Frequent arguments arise between divorcing couples as to whether certain assets constitute ‘matrimonial’ or ‘non-matrimonial’ property.  This distinction may be vitally important, especially in cases where there are significant financial resources available to the parties which exceed their reasonable financial needs and those of any children of the family. In such cases, one would generally expect that matrimonial property should be shared equally between the parties. In contrast, non-matrimonial property would generally fall outside the scope of equal sharing and should therefore remain with the party who acquired or brought the specific item of property into the marriage.  This distinction may often be black and white. However, there are often tricky cases where it is argued that during the course of the marriage items of non-matrimonial property have become matrimonial (so called ‘matrimonialisation’).

The recent case of Standish v Standish, heard by the Court of Appeal in May 2024, examined competing arguments and opinions as to how the Court should try and tackle the above.  The case itself saw a husband and wife arguing over total assets of £132m. They had married in 2005 and separated in 2020. The husband was 71 and the wife 56. The Judge dealing with the case initially concluded that of the £132m available, £112m was matrimonial property and the remainder was non-matrimonial (a farm in Australia which was the husband’s). Of the matrimonial property, around £80m of this represented largely pre-marital assets that the husband had transferred to the wife back in 2017, mainly for proposed but unfulfilled tax reasons.

The Judge determined that of the matrimonial property the wife should receive £45m with the husband to receive £67m and the farm.  This division reflected the Judge’s conclusion that the 2017 transfer had occurred towards the end of the marriage. As such, rather than an equal division of the £112m in matrimonial property, a 60/40 division in favour of the husband appeared to be justified. The net effect of this was that the wife was to receive around 34% of the parties’ total wealth.

Both parties appealed against the Judge’s decision. The wife contended that the Judge was wrong to decide that the assets transferred to her in 2017 had become matrimonial. She argued that the 2017 transfer meant that these assets should now remain her sole non-matrimonial property. Alternatively, if the assets transferred to her were found to be matrimonial property, fairness demanded that these be shared equally between the parties. The husband’s appeal reflected his argument that the Judge was wrong to label the assets transferred in 2017 as matrimonial at all, given that they largely arose from his own pre-marital wealth. Alternatively, if the assets transferred to the wife were found to be matrimonial property, it was unfair for her to receive 40% of the same when considering where the assets had come from.

Lord Justice Moylan gave the lead judgment at the Court of Appeal and stressed the following:

• In trying to identify whether property is or is not matrimonial, the source of the property is critical, rather than legal ownership. When and how the property was first generated is all-important.
• Fairness may require or justify treating property, which was not purely the joint creation of the parties’ efforts during the marriage, as matrimonial property. There is a balance to be struck between certainty and flexibility.
• The concept of non-matrimonial property becoming matrimonial (‘matrimonialisation’) should be applied narrowly.  The passage of time may be relevant here, as may the mixing of non-matrimonial property with matrimonial property during the course of the marriage.
• Once property has become matrimonialised and is treated as matrimonial property, it is not the case that such an asset must automatically be divided equally. A departure from equality may be justified when considering the source of the original non-matrimonial property.

Applying the above principles, Lord Justice Moylan firmly rejected the wife’s argument that the transfer of the assets to her in 2017 created a position of sole, non-matrimonial ownership on her part. The transfer of the assets did not change the characterisation of the assets; they remained non-matrimonial after the transfer.  A fair outcome would be one whereby of the £80m transferred to the wife, a position was adopted that 25% of figure this constituted matrimonial property with the remaining 75% staying as non-matrimonial property. This left the parties with £50.48 in matrimonial property and the wife was entitled to 50% of that figure, being roughly £25m. The husband, by contrast, would recover £107m.

The difficulty of such an outcome was a lack of clarity upon whether the wife’s significantly reduced award of £25m was now sufficient to meet her reasonable financial needs.  With significant regret, the Court of Appeal directed that the case would have to be resubmitted to the original Judge for consideration as to whether such an award met the wife’s reasonable financial needs. It was however impressed upon the parties that they should strive to find an amicable solution to the litigation.

When considering the decision of the Court of Appeal, it is therefore hard to avoid a conclusion that in trying to solve one problem (how to deal with matrimonialisation), they inadvertently created another one (the wife may not end up with enough money to meet her financial needs).  There could be little argument that the original award of £45m would clearly meet her reasonable financial needs. Whilst £25m remains a sum that most of us can only dream about, an overall outcome where the wife would recover only around 19% of all of the assets seems somewhat unfair when considering a marriage of some 15 years.

It seems that the concept of matrimonialisation remains one that continues to create difficulties for the Court. In turn, this creates problems for divorcing couples (and their lawyers!) who may be trying to identify what the ‘right’ answer may be. Like so much of the law surrounding financial remedies, the court’s wide discretion can be viewed as a cloak to cover a range of potential outcomes, all of which can be labelled as fair and reasonable.

For most couples in such an unfortunate position, the value of the assets in dispute and the costs of prolonged litigation should weigh heavily on their minds as good reasons to try and compromise.  Expert advice should always be sought at the earliest possible stage.

Case details: Standish v Standish [2024] EWCA Civ 567