Lecture to the Hong Kong Family Law Association 21st February 2012
White v White – A 10 Year Retrospective
Lucy Stone QC, Queen Elizabeth Building
Many years ago, longer than I care to remember, I was sent to do a case in the Accrington County Court. You may have never heard of Accrington. I had never heard of Accrington. It’s somewhere in the North of England. Curiously, every time I mentioned to anyone that I was going to Accrington, someone said in a mock Northern accent – “Oh aye, Accrington Stanley”. Accrington Stanley, it turned out, was a not very illustrious football team. Accrington County Court, it turned out, was a not very illustrious county court.
My opponent was a local – presumably a friend of the Judge. I say that, because immediately after the case concluded, the Judge asked whether I would be so kind as to stay behind and draft the order, as he and my opponent were off to play golf together.
If the day didn’t end very well, it hadn’t started very well either. My opponent introduced me as “Miss Stone plc”, at which hilarious joke my opponent and the Judge both burst out laughing. I stood up. “I am sorry, my Lord, I don’t get it. PLC? Public limited company?” “No, Miss Stone,” said the Judge, “PLC. Proper London Counsel, come up here to show us how to do it.”
It is a strange thing to appear off one’s regular patch. Never more so than when I had the privilege to appear in the Hong Kong Court of Appeal last September – six thousand miles away from England. The last thing I wanted was for anyone to think that I had come to Hong Kong to show anyone how to do it.
And so it is this evening. It’s an extraordinary privilege to be asked to address you tonight, and one which I feel equipped to do only because my topic – a 10 year retrospective of White v White – puts England a decade ahead of LKW. What I want to share with you tonight is our experience not of what the law is, but of how it has worked in practice in England over the past 10 – now 11 years – and where things seem to be heading now.
On the morning of 26 October 2000, as I left for work, knowing that judgment was due to be handed down in the HL that morning in the ongoing saga of the case of White v White, I told my husband with complete confidence that there was not a chance that 25 years of jurisprudence was about to be swept away by the HL.
We all knew where we were with reasonable requirements – even in really big money cases – a house in central London, a country estate, a villa in the South of France, a boat, some horses if the wife (and forgive me for using the convention in this lecture that the husband is the paying party) wanted them, and a big budget capitalised on a Duxbury basis.
And if that amounted to one-half of the H’s assets – fine. If 40%, also fine, and if 30%, 20%, 10% or some lesser amount – still fine. What more could she need? We didn’t “do” percentages in ancillary relief in England.
And if the parties had been married 30 years, and had 6 children, all of whom she had brought up whilst he had worked, all of whom were not now speaking to their father, since he had impregnated his 19 old secretary, whom he had recently married, as a result of which rift in relations he had now disinherited his 6 children in favour of the new baby – so what? Ancillary relief was not designed to benefit future generations.
Around 11 am that morning, soon after judgment was handed down, I telephoned my husband from my desk in chambers, which overlooks the embankment of the River Thames. I told him that there was an astonishing sight outside my window – a row of men in business suits, standing on the parapet wall of the river, each holding his cheque book in one hand, and his heart in the other, jumping off in turn like lemmings.
The late Joseph Jackson, the doyen of family law in England, was fond of saying that every new change in the law brought with it ten years of litigation – and White v White has been no exception – save that over 10 years have passed, and the law is still very much in a state of evolution.
In the beginning, we all thought that we knew where we were. Yardstick of equality. Half and half. Fifty percent. Pretty straightforward. We – the lawyers – would all be out of a job.
In the early days, I had many a con with a wealthy husband, asking me quite what his wife had done to deserve 50%. Routinely, such a husband would tell me that the children had been brought up the nanny, the house maintained by the housekeeper, and the garden by the gardener. His wife, he told me, would get up after the children had gone to school, be driven by the chauffeur for lunch out with friends, be drunk by 2 pm, go shopping – sprinkling his credit cards liberally down Sloane Street – buying more shoes and handbags than any woman could possibly use in a lifetime – returning home for more drinks after the children had done their homework with the tutor and been fed and put to bed by the nanny – only to retire to bed with a headache just as he put his key in the front door. Their sex life was a dim and distant memory. Quite what, then, had she done to deserve 50%?
The answer (at least, the only answer I could give him) was that she had done two things – two very clever things. She had stayed alive, and stayed married until after the HL decision in White v White.
And that, in the big, brave new world of White v White, meant that she deserved half of everything he had built up in 20 years of marriage. The year 2000 was a smart time to be wife.
Well, a smart time to be a stay-at-home wife. What of those wives who had worked throughout the marriage and brought up the children? (You know what they say: A woman knows all about her children. She knows about dentist appointments and romances, best friends, favourite foods, secret fears and hopes and dreams. A man is vaguely aware of some short people living in the house. I digress.) Presumably if a wife got half for staying at home and doing – well, dare I say it, nothing much (and did it matter according to White if a woman had six children or one, or none?) – a working wife and mother would get more than half? Er, no. 2000 was looking like a good time to decide to come back in the next incarnation as a helpless ditz.
So – the equation went – where x = H’s assets and y = W’s assets, W was entitled to retain (x + y)/2. Pretty straightforward, and the end of our careers as ancillary relief lawyers.
On 8 December 2000 – the Court of Appeal gave judgment in the case of Dharamshi – the first reported Court of Appeal decision since White – and a small, big money case – funds of about £4m. At first instance, prior to the decision in the HL in White, W’s counsel had argued what the Court of Appeal called – for then – a bold and original case arguing that her award should be judged by reference to an entitlement to a share in the proceeds of sale of a family business rather than by reference to her reasonable requirements or a capitalisation of her income needs by use of the Duxbury tables. Counsel for the husband, on the other hand, had said that this was a conventional case requiring a conventional quantification of a lump sum payment sufficient to enable the judge to order a clean break. No, said counsel for the wife: this was a highly unusual case on its facts where the wife as joint contributor to the successful sale of the family business was plainly entitled to such share as the judge felt fair without any reference to her future income requirements and without any reliance on a preliminary capitalisation of those requirements by the Duxbury method. And, he submitted, the judge was entitled to have regard to the wife's contribution not only by her work within the business but also as a wife and mother.
