Judges have a wide discretion when dividing assets upon divorce. Whilst that provides a huge amount of flexibility, it has also lead to a number of inconsistent outcomes.

 

Recent high profile decisions of the higher courts have provided much needed guidance on how to apply the list of factors the court must consider to achieve a fair outcome.
Every family is different and so the court needs to retain its discretion to adapt the principle of fairness to the circumstances of the case. However, consistency of approach is essential if unnecessary arguments and therefore costs are to be avoided.

So where are we now?

The recent decision of Mr Justice Mostyn in JL v SL [2015] helpfully sets out the principles which have been established in recent cases:

1. Equal sharing of what?

• There is an equal sharing principle which means that assets generated during a couple’s partnership (from when they first lived together to when they separated), known as “matrimonial property” should be shared equally between them unless there is a good reason to divide it unequally.

• Reasons for an unequal division of the matrimonial assets will usually relate to meeting needs or reflecting one party’s greater contribution.

• Matrimonial property will include anything built up through the couple’s joint efforts during the relationship but will exclude non-matrimonial property, which is:

o  Assets brought into the relationship by one party – unless it is mingled with joint assets or put into the family home

o  Gifts or inheritance received by one party during the relationship and kept separate.

2. What if I have mingled my pre-relationship wealth with joint assets or put the money into the family home?

• If pre-owned assets have been mingled and become matrimonial property then that contribution by one spouse may still justify a departure from equality in their favour.

• The extent to which the court is likely to depart from an equal division of the matrimonial property is unlikely to exceed a 1/3 – 2/3 division.

3. What about assets that are the result of hard work before and during the relationship?

• Where an asset has been brought into the relationship, for example a business, the value of the business when the relationship started and any passive growth on that value since then is likely to be ring-fenced from the equal sharing principle as non-matrimonial property.

4. Will assets or bonuses earned after separation be shared on divorce?

• Post separation growth in value of assets will only be deemed non-matrimonial in rare circumstances, where that growth relates purely to the effort of one party rather than being the result of the springboard of the wealth built up during the relationship.

• Bonuses will be shared unless it can be demonstrated that they were earned at least 12 months after separation.

5. When will non-matrimonial property be shared with a spouse?

• Non-matrimonial property should only be shared with the spouse where that is necessary to meet their needs or compensate them for a relationship generated disadvantage (limited to very rare cases such as where a lucrative career has been given up to care for children).

• Sharing non-matrimonial property where needs are already met by sharing the matrimonial property will be as rare as a white leopard.

Understanding the origin of the assets is therefore key to determining which are matrimonial in nature and which are non-matrimonial and therefore should be retained subject to meeting needs.

However, be wary: whilst Mr Justice Mostyn has set out his view in very cleat terms, other judges may take a different approach: and the risks inherent in that wide judicial discretion remain ever present.

 Sarah Atkinson is a senior associate at Stephens Scown and is part of the family law team in Truro, which was named Private Client and Family Law Team of the year at the British Legal Awards 2013. Sarah is rated as a “Leader in her field” by independent legal
guide Chambers. Sarah can be contacted on 01872 265100family.truro@stephens-scown.co.uk.