Cambridge Family Law Practice

The Supreme Court of the United Kingdom has ruled against the wife in a high-profile divorce dispute. In Standish v Standish, she had argued that assets totalling close to £80 million that had been transferred by the husband for tax planning purposes were jointly owned ‘matrimonial’ property which should have been divided in their financial settlement, under the well-established ‘sharing principle’. Supreme Court Justices disagreed.

The case concerned a couple who married in Switzerland in 2005. They went on to have two children, and lived in Australia for a period. The husband enjoyed a very successful career in the financial services sector and become very wealthy. He retired in 2007.

Eventually, in 2020, the marriage broke down and the couple separated. Typically for divorces in wealthy families, the courts were asked to rule on how their assets should be divided in order to reach a financial settlement.

Assets which had been transferred to the wife in 2017 for the eventual benefit of their children later become a matter of dispute. At the time worth approximately £77.8 million, the transfer was intended to avoid inheritance tax, but the wife did not set up the financial trusts the husband had requested, continuing to hold the assets in her sole name.

At the original hearing, a Judge had ruled that most of the 2017 assets had been “non-matrimonial”, meaning they had not been generated during the marriage, but their status had changed when they were transferred. At that point they become matrimonial property, and the ‘sharing principle’ therefore applied.

This term refers to the usual starting point for the division of assets when couples divorce – any assets that can be fairly classified as having been generated during the marriage should be divided equally.

In this case, the Judge did acknowledge the changed status of the assets by ruling that they should be divided 60-40 in favour of the husband. This meant the wife would receive £45 million. Neither party was satisfied with this ruling and both appealed.

At the Court of Appeal, Judges took a different approach, ruling instead that 75 per cent of the assets was wholly the property of the husband: it had not been become matrimonial property when transferred and should be returned to him. Only the remaining 25 per cent was therefore subject to the sharing principle.

This meant that the wife would only be entitled to £25 million. She therefore took her case to the Supreme Court. Her legal team argued that the husband’s status as main source of the disputed assets had been given too much weight and that the transfer to her had effectively been a gift.

But Supreme Court Justices Lord Burrows and Lord Stephens were not convinced, concluding that the Appeal Court ruling had indeed been correct. In their ruling, they explained:

“…it is important to recognise that there is a conceptual distinction between
matrimonial and non-matrimonial property. In general terms, this distinction turns on the source of the assets. Non-matrimonial property is typically pre-marital property brought into the marriage by one of the parties or property acquired by one of the parties by external inheritance or gift. In contrast, matrimonial property is property that comprises the fruits of the marriage partnership or reflects the marriage partnership or is the product of the parties’ common endeavour.”

The Lord Justices were clear in the importance of this distinction, stressing:

“…the time has come to make clear that non-matrimonial property should
not be subject to the sharing principle. With some exceptions…the courts have been reluctant firmly to say that non-matrimonial property is not subject to the sharing principle.”

The Judges continued:

“Although courts have a broad discretion in this area and despite the temptation to “never say never”, it is our view that the distinction between matrimonial and non-matrimonial property becomes largely meaningless if the sharing
principle applies to the latter as well as the former. The law is also rendered clearer and
more certain if one rejects the proposition that there can be sharing of non-matrimonial property.”

Adam Moghadas, one of the partners here at Cambridge Family Law Practice said:

“This is a significant judgement which shines a spotlight on one of the foundations of divorce legislation. If the sharing principle is the starting point for the division of assets when a couple go their separate ways, in the interests of fairness and justice clarity is clearly vital: there must be no fuzziness about the kind of assets the principle can be applied to, or about how these assets should be distinguished from other property.”

Read the full judgement here.