The Court of Appeal noted that White v White was effectively the first case admitted to appellate review by the Lords of Appeal in 30 years since the enactment of the Matrimonial Proceedings Act 1970.
Thorpe LJ said that the Judge at first instance had dealt with this case in a perfectly conventional fashion given the state of the law as it stood in 1999; but that the calculation of the wife's reasonable income requirements as a means of determining her award had now been expressly and emphatically rejected by the HL. He said that the ceiling of 'reasonable requirements', originated by Lord Justice Ormrod and applied by the Court of Appeal for nearly a generation must now be rejected. He cited the Judge’s findings on contribution where, towards the end of his judgment, he specifically considered the parties' respective contributions in the context of s. 25(2)(f) and said:
"I summarise my detailed findings on this issue by indicating that the wife has made, in my judgment, a perfectly acceptable contribution as wife and mother [!] and that her contribution to the building up of the business involved her working for the business for a period of some years rather than the roughly two set out by the husband and that on occasions she would work in the evenings or at weekends but her contribution was by no means pivotal nor was it vital to the success of the business. Nonetheless her contribution was not insignificant and is to be taken into account."
What is so interesting is that it is hard for me, 11 years on from White, even to read such a passage without gawping. Could we really have allowed the judiciary to refer to the contribution of a wife and mother as “perfectly acceptable”? And if so, what were we thinking of?
If there is any doubt that White has brought with it not just a change in the law, but a fundamental change in the way that we, as family lawyers, think, then I only have to read this passage to think that just over a decade ago, we were living in the dark ages.
In fact, in that case, Thorpe LJ found that there were reasons to depart from equality – a contingent tax liability and the fact that W’s award comprised a more secure base in her home, whereas H’s award was represented principally by his interest in the company.
But less than 2 weeks later, 20 December 2000, Thorpe LJ gave judgment in the case of Elliot v Elliot, a marriage which lasted for 19 years and produced 2 children. Only this time, it wasn’t a big money case. It was the H’s appeal against an order denying him a Mesher order – a charge against the former matrimonial home, redeemable on the youngest child attaining the age of 18.
Mesher orders had died a death many years earlier, and for a very good reason – a wife called upon to sell her home in her mid 50’s, having brought up the children, was far less able to recover her position than her husband who, 10 or 15 years later, had often rebuild his financial base and was no longer in anything like the same need of the modest funds which would be realised on a sale and redemption of his charge.
Thorpe LJ reinstated the charge. He said that circuit judge did not have at the date of his sitting the guidance of the House of Lords' recent decision in the appeal of White v White and so he did not have his attention directed specifically to the importance of equality of treatment. He said that although in his speech Lord Nicholls had emphasised that he was dealing with those comparatively rare cases where the totality of the assets exceeds the needs of the parties, nevertheless his emphasis upon the need to avoid gender discrimination and the consequential need to treat equality, if not as a starting point, still as a cross check to be applied to any provisional view formed in a court of trial is valid in a more general sense.
Could this really have been what the HL intended? It took another 6 years, until the judgment in the Court of Appeal in Charman, for the Court (including Thorpe LJ) to say definitively that it did not.
In January 2001, so 3 months after the judgment in White, Coleridge J handed down judgment in the case of N v N. The parties had been married for 14 years, W was 35, H 45, and the assets were worth £2.6m, most of which was tied up in the husband’s business. So again, not a very big money case, and illiquid capital.
In the olden days, i.e. 4 months ago, the case would have been decided upon the extent to which H could raise money from his business to meet W’s reasonable requirements.
But this was a new dawn. The judge referred to the case as highlighting some of the very real, practical difficulties which have to be confronted when the court seeks to achieve the overall aim set forth by White, which he paraphrased as the achieving of a fair result by the adoption of a starting point/yardstick of broad equality of outcome for each party.
He said that the actual practicalities involved in valuing, dividing up, and realising certain species of assets made the attaining of the White objective sometimes either impossible or only achievable at a cost which may not overall be in the family’s (including the children's) best interests and that he was sure that the House of Lords did not intend courts to exercise their far-reaching powers to achieve equality on paper if in doing so they, brought down the whole family’s financial edifice. He said that the Court must be creative and sensitive to achieve an orderly redistribution of wealth, particularly where this involves the realisation of assets owned by either of the parties.
So here was a thought. If reasonable requirements were out, and half shares were in, that might be bad news for the family lawyers, but it was starting to sound like really, really good news for the forensic accountants. After all, if the Court was going to give the wife half, didn’t that mean that first the Judge needed to know the value of the whole? Is this what the HL had in mind?
Coleridge J reminded himself that since White, the wife’s role must be regarded as equally valid and valuable in the overall family’s partnership, and then moved on to the issues of liquidity – of which, in this case, there was almost none; and the extent to which the assets had augmented since the separation.
Joe Jackson was right – three months on and a new dawn of litigation.
In this case, H’s business had seen a massive increase in turnover since separation and one of his two businesses did not even exist at the time of separation. So at what date was the Court to consider the value of the business? The Judge said that he was sure that even post-White, in most cases, the date of the hearing is the correct date when to consider valuation. But he said that the Court should also have an eye to valuation at the date of separation where there has been a very significant change accounted for by more than just inflation or deflation.
More litigation! More valuations! Who was to say that the change was accounted for by more than just inflation or deflation? In this case, the husband said, and the Judge found, that the exceptionally steep increase in value was attributable to H’s extra investment of time, effort and money since separation – but wasn’t every businessman going to argue that? The Judge weighed against this the wife’s continuing contribution, in looking after the home and the children. But supposing there was no such ongoing contribution by the wife?
The Judge thought that if the value had declined significantly since the date of the separation, that too could be a factor to be taken into account, particularly if the decline was as a result of action or inaction by the paying party.
