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Jonathan Herring claims that it is a divorce lawyer’s world
When a judgment on ancillary relief opens with an apology to the reader for its length, you are well warned and a trip to the coffee machine is entirely appropriate. In the case of J v J [2009] EWHC 2654 (Fam) the warning is justified, as would be the coffee. The judgment comes in at well over 100 pages and a little under 500 paragraphs. In it Charles J seeks to summarise the current state of play as regards “big money” cases. As he is one of the leading Family Division judges dealing with cases of this kind, it is a decision that deserves careful attention.
The facts of this case are complex and as our main interest is in the legal principles, they will be summarised briefly. The husband and wife married in 1996, when they were 44 and 30 respectively. For both it was a second marriage. Nine and a half years later the marriage came to an end. The parties soon agreed that a clean break settlement was appropriate. The couple had over £20 million combined wealth.
The wife sought £10 million, some 40 per cent of their total assets. The husband offered £2,896,000, that being half of the net increase of the value of his company during the marriage. The competing offers of the husband and wife reflect tensions in the current law. The husband’s offer focussed on the approach of the House of Lords in Miller v Miller [2006] 2 AC 618 towards short marriages, which emphasised a share in the increase of a couple’s wealth during the marriage. The wife’s claim, in essence, focussed on White v White [2001] AC 596, claiming a share of half of the couple’s total assets, with a departure from an equal split to recognise, that at ten years the marriage was not a “long” one.
Charles J emphasised the objective of the law on ancillary relief is to distribute assets of divorcing couples in a fair way and on a principled basis (see at [288]). This will have raised chuckles amongst critics of the current law who see it as neither fair nor principled. He emphasised that it is important to conduct the case in two stages. The first involves computation: determining the assets that each party has and their source. The second is distribution: determining how these assets are to be divided.
The importance of separating out the enterprise in this way is that it makes clear that there are no assets which are outside the scope of the court’s jurisdiction. At the distribution stage all of the factors in s 25 of the Matrimonial Causes Act 1973 have to be considered. When considering these the court should bear in mind the three principles set out in Miller: (1) meeting needs (generously interpreted); (2) providing compensation; and (3) sharing.
For Charles J the starting point for the law on “big money” ancillary relief is that the couple’s assets should be shared equally. However, that principle can be departed from if there was a good reason to do so. Examples of good reasons were where there were assets that were acquired prior to the marriage; were gifts; or where there was an increase in the value of assets post-separation (at [378]). He justified the sharing principle in this way (at [304]): “An underlying rationale of the sharing principle is that there is to be no discrimination between the contributions made by the parties to a marriage based on the roles they have played in their life together. This rationale provides strong support for the view that property acquired and built up during the marriage through the respective efforts and roles of the couple should be shared equally. Such property is a product of the relationship.”
Charles J emphasised that needs could be another reason for departing from equality. These had to be generously interpreted in big money cases and could take into account the age, health, accustomed style of living, and the choices made by the parties during the marriage (at [294]-[295]). He added that also included within the concept of needs were the “making of savings and the provision of assets so that they can be passed on to children or grandchildren.” (See at [294].)
Charles J considered the argument that unilateral assets (the fruits of a business in which only one of the parties had worked (at [310])) should not be available for distribution. He was clear that at most the fact that assets were “unilateral” could be an argument for departing from equality. It was not a reason for excluding such assets from potential distribution. Even then he thought, following Charman v Charman [2007] 1 FLR 1246, only rarely would they be a factor justifying departure from equality: “it would only be in exceptional circumstances that the unilateral assets argument, as presented therein (ie an argument that solely because one party had worked in the business during the marriage), could be a relevant factor in any case (including ones where there is a good reason for departing from equality within the sharing principle). This is because it runs directly counter to the non discriminatory approach that is required to be taken to the different contributions of the parties during the marriage (up to separation) in assessing how the product of those contributions, and thus that partnership should be shared.” (See at [316].)
Charles J firmly rejected the view that assets acquired prior to the marriage or gifts were not available for distribution. However, he accepted that the source of such assets could provide a good reason to depart from equality. In considering whether they did, the court should consider whether the assets had been enjoyed by the couple together during the marriage, in which case they might indicate they should be shared equally.
