Standish v Standish and its impact on the application of the sharing principle

Standish v Standish [2024] EWCA Civ 567 

The importance of source not title, the application of the sharing principle and the process of matrimonialisation. 

On appeal, the Wife’s award was reduced from £45m to £25m – one of the greatest reductions of a financial remedy award ever made on appeal. 

The first instance Judgment of ARQ v YAQ [2022], centred around the following facts: 

• The husband made his fortune in finance, sold his company in mid 1980s and made A$127m, he became CEO of that company, owning 20%, this company was then acquired by UBS, at which point the husband was earning $1m per annum.
• By 1999 the husband was chairman and CEO of regional division of UBS and by 2002, H was on the executive board of UBS, earning A$11M pa. 
• In 2002 the husband purchased a large cattle and sheep farm (Ardenside Angus) for A$12m. 
• The parties married in 2003
• At the point of marriage Husband was worth £57m, whilst the wife’s assets were comparably modest.

 

There were two key financial events during the marriage: 

• In 2017, the transfer from Husband’s sole name to Wife’s sole name of investment funds then worth £77m (‘the 2017 Assets’) – the intention was to avoid inheritance tax on Husband, and for the funds to be placed into a trust for the children. 
• The issuing of shares in Ardenside Angus to the Wife – also with the intention of avoiding tax. 

 

The 2017 assets were never settled into trust for the children. The wife then wrote the husband out of her will without telling him. 

The first instance Judgment – ARQ v YAQ [2002] EWFC 128, Moor J: 

Moor J held that by reason of the transfer from Husband to Wife, ‘the only possibility is that the ‘2017 assets’ became matrimonial and were thus matrimonialised. – He concluded that the transfer must have transformed the character of the property. Similarly with the placing of the shares in Ardenside Angus in the wife’s name also matrimonialised those shares. However, in both instances, whilst the wife was entitled to a share in those assets as a result of their matrimonialisation, there was a departure from equality in the husband’s favour of 60:40, to reflect their non-matrimonial source. 

Both Husband and Wife appealed. The wife’s appeal was dismissed, and the Husband’s appeal was allowed. 

Both contended on different reasons that the 2017 assets were non-matrimonial property. 

The wife argued that upon transfer into her sole name, H’s non-matrimonial property became her separate property – that the source was irrelevant, the title of the property was determinative, and that the court should respect the parties’ autonomy to choose how they hold their assets. 

The husband meanwhile argued that the 2017 assets were, and remained, non-matrimonial, that the source of the assets (his 32 years of pre-marital endeavour) had not been given sufficient weight by Moor J in his distribution of the assets. 

Hence the Court of Appeal was forced to contend with the importance of source vs title in determining the character of an asset as matrimonial or separate. 

The Appeal Judgment contains helpful revelations. 

Whilst the Court of Appeal agreed with much of Moor J’s decision, they disagreed on Moor J’s reasoning that the only possibility was that the 2017 assets had become matrimonial property, because this conclusion was solely based on the fact that the assets were transferred by the husband into the wife’s name – making title the determinative factor in characterising wealth, rather than source. 

• The unanimous Judgment emphasised the importance of source in determining the character of wealth, title is not to be the determinative factor. 

 

On the process of matrimonialisation: 

Standish v Standish emphasises that matrimonialisation is a principle to be applied narrowly. 

‘Matrimonialisation is the process by which non-matrimonial property acquires a matrimonial quality because of the way property has been used or treated’ (Calum Smith, Financial Remedies Journal). That how wealth is treated during a marriage can change a non-matrimonial asset into an asset that can be shared.

The consequence of matrimonialisation, is that matrimonialised property falls to be shared, not necessarily equally, but still to be shared. This represents an exemption to the principle that sharing only applies to matrimonial property, and not to non-matrimonial property – so this must be applied narrowly. 

Therefore, whilst it was concluded at appeal that the 2017 assets became matrimonial property, this was not determined by the transfer of title to the wife. The Court of Appeal found that Moor J should have assessed what of those 2017 assets could be attributed to the endeavour during the marriage – and apply the sharing principle only to that portion. Holding that whilst assets can become matrimonialised, despite their non-matrimonial source, and at the same time that characterisation of the assets as matrimonial or not is determined by source not title, matrimonialisation can be assessed to apply to only a part of the assets, with the sharing principle then applied to that part only. 

This meant in this case, Moylan LJ concluded that 20% of the assets had not matrimonialised, and the rest was shareable, because there was insufficient evidence to say that Moor J’s finding that much of the value of the shares may have been generated during the marital partnership, was wrong. 

All of this was justified as an application of the broad discretion conferred onto financial remedy Judges in pursuit of fairness. This case emphasises that broad discretion and reaffirms the definitions of matrimonial and non-matrimonial on which the sharing principle was built 

Standish shows that Instead of a reflection of a non-marital source in a departure from fairness, a better approach is to segregate by source which property has become matrimonial, and which has not, then reassess sharing on the equality principle of only that property which has ‘matrimonialised’.