So – was life now simpler, or not? Valuations, where none had been needed before – possibly two valuations – one at the date of separation and one at the date of the proceedings; contested valuation evidence, unless the parties agreed, or the Court ordered, joint valuations; and then an argument about whether any increase or decrease in valuation was attributable to factors referable to something other than the economy in general.
Could a husband any longer be heard to say that there was no liquidity in the business? The Judge said the Court needed to proceed with sensitivity and creativity so that the values upon which the court’s judgment had been based were in fact realised, which could only be done if proper opportunity were given for an orderly and prudent disposal where appropriate. A disposal of the business to pay W out? Now this really was radical.
The Judge awarded W a lump sum from the proceeds of sale, rather than a percentage of them, to avoid the need to police the sale at a time when trust between the parties was likely to be non-existent.
He said that the husband here must have plenty of time to re-arrange his financial and business affairs by way of borrowing and/or sale to meet the sums which he had found the wife was entitled to. He said that liquidation of the business was an inevitable consequence of the break up of this marriage and that there was no doubt that had this case been heard before White, the court would have strained to prevent a disruption of the husband’s business and professional activities except to the minimum extent necessary to meet the wife’s needs.
But, he said, the old taboos against selling the goose that lays the golden egg had largely been laid to rest. Nowadays the goose may well have to go to market for sale but, if it is necessary to sell her, it is essential that her condition be such that her egg laying abilities are damaged as little as possible in the process. Otherwise there is a danger that the full value of the goose will not be achieved and the underlying basis of any order will turn out to be flawed.
This then was a real change – as Coleridge J said – a sweeping away of old taboos. Now, if a wife needed to be paid out, no longer could a husband say – at least not as a get out of jail free card – that the money was all tied up in the business.
So – only 3 months on from White, and we were all beginning to school ourselves to testing the outcome against a yardstick of equality.
Except that something rather odd was happening. First, we had White itself – where the yardstick of equality resulted in W receiving 38%. Then in May 2001, we had Cowan – where the yardstick of equality also resulted in W receiving 38%. Something was afoot.
In White, as we all know, the parties had had a financial head start by way of the generosity of H’s father towards the acquisition of the parties' farms during the marriage. But notwithstanding his generosity, the parties had nonetheless been married for 33 years, had had 3 children, one of whom tragically had died, and Mrs W had worked on the farms. Had the disparity between them really been so great as to result in an outcome so heavily weighted in Mr. White’s favour? [For a number of years after White, I told all my wife clients that they might want to send Mrs. White a small donation for having blazed the trail for them, but having got an award which by the standards of – well, White v White – was pretty rubbish actually.]
But if the disparity in White had been considered significant, what of Mrs. Cowan? Mr. and Mrs. Cowan had been married for 35 years; a very long marriage indeed by anyone’s standards. Mrs. Cowan had worked in business with Mr. Cowan at the outset of the marriage, but had later dedicated her life to bringing up the children and thereafter to supporting Mr. Cowan as his helpmate – roles which the parties had agreed upon during their marriage, or if not agreed upon, been content to accept. And by 2001 we knew from White – no discrimination between gender roles.
So what had Mr. Cowan done to deserve not half the assets, but 62% of them? He had had a flash of genius. He had invented black bin liners. Not just black bin liners, mark you, but black bin liners on a roll. Now, doesn’t that just take your breath away? Can you think of anything in the history of the evolution of mankind which could more easily be described, as it was by the Court of Appeal – in May 2001 – as “genius”? In case you are thinking, “Yes, disposable nappies … electric toothbrushes … sliced bread …” … Mr. Cowan’s final innovation was the introduction of drawstrings for closing the bags when filled.
How could this be? 35 years of marriage, they married when H was 19 and W 17, they started out with nothing, and had not each made an equal contribution, each within his or her own sphere; no discrimination.
Thorpe LJ said this about White:
“[24] I intend first to place the judgment of the House of Lords in the context of mounting pressure for the reform of s 25 of the 1973 Act and then to consider how courts of trial should adjust to the loss of a measure which, although founded on an impermissible judicial construction of the statute, had the merits of familiarity and practicality …
“The test of reasonable requirements, adopted primarily for the determination of the wife's award in big money cases, has been viewed and criticised as a judicial invention to depress the wife's share of the available assets. The criticism seems to me not fully to understand the elasticity of the concept.”
Having set out over 5 pages his analysis of what he termed “The context of White’s case”, he then cited academic opinion that 'without some statutory guidance we may be entering a very unsettled period'... and continued:
“[41] Those whom I have cited in this section are probably the three leading academic commentators in this field. I share their common view that the declaration of the mechanism of reasonable requirements as an impermissible aid to quantification leaves specialist practitioners and judges facing a period of considerable uncertainty which this court has only a limited power to resolve without contriving some alternative impermissible mechanism. … I see the decision in White's case as a step on the road but very far from journey's end. Only Parliament can take us much further.”
In paragraph [42]-[51] he set out the principles in White:
Not equality, but fairness;
No place for discrimination.
And he reminded himself that Lord Nicholls said that whilst 'sometimes' the result will be 'a more or less equal division of the available assets', 'more often' it will not.
“[53] The decision in White's case clearly does not introduce a rule of equality. The yardstick of equality is a cross check against discrimination. Fairness is the rule and in its pursuit the reasons for departure from equality will inevitably prove to be too legion and too varied to permit of listing or classification.”
And so its application to the facts of this case – §64 – discarding reasonable requirements, discarding discriminatory bias, recognising that the wife as well as the husband has a legitimate aspiration to devise a substantial estate at the end of her life. But – but, but, but – paragraph 67 – “in my opinion fairness certainly permits and in some cases requires recognition of the product of the genius with which one only of the spouses may be endowed.
“Indeed Miss Baron conceded the proposition, whilst contending that this husband was not in the category, since she submitted that he was no more than a hard working businessman. That submission does not seem to me to do justice to the husband's achievements, which clearly for their scale depended upon his innovative visions as well as upon his ability to develop those visions [here it is – special contribution … ]. It is a factor that in the present case deserves some recognition. I do not regard it as discrimination by the back door. Whilst no doubt the husband's capacity to devote himself to the expansion of the companies depended in part upon the stability and security of the home and family life which the wife created and sustained, his creativity was not so dependent to the same or perhaps to any degree [how then is a non-working wife to make a special contribution – and if she cannot, how is that not discrimination?].