In line with Charman v Charman [2007] 1 FLR 1246, Charles J confirmed that the date of valuation of assets was the date of trial. That, of course, will be some time after the separation. The increase in value in assets post-separation could be a reason for departing from equality. Charles J also recognised that post-separation gains could reflect work done on the asset during the marriage, and therefore be attributable to the marriage.
Perhaps the most novel aspect of Charles J’s judgment is his willingness to consider the way a couple have run their life together as an aspect of conduct that could appropriately be taken into account. He refers to the “cautious movement” in the law towards attaching weight to the agreement of the parties (most notoriously in Radmacher v Granatino [2009] EWCA Civ 649). However, he argues that this should not be restricted to formal contracts, but can take account of informal arrangements or conduct which reveal “underlying agreement[s], understanding[s] or choices that founded the way in which and the principles by which, the parties ran their lives’ (at [341]). He adds an important rider to this: “the non-discriminatory approach that must be applied will probably mean that in most cases the result of the choices made by the parties will be that their contributions to the creation and development of assets during that period will be treated as being equal.” (See at [355].)
He is careful to make it clear that he is not wanting to encourage parties to engage in disputes over whether a spouse was a good home maker or who caused the breakdown of the marriage. Charles J appears to have in mind a short marriage between dual earners where the couple kept their financial affairs separate. In such a case a court might legitimately conclude that each party should retain what they earned during the marriage.
Charles J ended his judgment with some points specifically addressed to the profession. He saw a general failure to appreciate the need to “identify (a) the findings the court is being invited to make and the reasons why they are relevant, (b) the facts and matters the court is being asked to find as the basis for those findings, and (c) the evidence that is needed to achieve these goals.” (See at [477].)
He suggested that after a failed FDR it may be appropriate for directions to be given requiring an exchange of the documents which are regarded as the “building blocks” of their case.
Applying the approach to the facts of the case it was held that the wife should receive £5 million. This was in excess of her needs, which the judge calculated to be £4.2 million. It was less than an equal division of the assets to reflect the fact that there had been a significant increase in the value of the husband’s shares post divorce.
Jonathan Herring, Fellow in Law, Exeter College, Oxford University. This article was first published at 160 NLJ 300
When a judgment on ancillary relief opens with an apology to the reader for its length, you are well warned and a trip to the coffee machine is entirely appropriate. In the case of J v J [2009] EWHC 2654 (Fam) the warning is justified, as would be the coffee. The judgment comes in at well over 100 pages and a little under 500 paragraphs. In it Charles J seeks to summarise the current state of play as regards “big money” cases. As he is one of the leading Family Division judges dealing with cases of this kind, it is a decision that deserves careful attention.
The facts of this case are complex and as our main interest is in the legal principles, they will be summarised briefly. The husband and wife married in 1996, when they were 44 and 30 respectively. For both it was a second marriage. Nine and a half years later the marriage came to an end. The parties soon agreed that a clean break settlement was appropriate. The couple had over £20 million combined wealth.
The wife sought £10 million, some 40 per cent of their total assets. The husband offered £2,896,000, that being half of the net increase of the value of his company during the marriage. The competing offers of the husband and wife reflect tensions in the current law. The husband’s offer focussed on the approach of the House of Lords in Miller v Miller [2006] 2 AC 618 towards short marriages, which emphasised a share in the increase of a couple’s wealth during the marriage. The wife’s claim, in essence, focussed on White v White [2001] AC 596, claiming a share of half of the couple’s total assets, with a departure from an equal split to recognise, that at ten years the marriage was not a “long” one.
Charles J emphasised the objective of the law on ancillary relief is to distribute assets of divorcing couples in a fair way and on a principled basis (see at [288]). This will have raised chuckles amongst critics of the current law who see it as neither fair nor principled. He emphasised that it is important to conduct the case in two stages. The first involves computation: determining the assets that each party has and their source. The second is distribution: determining how these assets are to be divided.
The importance of separating out the enterprise in this way is that it makes clear that there are no assets which are outside the scope of the court’s jurisdiction. At the distribution stage all of the factors in s 25 of the Matrimonial Causes Act 1973 have to be considered. When considering these the court should bear in mind the three principles set out in Miller: (1) meeting needs (generously interpreted); (2) providing compensation; and (3) sharing.
