) to 100% - 0%."" (emphasis in original)
""8. While matrimonialproperty
will normally be divided equally, this is not an invariable rule. The reason for this is that sometimes the matrimonial
property
in question will not be the product of the endeavours of the parties within the social-economic partnership that is marriage (as Guest J described it in the Australian case of Farmer and Bramley [
2000]
![]()
FamCA
1615 at para 188). Sometimes one party brings assets in which become ""part of the economic life of [the] marriage…utilised, converted, sustained and enjoyed during the contribution period"" (ibid at para 190). This is the concept of mingling referred to by me in N
v
F at para 9 (where I cited the remarks of Lord Nicholls in Miller & McFarlane at paras
24
–
25
and of Baroness Hale at para 148), and by Wilson LJ in K
v
L at para 18(b). But even if there has been much mingling the original
non-matrimonial
source of the money often demands reflection in the award. Thus in S
v
S [
2007]
1 FLR 1496 Burton J divided the matrimonial
property
60/40 to reflect this factor.
9. In Miller & McFarlane Lord Nicholls specified that the matrimonial home should always be designated matrimonialproperty,
whatever its source. He stated at para
22
that ""the parties'' matrimonial home, even if this was brought into the marriage at the outset by one of the parties, usually has a central place in any marriage. So it should normally be treated as matrimonial
property
for this purpose."" This is reflected in the remarks of Wilson LJ in K
v
L at para 18(c). But even the matrimonial home is not necessarily divided equally under the sharing principle; an unequal division may be justified if unequal contributions to its acquisition can be demonstrated. In
Vaughan
![]()
v
![]()
Vaughan
[
2008]
1 FLR 1108 Wilson LJ stated at para 49:
""Such would be the award notwithstanding that the home had been owned by the husband, free of mortgage, since well before the marriage and that, putting to one side his misconduct in dissipating assets following the breakdown of the marriage (the effect of which is intended to be rectified by the calculation), the contributions of each party to the welfare of thefamily
during the marriage were in effect agreed to have been equal in
value
albeit not in kind. Although, in the words of Baroness Hale in Miller
v.
Miller, McFarlane
v.
McFarlane [
2006]
UKHL
24,
[
2006]
![]()
2
AC 618 at 663E, ""the importance of the source of the assets will diminish over time"", I consider that the husband''s prior ownership of the home carried somewhat greater significance than either the district or circuit judge appears to have ascribed to it.""""
""It seems to me that the process should be as follows:
i) Whether the existence of pre-maritalproperty
should be reflected at all. This depends on questions of duration and mingling.
ii) If it does decide that reflection is fair and just, the court should then decide how much of the pre-maritalproperty
should be excluded. Should it be the actual historic sum? Or less, if there has been much mingling? Or more, to reflect a springboard and passive growth, as happened in Jones?
iii) The remaining matrimonialproperty
should then normally be divided equally. …""
In that case the husband brought £2.116m
into a 16 year marriage. It was well and truly mingled into the economic life of the partnership. But, as I found in para 44 it was ""the bedrock on which [the] marriage was founded"". But for the question of need I would have excluded the initial £
2.116m
but not any growth on it. I adopted the same approach in my earlier decision of FZ
v
SZ and Others (Ancillary Relief: Conduct:
Valuations)
[
2011]
1 FLR 64. In contrast in Jones Wilson LJ excluded not only the initial £
2m
of pre-marital
property
introduced by the husband but also £7m of growth on it.
Post-separation accrual
""But what of the position where a party has taken matrimonialproperty
that existed at separation and traded with it and achieved a significant profit? Two points of
view
arise here. On the one hand it can legitimately be argued that the party in question has traded with the other party''s undivided share and so should share with that party the profit that has been generated. On the other hand it can equally convincingly be said that the second party has not contributed to the industry or endeavour that gave rise to the profit or growth and so it is unfair that the second party should share to the same extent in that profit as the first who made all the effort. Similar controversy arises in relation to bonuses earned in the period of separation. The earner of such bonuses can
validly
argue that he did his work outside married life and without the support of his spouse. But the other party can equally
validly
argue that the ability to earn was generated during the marriage; that she was maintaining the
family
infrastructure pending dissolution of the marital partnership and division of the assets; and that during the period of separation the parties were financially linked.""
""24.1.
The statute requires all the assets to be
valued
at the date of trial.
24.2.
For the purposes of establishing the matrimonial
property
in respect of which the yardstick of equality will ""forcefully"" apply the
value
of assets brought into the marriage by gift and inheritance (other than the former matrimonial home), together with passive economic growth on those assets, should be excluded as
non-matrimonial
![]()
property.
24.3.
Assets acquired or created by one party after (or during a period of) separation may qualify as
non-matrimonial
![]()
property
if it can be said that the
property
in question was acquired or created by a party by
virtue
of his personal industry and not by use (other than incidental use) of an asset which has been created during the marriage and in respect of which the other party can
validly
assert an unascertained share. Obviously, passive economic growth on matrimonial
property
that arises after separation will not qualify as
non-matrimonial
![]()
property.
24.4.
If the post-separation asset is a bonus or other earned income then it is obvious that if the payment relates to a period when the parties were cohabiting then the earner cannot claim it to be
non-matrimonial.
Even if the payment relates to a period immediately following separation I would myself say that it is too close to the marriage to justify categorisation as
non-matrimonial.
Moreover, I entirely agree with Coleridge J when he points out that during the period of separation the domestic party carries on making her non-financial contribution but cannot attribute a
value
thereto which justifies adjustment in her favour. Although there is an element of arbitrariness here I myself would not allow a post-separation bonus to be classed as
non-matrimonial
unless it related to a period which commenced at least 12 months after the separation.
24.5.