What he also decided, however, was that H was to have no credit for the increase in the value of his business during the 6 years of the parties’ separation, on the basis that H was gambling with her unascertained share of the assets, and therefore she was entitled to the benefit of this.
And so, 62% – a huge disparity after a 35 year marriage with a fully contributing wife.
In the same case, Robert Walker LJ said this:
“[75] I cannot see the House of Lords' decision as some sort of cataclysm which has put a quarter of a century's family jurisprudence into antediluvian obsolescence …
“[79] there was to my mind nothing particularly startling or revolutionary in the speech of Lord Nicholls … Lord Nicholls made very clear that he was not introducing a disguised presumption of equal division and that any such presumption would be a matter for Parliament”. Really?
At §81, he went on to suggest that it might be better to return to the language of the statute... and to stop using the troublesome expression 'reasonable requirements'. Presumably this is the source of the concepts of “sharing” and “compensation”?
And so he found at §94 that “Mr Cowan was not merely a successful businessman but an exceptionally active, determined and innovative businessman.”
Would he really have said that, had he known of the queue outside the door of the Court of exceptionally active, determined and innovative businessmen?
And just to confirm that the concept of the little woman was gone for good, he added this: “She too worked very hard and showed courage and determination in a fairly tough man's world.”
2001, and I don’t think the Court of Appeal had quite got it yet. Mrs. Cowan didn’t have to do anything to make her contribution – she just had to be married and have done her bit as a wife and mother – she didn’t have to have her contribution assessed.
Mance LJ put it like this:
“[161] I start by recording my conviction that there is no sensible basis for restricting consideration to cases of 'stellar contribution' as Miss Baron submitted. Ultimately, there is probably one continuous spectrum, extending from the entirely ordinary to the 'stellar'. For convenience, it is useful to speak of any acquisition of wealth that is achieved by more than ordinary skill and effort as 'special', and I would certainly wish to discourage over-refined analysis of the precise extent to which skill and effort may have been 'special'. …
“[166] For my part, I would not wish attempts at detailed examination and invidious comparison of the respective contributions of spouses on the different domestic and business fronts to become commonplace”
Too late, my Lord. Stellar contribution was now well and truly out the bag. Could the judiciary get it back into the bag?
In October 2001, Coleridge J decided the case of H-J. A 25 year marriage, with 2 children, now adult, H had worked, W had been mother and home-maker. H was now living with his business partner, with whom he had a 13-month old child. The District Judge had divided the assets 45:55 in favour of the husband. The wife was aggrieved and wanted a half-share (the husband was aggrieved as he had allegedly made a special contribution).
Coleridge J said:
“I have also been referred to almost every recent authority on this area of jurisprudence since the decision of White this time last year. This is an area of jurisprudence which (as I am being polite) I will refer to as being in a state of considerable flux and uncertainty.”
He quoted the District Judge, with whose analysis he agreed, who had said that it was not inevitable that, as a result of White, that there needed to a minute analysis of absolutely everything in the parties' marriage to ascertain who had made what contribution, but rather a proportionate one – what he called a clarity threshold of significance – unlike in this case where there had been, for example, disagreement over whether the wife moved a larger or smaller number of flagstones in one of the properties they occupied and other disputes relating to the period twenty years ago, before the birth of either of the children.
He said that he would find it repugnant as a judicial exercise to have, in effect, to draw up a merit table in which fine gradations of contribution give rise to a marginally increased or decreased share in the financial spoils of marriage, especially given that we live in a multi-cultural society with a variety of aspirations, expectations and traditions.
Instead, he recorded that both parties had made their full and equal contributions in their respective roles within this long marriage, the husband primarily as breadwinner and the wife as homemaker and mother. Beyond this, he found, any further distinction unnecessary and sterile. He said that he could find nothing special, exceptional or stellar about the husband’s contribution. He had worked diligently and successfully and over a long period to amass the assets which had been amassed over the duration of this marriage but if that led to a finding of a special contribution, in my judgment, it would be the thin end of a wedge being driven right into the heart of the principles underlying White v White.
However, Coleridge J disapproved of the District Judge's departure from equality (to 44/55) and said that the courts should be slow to start nibbling at the edges of cases where all other factors, as it were, under s 25 are equal, and so 50% is the natural and fair outcome. And he finished by expressing the view that it would indeed be sad if the broad and sweeping reform underlying the speeches in White v White was to become bogged down in a welter of zealous, over-sophisticated and costly forensic analysis, or watered down by judicial reticence.
In G v G, in July 2002, the parties had been married for over 30 years and had 4 children. There were assets of £8.5m and W sought half. H argued that his contribution had been stellar. Coleridge J was having none of it. He said that he could not evaluate the husband’s contribution as greater than the wife’s without discriminating against her on the grounds that the work she did over just as long a period was of less value than the husband’s.
He stressed that each having broad financial equality does not necessarily mean precisely 50% of the value of a given assets schedule on a given date but rather leaving each side in a position of broadly similar financial muscle which may mean giving the wife a greater measure of security given her lack of earning capacity. He also stressed that the parties are not assisted to achieve compromise if they are encouraged to indulge in a detailed and lengthy retrospective involving a general rummage through the attic of their marriage to discover relics from the past to enhance their role or diminish their spouse’s. He said there was a real danger that the forward-looking White v White innovations would be lost in a sea of post-break-up, backward-looking mutual recrimination and that the court’s task and role in this already uncertain area would thereby be set back at least a generation.
Incomes, earning capacities, capital growth potential … everything was starting to look so much more complicated than (x+y)/2. Hurrah!
