The latest headline-grabbing ruling from the Court of Appeal suggests that in the case of a short marriage, the principle of financial equality in divorce may be set aside.
The Court of Appeal has recently delivered a judgement in which it departed from the principle of a 50:50 split of the assets built up during the marriage. The facts were that the couple were both earning around £100,000 a year when they met. During the 7 year relationship, including 5.5 years of marriage, Mrs Sharp received bonuses of over £10 million. In 2015, when the couple divorced, the court awarded Mr Sharp half the matrimonial pot, amounting to nearly £3 million. Mrs Sharp appealed, arguing that the marriage had been short, finances had been kept separate and there were no children. The Court of Appeal has found in her favour. It held that the husband had made no ‘contribution’ in respect of these bonuses, and the rest of their financial arrangements were sufficient to justify a departure from the usual 50:50 approach to assets built up during the marriage.
Matrimonial Causes Act 1973
Section 25 of the Matrimonial Causes Act 1973 gives the Courts a wide discretion in deciding what financial orders are appropriate in a divorce. While the primary consideration must be the welfare of any children under 18, the courts must take into account a number of factors including, under s 25(2)
- The resources available to each party to the marriage, including earning capacity
- The likely financial needs and responsibilities each is likely to have in the foreseeable future
- The standard of living enjoyed before the relationship breakdown
- The age of the parties to the marriage and the length of the marriage
- Any physical or mental disabilities
- Contributions made by the parties including looking after the home/family
- The conduct of the parties (or of a party)
- The value of any benefit that will be lost to a party as the result of the divorce – such as a pension
The aim of any determination of the court in a divorce is the achievement of ‘fairness’ – guided by the principle of equality as expressed in the landmark case of White vs White which we looked it in our recent blog about ‘stellar performers’. While the case law does contemplate the possibility that ‘fairness’ does not always mean ‘equality’, it is clear that there should only be a departure from the principle of equality if there is a good reason for doing so.
This principle of equality has been refined in subsequent cases, including those of Macfarlane and Miller. In Miller, the marriage had only lasted 3 years. In the judgment, Baroness Hale described a scenario in which property or assets generated by only one spouse during the marriage could be viewed as ‘non-matrimonial’ assets. She envisaged a situation in which those non-matrimonial assets could be treated in a different way – and perhaps left out of consideration altogether, within the overall principle of equality.
The conclusion in Sharp v Sharp
Having reviewed in some detail the case law, the Court of Appeal reached the conclusion that the very specific combination of facts in this case meant that overall fairness did dictate a departure from the principle of equality. In particular, the Court looked at the decision in Miller which is perhaps the most similar factually to this case. In Miller, the Court excluded the value of shares which had accrued during the marriage, but which had been acquired before the marriage, and without any input from the wife.
In the Sharp case, the very clear delineation of financial arrangements between the couple appears to have made it relatively easy for the Court of Appeal to hold that the bonuses earned by Mrs Sharp should not form part of the assets that would be divided equally.
The consequences of Sharp v Sharp
A number of commentators have been quick to criticise the judgement of the Court of Appeal in this case. On the one hand, it does appear to undermine the principle of equality. It also raises more questions – such as ‘how long does a ‘short’ marriage have to be to be a short marriage? Or, at what point does wealth generated by one spouse become matrimonial property and subject to the sharing principle? Further, if one spouse’s financial obligations do not begin on the taking of their marriage vows – when does this obligation begin during the course of the marriage? Who decides when the obligation has been triggered?
If short marriages should now be viewed on the principle of meeting needs only as opposed to the previous approach of cross checking the sharing principle, then this means that consistency of approach is lost and there is greater scope for legal disagreement.
Even though the Court of Appeal’s judgment represents a significant departure from the issue of sharing property in divorce, the Court itself does set the decision firmly within the parameters of preceding case law. The important point to note is that this case is one of an extremely rare set of facts and may not be the sort of case generally cropping up in day to day practice.
Parties wishing to marry should consider a prenuptial agreement as a matter of course because a properly drafted prenuptial agreement would likely result in the parties opting out of the sharing principle in any event.