For Charles J the starting point for the law on “big money” ancillary relief is that the couple’s assets should be shared equally. However, that principle can be departed from if there was a good reason to do so. Examples of good reasons were where there were assets that were acquired prior to the marriage; were gifts; or where there was an increase in the value of assets post-separation (at [378]). He justified the sharing principle in this way (at [304]): “An underlying rationale of the sharing principle is that there is to be no discrimination between the contributions made by the parties to a marriage based on the roles they have played in their life together. This rationale provides strong support for the view that property acquired and built up during the marriage through the respective efforts and roles of the couple should be shared equally. Such property is a product of the relationship.”
Charles J emphasised that needs could be another reason for departing from equality. These had to be generously interpreted in big money cases and could take into account the age, health, accustomed style of living, and the choices made by the parties during the marriage (at [294]-[295]). He added that also included within the concept of needs were the “making of savings and the provision of assets so that they can be passed on to children or grandchildren.” (See at [294].)
Charles J considered the argument that unilateral assets (the fruits of a business in which only one of the parties had worked (at [310])) should not be available for distribution. He was clear that at most the fact that assets were “unilateral” could be an argument for departing from equality. It was not a reason for excluding such assets from potential distribution. Even then he thought, following Charman v Charman [2007] 1 FLR 1246, only rarely would they be a factor justifying departure from equality: “it would only be in exceptional circumstances that the unilateral assets argument, as presented therein (ie an argument that solely because one party had worked in the business during the marriage), could be a relevant factor in any case (including ones where there is a good reason for departing from equality within the sharing principle). This is because it runs directly counter to the non discriminatory approach that is required to be taken to the different contributions of the parties during the marriage (up to separation) in assessing how the product of those contributions, and thus that partnership should be shared.” (See at [316].)
Charles J firmly rejected the view that assets acquired prior to the marriage or gifts were not available for distribution. However, he accepted that the source of such assets could provide a good reason to depart from equality. In considering whether they did, the court should consider whether the assets had been enjoyed by the couple together during the marriage, in which case they might indicate they should be shared equally.
In line with Charman v Charman [2007] 1 FLR 1246, Charles J confirmed that the date of valuation of assets was the date of trial. That, of course, will be some time after the separation. The increase in value in assets post-separation could be a reason for departing from equality. Charles J also recognised that post-separation gains could reflect work done on the asset during the marriage, and therefore be attributable to the marriage.
Perhaps the most novel aspect of Charles J’s judgment is his willingness to consider the way a couple have run their life together as an aspect of conduct that could appropriately be taken into account. He refers to the “cautious movement” in the law towards attaching weight to the agreement of the parties (most notoriously in Radmacher v Granatino [2009] EWCA Civ 649). However, he argues that this should not be restricted to formal contracts, but can take account of informal arrangements or conduct which reveal “underlying agreement[s], understanding[s] or choices that founded the way in which and the principles by which, the parties ran their lives’ (at [341]). He adds an important rider to this: “the non-discriminatory approach that must be applied will probably mean that in most cases the result of the choices made by the parties will be that their contributions to the creation and development of assets during that period will be treated as being equal.” (See at [355].)
He is careful to make it clear that he is not wanting to encourage parties to engage in disputes over whether a spouse was a good home maker or who caused the breakdown of the marriage. Charles J appears to have in mind a short marriage between dual earners where the couple kept their financial affairs separate. In such a case a court might legitimately conclude that each party should retain what they earned during the marriage.
Charles J ended his judgment with some points specifically addressed to the profession. He saw a general failure to appreciate the need to “identify (a) the findings the court is being invited to make and the reasons why they are relevant, (b) the facts and matters the court is being asked to find as the basis for those findings, and (c) the evidence that is needed to achieve these goals.” (See at [477].)
He suggested that after a failed FDR it may be appropriate for directions to be given requiring an exchange of the documents which are regarded as the “building blocks” of their case.
Applying the approach to the facts of the case it was held that the wife should receive £5 million. This was in excess of her needs, which the judge calculated to be £4.2 million. It was less than an equal division of the assets to reflect the fact that there had been a significant increase in the value of the husband’s shares post divorce.
Jonathan Herring, Fellow in Law, Exeter College, Oxford University. This article was first published at 160 NLJ 300
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