Around that time, I had a paragraph which I cut and pasted into all my submissions. If Mr. Cowan had made an exceptional contribution – what about the head teacher of an Inner London secondary school with 2,000 children, 70% of whom do not have English as a first language? Is this not a special contribution? Or is it simply that the head teacher does not generate the wealth of a Mr. Cowan? What of the Goldman Sachs managing director? Has he made a special contribution? Or just an awful lot of money? What about the chemist who has discovered a drug to treat MS, but made no money from it? What of the talentless, but very rich rock star?
November 2002 – two years after White – and Mr. and Mrs. Lambert found themselves before the Court of Appeal. A 23-year marriage, 2 children. The parties had sold their business for over £26 million, £6 million of which they had put in trust for the children. All the funds were liquid. H claimed that he had made a special contribution and offered W 30%. He asserted that his wife's involvement in the company was “more or less ornamental”. W claimed for herself not only a committed contribution as wife and mother but also a contribution to the success of the business which she asserted was pivotal.
Plainly, the message of White had not filtered through, two years on – either to the litigants (why did W have to claim to have made a contribution to the business?) – or to the judiciary, for the Judge gave W 37.5%. What had H done to deserve this? He had established a company which produced and distributed a free local newspaper funded by advertising revenue.
The Judge said he did not see the wife's contribution to the business as pivotal nor purely incidental, irrelevant or meaningless. But he said that the development of the business was achieved very largely thanks to the husband's efforts and that he was an excellent businessman and a successful entrepreneur.
Why 62.5% for H? In the Judge’s view the contribution made by this husband was entitled to the description "really special" or "exceptional", as was the contribution made by Mr Cowan. Although not a genius, he was more than just a hard working businessman who showed innovative visions and the ability to develop these visions. He said that although the wife could probably have done nothing more to justify an award for 50%, that did not mean that less than 50% was necessarily unfair; but that 37.5% of the assets was a fair outcome, in deference to the really special contribution of the husband. and similar to the award made in Cowan v Cowan where the wife achieved 38%.
The Court of Appeal, including Thorpe LJ upheld W’s appeal and said that it was unacceptable to place greater value on the contribution of the breadwinner than that of the homemaker as a justification for dividing the product of the breadwinner's efforts unequally between them.
The Court questioned both the practicality and the value of the exercise of marking the parties to a failed marriage on their respective performances and noted that the excess commonly seen in the litigation of the issue of the applicant's reasonable requirements was now being transposed into disputed and futile evaluations of the parties' contributions. The Court of Appeal also noted that the danger of gender discrimination resulting from a finding of special financial contribution was plain and referred to the consequence of the decision of the Court of Appeal in Cowan v Cowan as having created a culture in which the husband in every big money case was asserting an exceptional financial contribution, thus provoking lengthy and costly battles.
Thorpe LJ said that if the decision of the Court of Appeal in Cowan v Cowan had indeed opened a forensic Pandora's Box, then it was important that the Court of Appeal should now endeavour to close and lock the lid. He said that having now heard submissions against the concept of special contribution save in the most exceptional and limited circumstance, the danger of gender discrimination resulting from a finding of special financial contribution was plain since if all that is regarded is the scale of the breadwinner's success then discrimination is almost bound to follow since there is no equal opportunity for the homemaker to demonstrate the scale of her comparable success. And he concluded that he was now much more wary of the issue of special contribution than he was in writing his judgment in Cowan v Cowan.
Save yourself the years we wasted, and don’t go there. Hard on the heels of Cowan came a year of lengthy affidavits claiming special contributions and, during the same period, lengthy affidavits claiming to have been an exceptional homemaker. How low could this go? The nadir – for me – was an affidavit in which my homemaker client asserted: “I alone changed all André’s nappies”. At the time of the affidavit, André was – I kid you not – 37. Lambert did, however, all but close the lid on Pandora's Box.
By 2004, stellar contributions were on the wane as a reason to depart from equality. Not so inherited wealth, which waxed, even as stellar contributions waned.
I’m going to guess that there isn’t much by way of farming in Mid-Levels or on the Peak. Not so in Middle England, or the Peak District. In England, a man’s land is more than his mere livelihood, it is his life.
In June 2004, the case of P v P came in front of Munby J. A 16 year marriage, during which the parties had worked on a farm inherited from H’s family – indeed, it had been in H’s family for 4 generation.
Of his attachment to the land, the Judge said this:
“It is his way of life, indeed it is his whole life. He was born there. He has worked on it since 1968. Now that his marriage has broken down he sees it as all that he has left... He wants to die there--preferably in harness ... His life is – always has been – bound up in the farm... It is this factor that has made this case so excruciatingly difficult, for the relief which the wife says she is entitled to would almost certainly necessitate a sale of the farm ...”
Is it just me, or does this sound like a Thomas Hardy novel? What about, “She loved this house. She had lived here for 30 years; put her heart and soul into this house. She had raised her children here. Here the parties had shared the joys and sorrows of their married life. She clung to this house even as her husband waltzed off into the sunset with the au pair.” Could a wife use that argument to get the house, leaving H to his reasonable requirements? Nope.
Inexplicably, the Judge thought it appropriate to comment on the quality of W’s contribution, which he did in a fulsome way – but why? So what if she had stayed at home and painted her toe nails?
The Judge reviewed and adopted what Lord Nicholls had said in White about inherited property; that Lord Nicholls had rejected the suggestion that the spouse to whom inherited wealth was given should be allowed to keep it and that conversely, the other spouse has a weaker claim to it. He cited the Family Court of Australia in the case of Figgins, which set out Lord Nicholls’ view that:
…when present, the factor of an inheritance is one of the circumstances of the case; it represents a contribution by one of the parties; the judge should take it into account and decide how important it is in the particular case; the nature and value of the property and the time that it was acquired are among the relevant matters to be considered.
However, in the ordinary course, this factor carries little weight, if any, in a case where the claimant's financial needs cannot be met without recourse to the property.
But he said – and mark this:
“There is inherited property and inherited property. Sometimes, as in White v White itself, the fact that certain property was inherited will count for little [didn’t it count for 24% in White?]. On other occasions the fact may be of the greatest significance. Fairness may require quite a different approach if the inheritance is a pecuniary legacy that accrues during the marriage than if the inheritance is a landed estate that has been within one spouse's family for generations and has been brought into the marriage with an expectation that it will be retained in specie for future generations.
