The Supreme Court has dismissed the appeal of a wife who argued the transfer of nearly £80m from her husband for the purposes of future tax planning was a shared asset and therefore subject to the ‘sharing principle’ in divorce proceedings.
Lord Burrows and Lord Stephens have today delivered the verdict of the Supreme Court, with which the other Justices agree, dismissing the claims of the wife and reinstating the decision of the Court of Appeal.
In its judgement, the Supreme Court laid out five key elements of the decision, clarifying the view of the courts on what constitutes a process of ‘matrimonialisation’; the process by which non-matrimonial assets become matrimonial assets.
The background to the case concerns the divorce of Mr Standish and Mrs Standish. Pre-divorce, Mr Standish transferred the sum of £77.8m to his then-wife for the purposes of tax planning; there is little contention those assets had been accumulated prior to their wedding and were therefore non-matrimonial property. During the first trial, the judge held those assets were matrimonial property. He divided the matrimonial property unequally (60/40) in the husband’s favour to reflect the fact that it was derived from an unmatched contribution by the husband. The wife was awarded assets worth £45 million and ordered to transfer to the husband the other assets owned by her.
Mr Standish appeal the decision with the the Court of Appeal ruling the assets transferred to the wife in 2017 were not transformed into matrimonial property. It held that at least 75% of the 2017 assets were not matrimonial, and therefore reduced the wife’s total award by 40% to £25 million.
In dismissing the wife’s claims the Supreme Court said there were five principles relevant to the application of the sharing principle.
1) There is a ‘conceptual distinction’ between non-matrimonial property and matrimonial property
which is typically pre-marital property brought into the marriage by one of the parties, or property acquired by one party by external gift or inheritance – and MP – which is property which comprises the fruits of the marriage, reflects the marriage partnership or is the product of the parties’ common endeavour
2) Reading the decision Lord Burrows said although courts have been reluctant previously to say so, the time has come to recognise that the sharing principle applies only to matrimonial property and not to non-matrimonial property (although NMP can be subject to what have been termed the “needs” and “compensation” principles that are not in issue on this appeal)
3) The starting point for matrimonial property is it should be shared on an equal basis.
4) One of the key elements of whether matrimonialisation has taken place is how the parties have been treating the asset and whether, over time, they have treated it as shared.
5) and a transfer of an asset between spouses in a scheme designed to save tax, irrespective of the time period involved, will
not normally show that the asset is being treated as shared 2 between the spouses. Therefore, such a transfer will not normally constitute matrimonialisation
Applying those rules to Standish v Standish Lord Burrows said the Court of Appeal decision that 25% of the 2017 assets were MP and 75% were NMP was correct. The 25% should there be shared equally. There was no evidence the 2017 assets had been treated as shared, and as they were clearly for the purposes of tax planning and not for the benefit of the wife, they had therefore not be matrimonialised
The Court of Appeal therefore correctly decided (although the Supreme Court does not agree with all its reasoning) that the husband was entitled to 75% of the 2017 Assets plus half of 25% of those Assets.
The judgement can be found in full here.
Representing Mr Standish, Sam Longworth of Stewart’s said the outcome provided ‘essential guidance’ on when assets which do not originate in the marriage, will be considered matrimonial
“We are very grateful for the speed at which the Supreme Court reached this unanimous decision to reject the appeal of Mrs Standish against the largest ever reduction by the Court of Appeal to a divorce award. In 2021, Mr Standish offered to settle this case for £25m. The Court of Appeal in 2024 acceded to his appeal of the order of £45m made in 2022, whilst rejecting Mrs Standish’s attempts to achieve an even greater award at that time.
The Supreme Court have now upheld the Court of Appeal’s determination of £25m, whilst accepting our arguments that the sharing principle should only apply to marital (as opposed to non-marital) assets. The Supreme Court has also provided essential guidance as to when assets which do not have an originating connection to the marriage partnership should be considered marital. This guidance will give the courts a clear framework to ensure individuals cannot benefit from running false arguments as to whether they had or had not agreed to share certain assets during the currency of their relationship.”
Lucy Stewart-Gould, Second Partner for Mr Standish added
“The team at Stewarts are pleased to have secured for our client a judgment which fairly reflects the fact that the majority of the wealth in this case was non-marital, having been generated almost entirely by our client’s work prior to the marriage. The Court confirmed that title alone is no determiner of how assets should be divided upon divorce; such an approach risks discrimination and is contrary to fairness which underpins the ‘sharing’ principle. Title alone is insufficient evidence to permit a party to share in a non-marital asset. What is required is an intention to share and treatment of the asset as shared; on the proper analysis of the facts of this case there was neither. Divorcing couples across England and Wales now have clearer guidance on how their assets will be categorised upon divorce.”
One Response
In transferring assets for tax purposes the Transferor is stating publicly that he has dispossessed himself of those assets. His motive for doing so is monetary advantage to himself. The transferee accepts whatever disadvantages possession of the assets may confer and in most cases is not separately advised .
It is inequitable for the Tranferor to then claim the transfer was a “sham” and to deny the arrangement matrimonialised the assets. No clean hands here in the marriage relationship.
Another principle devised to favour rich men.