Non-matrimonial wealth in financial settlement on divorce

8th March 2015 by

When ruling upon a couple’s financial settlement on divorce, judges in the family court must consider each case based upon its individual merits. However, the court will, in most cases, base its decisions on precedent set in other ancillary relief hearings if the principles are similar or suggest an argument for comparable treatment in law.

Pre-acquired assets in financial settlement on divorce

In a high-value divorce settlements the spouses may disagree about the value of assets, particularly when parties to the marriage brought significant wealth, property or business interests to the relationship.

In 2011 the Court of Appeal heard the case of Jones v Jones EWCA Civ41, which involved a court decision to capitalise an earning capacity and treat it as non-matrimonial wealth. The appeal decision took precedence over the previous approach adopted in GW v RW [2003] EWHC 611.

In Jones v Jones the couple had been married for nine and a half years and were childless. The 44-year-old wife had a child from a previous relationship. At the time of separation in 2006 the husband had been 58.

At the initial ancillary relief hearing the judge ruled that 60% of the couple’s assets were non-matrimonial and awarded Mrs Jones a £5 million lump sum plus costs.

When the couple had commenced their relationship both parties possessed independent wealth – the husband had built up an oil and gas manufacturing business and the wife was from a wealthy family.

Valuations of the husband’s business for the purposes of the divorce revealed a £10 million increase during the time the couple had been together; however, the business was sold during the financial settlement proceedings for £25 million net profit.

The judge ruled that equality in entitlement to the asset was not justified as the business had been built up over many years before Mr and Mrs Jones met.

At appeal, the Court made further calculations of the couple’s assets and altered the attributed valuations, while also adjudging that the original ruling had been wrong because the husband’s earning capacity had been valued as it was at the start of the marriage, capitalised and then treated as a non-matrimonial asset.

Lord Justice Wilson’s lead judgement gave that the key to the ruling was thus:

“When an asset of a spouse – in this case a husband – represents the proceeds of sale of a company which he brought into the marriage and built up during it, how is the attribution of part of the proceeds of the husband’s ownership of it at the date of the marriage to be conducted for the purposes of the sharing principle and, in particular, does the exercise of attribution permit focus not only on the value of the company at the date of the marriage but also on the husband’s personal capacity at that date to build it up in the future?”

The court ruled that £16 million from the proceeds of the business’s sale should be considered a matrimonial asset and, therefore, was subject to a 50 per cent division between the couple. Mrs Jones was awarded £8 million – representing 32% of the total assets.

Case law and reputation

In 2012 a Law Commission consultation report on divorce financial settlements cited the case of White v White as attributable for the perception that the UK, and London in particular, is a generous jurisdiction for partners of wealthy business people. Following a number of very high-profile, and high-value divorce settlement hearings, London is now sometimes known as the “divorce capital of the world”.

Financial settlement lawyers at Healys

Healys believes that the best way to achieve just and fair financial remedy is to ensure all necessary information and evidence – such as business and property valuations, investments held and projected earnings – is gathered in as timely a manner and as accurately as possible. We will always strive to bring this situation about.

Our experienced divorce solicitors, based in offices in Brighton and London, can help you negotiate a suitable financial settlement on divorce by advising on all aspects of the financial claim application and all areas of further negotiations.

In our Brighton office you can speak directly to Catherine Taylor on 01273 669 124 or e-mail on catherine.taylor@healys.com

Call our London office on 020 7822 4000 or email London@healys.com