”[38] That said, the reluctance to realise landed property must be kept within limits. After all, there is, sentiment apart, little economic difference between a spouse's inherited wealth tied up in the long-established family company and a spouse's inherited wealth tied up in the long-held family estates.”
But in the end, he said:
“.. the proper approach is to make an award based on the wife's reasonable needs for accommodation and income. I do that … because in the particular circumstances of this case that is the approach which most closely accords with the over-arching requirement of fairness, having regard to all the circumstances but in particular to: (i) the fact that the bulk of the family's assets represent a farm which has been in the husband's family for generations and which was brought into the marriage with an expectation that it would be retained in specie; … (iii) the fact that any other approach will compel a sale of the farm, with implications little short of devastating for the husband …. In short, because to give this wife more than she reasonably needs for accommodation and income would tip the balance unfairly in her favour and unfairly against the husband.”
And so W got a little over 25% of the family assets – the vast bulk of which were brought into the marriage by the husband from his inheritance.
75:25 – a result of which Mr. Cowan can only have dreamt. That was June 2004.
In July 2005 – in a last gasp at special contributions, Sir Martin Sorrell, the founder of the WPP advertising agency argued that he was entitled to an unequal share of their wealth of about £70 million accumulated over a 32-year marriage during which his wife had borne 3 children. You only need to read one paragraph of the judgment to see why he felt entitled so to argue:
“[16] In 2004 WPP profits were £546 million. Currently WPP is worth over £7bn, has a turnover of £4.3bn, and employs 85,000 people including (associates) in 1,700 offices in 104 countries.”
And with that, special contribution – at least on a contested basis, for Mrs Charman conceded that Mr Charman had made a special contribution – effectively died a death.
In 2006, the conjoined appeals in Miller v Miller and McFarlane v McFarlane came before the HL. I had never really wanted to do anything other than be a barrister from my teenage years until I discovered that Mrs Miller had earned £5 million for being married for under three years, with no children, at which point I realised that getting divorced was probably more lucrative than getting others divorced was ever likely to be. I didn’t know anybody who didn’t think that this was an outrageous result.
Mrs McFarlane, on the other hand, had a really good claim – a really good claim – and not just because I was acting for her. Here was a woman who had given up her career as a solicitor, when she had had her second child, by mutual consent with her husband, because they didn’t want their children brought up by nannies; and now, 15 years later, he was earning £750,000 pa net, living with a woman earning £200,000 pa net, and proposing that his wife should have £100,000 pa net to support herself, on the basis that that was all she needed. If the law, post-White, did not have a principle of compensation, we would have to formulate one – and we did. (I am afraid I had lost Mrs McFarlane as a client before the case reached the HL – but the HL restored her original order – so I did feel somewhat vindicated.)
I am not going to dwell on the speeches of their Lordships in the HL, save to pause to note that, having been exhorted by the Court of Appeal in Cowan to go back to the language of the statute, we now found ourselves been told to look to the concepts of (1) the needs (generously interpreted) generated by the relationship between the parties; (2) compensation for relationship-generated disadvantage; and (3) the sharing of the fruits of the matrimonial partnership – none of them found, in this language, in the Matrimonial Causes Act.
The speeches in Miller/McFarlane were not all idem, but it for these principles of need, compensation and sharing that that case has, for the time being at least, found its way into current jurisprudence.
We were also told:
In general it could be assumed that the marital partnership does not stay alive for the purpose of sharing future resources unless this was justified by need or compensation.
A periodical payments order could be made to afford compensation as well as to meet financial needs [this was Mrs McFarlane; I have not seen a successful claim for compensation since then, although I am sure that there must have been some. I have certainly seen several unsuccessful claims for compensation. Not every flight attendant on Cathay Pacific was destined to become CEO].
Special contribution is to be regarded as wholly exceptional [so there’s one area of litigation more of less closed down …]
[… but here is another one opening …] Baroness Hale: there remains some scope for one party to acquire and retain separate property which is not automatically to be shared equally between the parties. If assets are not generated by the joint efforts of the parties, then in a short marriage [per Baroness Hale] and sometimes in a longer marriage [per Lord Nicholls], this might justify a departure from the yardstick of equality of division. The nature and source of the property might be taken into account in deciding how it should be shared [nothing new here – farms and inherited wealth] and the way the couple had run their lives [so if one party has declined to share their wealth during the marriage, they might not have to do so if the marriage ends? More litigation – why didn’t they share their wealth?].
Lord Mance put the same concept another way: Once needs and compensation had been addressed, divorce itself would not justify the court disturbing principles by which the parties had chosen to live their lives while married.
Lord Mance also doubted whether an established earning capacity, or very valuable acquired expertise and acumen could, if viewed as ‘assets’ brought into a marriage, be easily or reliably measurable or comparable with other qualities.
Given the internal inconsistencies between their Lordships in Miller/MacFarlane, it has proved to be a field day for the lawyers. Within a year, we were flying, and with everything now clear as mud in the light of Miller/MacFarlane, nobody any longer had a clue where we were headed.
In 2007, Charles J heard the case of H v H, where the Court grappled with the question of substantial income earned post-separation but pre-divorce, in a clean break case. The principles are set out in the headnote [which is shorter and a lot easier to read than the judgment]:
These cases are not decided by defining the matrimonial property with precision; dividing its value in half; and treating that result as an established and unalterable part of the award.
There is a range of circumstances to be considered in applying concepts such as matrimonial property and the yardstick of equality. These are flexible concepts.
The concept of the matrimonial property to which the yardstick of equality applies readily and with force is based on the concept of an equal and voluntary partnership providing mutual emotional, economic and general support, and matching contributions to it, albeit of different kinds. A point for defining the matrimonial property is therefore a date when that mutual support ended, which might be before the parties split up.
So in this case, the Judge decided that bonuses earned after the separation did not form part of the matrimonial property; but the Judge awarded W a sort of run-off of H’s income – one-third of the income earned in the year the marriage broke down, a sixth of the income earned the following year and one twelfth of the income earned for the year after that.