By this process the court should, without great difficulty, be able to separate the matrimonial and
non-matrimonial
![]()
property.
The matrimonial
property
will in all likelihood be divided equally although there may be deviation from equal division (a) if the marriage is short and (b) part of the matrimonial
property
is ""non-business partnership, non-
family
assets"" (or if the matrimonial
property
is represented by autonomous funds accumulated by dual earners).
24.6.
The
non-matrimonial
![]()
property
is not quarantined and excluded from the court''s dispositive powers. It represents an unmatched contribution by the party who brings it to the marriage. The court will decide whether it should be shared and if so in what proportions. In so deciding it will have regard to the reality that the longer the marriage the more likely
non-matrimonial
![]()
property
will become merged or entangled with matrimonial
property.
By contrast, in a short marriage case
non-matrimonial
assets are not likely to be shared unless needs require this.
24.7.
In deciding whether a
non-matrimonial
post-separation accrual should be shared and, if so in what proportions, the court will consider, among other things, whether the applicant has proceeded diligently with her claim; whether the party who has the benefit of the accrual has treated the other party fairly during the period of separation; and whether the money-making party has the prospect of making further gains or earnings after the division of the assets and, if so, whether the other party will be sharing in such future income or gains and if so in what proportions, for what period, and by what means.""
""The summary of the principles provided in Rossiv
Rossi is broader than Thorpe LJ’'s stricter approach [in Cowan] and is, in my
view,
preferable. It points to
various
factors relevant to deciding whether a post-separation accrual justifies departure from equality, including the length of the marriage and separation, the nature of the
property
accruing and the means or efforts by which it was acquired, and so forth.""
""In myview,
the increased Analogue Group profits do not provide a ground for departure from the equal sharing principle in the present case. The parties married in January 1968 and separated in mid-
2008,
over 40 years later. The period of separation prior to the hearing date was relatively insignificant. The profits accruing to the Analogue Group during the post-separation period arose out of the business which had been built up in the course of the marriage, in respect of which W can legitimately assert an unascertained share on the principles accepted in LKW
v
DD.""
""Thus what I have to decide is whether and to what extent the new work and new investments created by the husband in the period after the parties separated falls to be considered in the character of matrimonialproperty
in which the wife should be entitled to a share or whether some or all of it falls at a point too distant from the essential character of the matrimonial partnership to qualify.""
And her next section was pithily headed ""Continuumversus
new
ventures""
which to my mind rightly captures the essence of the debate.
""Whilst I shall come on to the precise figures once I have considered the issue of overall computation and special contribution, it is not my intention that this wife should receive no share of the assets which fall outside the marital acquest in this case. She will receive a share and that share will form part and parcel of the overall award which I will make on the basis of fairness to both parties. There is no question of her entitlement to any element of post-separation accrual being triggered by a ''needs'' argument but I take theview
that, notwithstanding the exponential increase in the growth of the Fund post-separation, its genesis as a matrimonial asset is a factor of considerable significance. That factor must, in my
view,
find its reflection in the overall quantum of the financial award she will receive at the conclusion of these proceedings. It goes to the heart of what I consider to be fair in the overall context of the case.""
This case
Total assets | 4,635,981 |
less wife''s inheritance | (465,000) |
less husband''s share proceeds | (586,000) |
matrimonial ![]() | 3,584,981 |
50% of matrimonial ![]() ![]() |
1,792,491 |
plus inheritance | 465,000 |
total non-pension assets | 2,257,491 |
plus pension share | 650,000 |
total assets | 2,907,491 |
i) Phase 1. Years 1 – 3: £75,329 p.a. while the youngest child was in tertiary education
ii) Phase2.
Years 4 – 10: £55,964 p.a. after deduction of earnings of £13,007 net to age 60.
iii) Phase 3. Years 11 – death: £68,981 p.a.
Calculation of assets | ||
Non-pension assets | 4,635,981 | |
pension assets | 1,300,000 | already divided |
Total assets | 5,935,981 | |
Calculation of matrimonial ![]() | ||
Total non-pension assets | 4,635,981 | |
less W inheritance | (465,000) | |
less H share proceeds | (586,000) | |
matrimonial ![]() | 3,584,981 | |
50% | 1,792,491 | |
Receipt by W | ||
W receives 50% of MP | 1,792,491 | |
plus her inheritance | 465,000 | |
total non-pension assets | 2,257,491 | A |
plus pension share | 650,000 | |
total assets | 2,907,491 | |
W needs | ||
W housing need | 955,000 | B |
leaving to invest | 1,302,491 | A-B = C |
1. W needs years 1-3 | 75,329 | p.a. |
2. W needs years 4-10** | 55,964 | p.a. |
3. W needs year 11 to death | 68,981 | p.a. |
Duxbury for phase 3 | 1,191,357 | amortising |
less pension fund | (650,000) | |
capital to be preserved | 541,357 | D |
income yield on preserved fund | 16,241 | p.a. |
capital for phases 1 and ![]() | 761,134 | C-D |
Duxbury for phases 1 and ![]() | 884,030 | non amortising |
Sum available | 761,134 | |
amortisation needed to meet 1 and ![]() | 98,947 | |
Payment to W | ||
W entitlement | 2,257,491 | |
W has now** | 2,100,663 | |
sum to be paid by H | 156,828 | |
plus costs at first instance | 85,000 | |
plus ![]() |
15,000 | |
sum to be paid by H | 256,828 | |
W receipt | 2,357,491 | |
W pension assets | 650,000 | |
3,007,491 | ||
percentage of total | 50.7% | |
W passing on | ||
W receives | 3,007,491 | |
Duxbury phase 3 | (1,191,357) | |
sums to pass on | 1,816,134 | |
* after deduction of child needs and earnings of £13,017 net | ||