How does this sit with Cowan? If a party trades with the other party’s unascertained share of an asset built up during the marriage, the capital is liable to be divided at the date of the proceedings, not the date of the separation. But if one party continues post-separation to exploit an earning capacity built up during the marriage, then, as a matter of principle, that income does not form part of the matrimonial property. Is the demarcation always that clear? Is the Court supposed to ring-fence part of the assets – the post-separation earnings part – divide the rest and then see whether there is any appropriate claim on the earnings part? Hold that thought.
In May 2007, the Court of Appeal gave judgment in Charman – a very strong Court of Appeal – the President, Thorpe and Wilson LJJ – although judgment was delivered by the President alone on behalf of the Court.
I never met Mr Charman but I have a sneaking admiration for him. A marriage of 28 years; 2 children; H had built up assets of £131m during the marriage. W conceded, from the off, that H had made a stellar contribution. So what should W get – the magic 38%? Not according to Mr Charman. Not for him the namby-pamby principles of White v White, non-discrimination, yardstick of equality. According to him, a fair share of these assets would have been £20m to her and £111m to him. I sort of regret not having had the opportunity to stand up and make that submission; although I notice from the law report that H had five counsel in the Court of Appeal – 2 silks and 3 juniors. Presumably that was so that he could hide behind them.
The Court of Appeal in Charman took the opportunity to set out the proper post-White approach.
First, the court's consideration of the sharing principle was no longer required to be postponed until the end of the statutory exercise. Since the sharing principle meant that the property should be shared in equal proportions unless there was good reason to depart from such proportions [is this really what White said?], departure was not from the principle but took place within the principle [in other words, the Court might look at a case and, without going the whole s.25 exercise, say – this is obviously a case for equal sharing; but could it also say – this is obviously a case for 40%, or some other proportion?]
To the extent that their property is non-matrimonial, there is likely to be better reason for departure from equality. [But how far?]
The inquiry is always in two stages, computation and distribution [!].
Irrespective of whether the assets are substantial, likely future income has always to be appraised for, even in a clean break case, such appraisal might well be relevant to the division of property which best achieved the fair overall outcome [this one is important – is it fair if each party gets half the capital, but one of the parties will carry on earning a vast fortune? And if not, what does the Court do about it?]
If needs exceed sharing, needs prevail. If sharing subsumes need (and compensation), sharing prevails.
The sharing principle applies NOT only to matrimonial property, namely the property of the parties generated during the marriage otherwise than by external donation; rather, sharing applies to all the parties' property but, to the extent that it is non-matrimonial, there is likely to be better reason for departure from equality. [So, no ring fencing].
And finally, if there is a special contribution, the divergence from equality should be not less than 55/45 and not more than 66/33.
In December 2007, following the decision Charman, Moylan J gave judgment in the case of P v P. This was a 24 year marriage, with 3 children. It was a big money case, although the parties did not agree the extent of the assets – per W, about £19.5m and per H, about £17.6m. More to the point, H asserted that approximately £6.8 million of this wealth was non-marital, comprising bonuses and shares which H had received in the two years since separation. The key issue was the husband’s post-separation assets and how they should be treated.
This was 2007. Moylan J said – absolutely on all fours with Miller/MacFarlane, H v H, Charman – that the general proposition that the marital partnership did not stay alive for the purpose of sharing future resources unless that was justified by need or by compensation did not require the court considering financial relief to define what was and what was not matrimonial property. The weight to be given to the fact that some assets had accrued since separation was a matter for the court’s discretion. Future earning capacity was one of the express factors listed in s 25(2) of Matrimonial Causes Act 1973, so could not be ignored.
But what about assessing the assets at the time of hearing? Remember Coleridge J in N v N : “I think the court must have an eye to the valuation at the date of separation where there has been a very significant change accounted for by more than just inflation or deflation. In this case the increase in value is attributable to extra investment of time, effort and money by the husband since separation and I do take into account the exceptionally steep increase in the turnover figures since the date of the separation.”
So do we look at the assets at the date of separation, per N v N and P v P; or at the date of the hearing, per Cowan. Does it depend whether the assets have increased by way of earnings, or by way of capital growth? And is it always easy to discern which of these it was? What if the husband has the ability to continue to generate very substantial sums of money following the divorce?
Moylan J said:
“[125] In reaching my decision, therefore, I take into account both the fact that a significant part of the wealth has been earned by the Husband since the separation and the fact that he has a very significant earning capacity.”
[So – think of a figure, up a bit, down a bit, paint with a broad brush …]
In the event, the wife received £8.4m, and the husband £8.3m, although this was complicated by tax and liquidity issues.
In the third paragraph of his judgment, Moylan J said:
“[4] During the course of the hearing, the stress of the proceedings was palpably evident on the parties and particularly the Wife. It brought home to me yet again the benefits of an agreed settlement and the emotional as well as the financial cost of contested litigation. The impact of the latter are often, in my view, underestimated at the early stages of proceedings.”
Mr. Justice Moylan is a very nice man. He used to be Head of my chambers. He is a close friend of mine. And he is very, very clever. But he has taken to heart the dictum of the Court of Appeal in Charman that consideration of the sharing principle is no longer required to be postponed until the end of the statutory exercise expounded in Miller v Miller. But does it really do justice between the parties if the Court stands back – at the outset of the case – and says, well, it probably isn’t a 50% case, but I think it is 45% or 40%?
But perhaps those days are now over in any event. Three Court of Appeal decisions in 2010 and 2011, and one in the Supreme Court, seemed to have veered the law right away from the broad brush.
In Robson, the Court of Appeal had to decide what to do in the case of a long marriage, with 2 children, with very substantial assets, which H had inherited from his father and which, he argued, he ought be able to pass down to his children. The judge found that both parties, through wanton mismanagement and reckless expenditure, had squandered rather than husbanded, H's inheritance, during their marriage.
Ward LJ took the opportunity to give guidance about how to approach a big money case where the wealth is inherited. Remember that in White itself, Lord Nicholls had rejected the suggestion that the spouse to whom it was given should be allowed to keep it and that conversely, as a consequence of such a view, the other spouse has a weaker claim to it. Hold that thought.
Ward LJ reminded us that resort should be had to the precise language of the statute. White had done away with reasonable requirements – but how had “need generously interpreted” worked its way into our consciousness?
“[43] 7. The fact that wealth is inherited and not earned justifies it being treated differently from wealth accruing as the so-called "marital acquest" from the joint efforts (often by one in the work place and the other at home). It is not only the source of the wealth which is relevant but the nature of the inheritance. Thus the ancestral castle may (note that I say "may" not "must") deserve different treatment from a farm inherited from the party's father who had acquired it in his lifetime, just as a valuable heirloom intended to be retained in specie is of a different character from an inherited portfolio of stocks and shares. The nature and source of the asset may well be a good reason for departing from equality within the sharing principle.”
[Meaning? That a party is more likely to be able to keep a castle than a farm, more likely to keep a painting than a portfolio?]
“[8] The duration of the marriage and the duration of the time the wealth had been enjoyed by the parties will also be relevant. So too their standard of living and the extent to which it has been afforded by and enhanced by drawing down on the added wealth. The way the property was preserved; enhanced or depleted are factors to take into account. Where property is acquired before the marriage or when inherited property is acquired during the marriage, thus coming from a source external to the marriage, then it may be said that the spouse to whom it is given should in fairness be allowed to keep it. On the other hand, the more and the longer that wealth has been enjoyed, the less fair it is that it should be ringfenced and excluded from distribution in such a way as to render it unavailable to meet the Claimant's financial needs generated by the relationship.”
[“Ringfenced”? I thought from White and Charman that we didn’t do ringfencing? Do we sometimes do ringfencing? And, “Where it is acquired before the marriage or inherited during the marriage, then it may be said that the spouse to whom it is given should in fairness be allowed to keep it?” Isn’t this starting to sound very formulaic? And isn’t formulaic the antithesis of the broad brush, the wide discretion?]
“[9] It does not add much to exhort judges to be "cautious" and not to invade the inherited property "unnecessarily", for the circumstances of the case may often starkly call for such an approach. The fact is that no formula and no resort to percentages will provide the right answer. Weighing the various factors and striking the balance of fairness is, after all, an art not a science.”
So – no formula, no broad brush – weigh up all the circumstances and find an answer which is fair.
And what did the Court in fact do in Robson? Determined a dispute between the parties about the right level of housing for W. Determined a dispute between the parties about the right budget for W. Did a bespoke Duxbury calculation, taking into account W’s ability to downsize at a certain age and for a more modest budget at that age. Added these two elements together and stood back to see whether the outcome looked fair.
Is it just me, or does that sound like reasonable requirements?
So, is the formula, (x + y)/2 = 50%, unless it equals 38%; and if some part of x or y is from a source external to the marriage, consider taking it out the equation altogether and providing for the claimant’s reasonable requirements, so long as that looks fair? Is this not a long, long way from White; or at least from White, as we first understood it?
I have already referred to Jones v Jones. The irony about the first instance judgment (as noted by the Court of Appeal) was that, despite the fact that it ran to about 500 paragraphs, it was almost impossible to discern how the Judge had reached his decision. I tried, valiantly, to uphold the judgment, which had been very much in my client’s favour, but in truth, I struggled to explain how the Judge had reached his decision when I didn’t really know myself. Wilson LJ in the Court of Appeal pulled me up for trying to find the answer to that question in the transcript of the closing submissions – which, with judicial interventions – took about three days, and told me that it was a bit rich trying to distil the reasoning from the transcript of the submissions, if I couldn’t point to it in 500 paragraphs of judgment.
Mr. Jones was a lovely man. He had left school at the age of about 15, and worked his way up the ladder in the offshore gas industry, in which he was now a leading light. He had started his own business 10 years before the marriage. At the age of 20, he had married, had two sons and later divorced. He and his first wife, and his sons, were all on exceedingly good terms and his sons, now adult, were a credit to their parents. W had also been married and divorced, in her case, very acrimoniously and, at the time of these parties’ marriage, she had a very small daughter by her first marriage. She was the only daughter of wealthy parents.
The parties met and married very quickly. It wasn’t a marriage made in heaven. For one thing, H’s business was in Aberdeen, on the bleak, cold, unattractive eastern coast of Scotland, at the centre of the UK’s oil and gas industry. But the parties bought, and renovated, a castle in Scotland and for a time, they had a joint project. Save that no sooner was it finished, than it caught fire and burnt down.
About 5 years into the marriage, W effectively moved back to her house in London, bought and did up another house in London, from funds which had been nominally lent to her by her mother, but which, in reality, she would never have to repay. She didn’t end the marriage; and nor did H. For about another five years, H came down to London on a Friday evening, not every week, and back up to Aberdeen on a Monday morning. W barely returned to Scotland during those five years. Eventually the marriage ended - not with a bang. It simply fizzled out.
H busied himself with the expansion of his business from Scotland into Norway. He and W had limited contact thereafter.
Sadly for Mr. Jones, he managed to sell his business at the very time that W – ignorant of the sale – began proceedings for ancillary relief. And in the year between the separation, and sale and subsequent ancillary relief proceedings, the company doubled in value.
I tell you this background because (at least from H’s perspective) everything in the story strained against the notion that Mrs. Jones had been a fully contributing wife. But it wasn’t a conduct case. And if it wasn’t a conduct case, then what she had done between marriage and separation was completely immaterial.
Can that be what the HL intended in White? Moylan J thinks so. In a recent case, he asked me why, unless the parties are running conduct, he needed to know anything about the parties' respective contributions at all, beyond the date of the marriage and the date of the separation? That was a poignant case. The wife had become an alcoholic and H had had to take over not just the role of breadwinner, but of homemaker and parent too. But the law in England says that alcoholism is an illness, and an illness is not conduct.
But back to Jones. The Court of Appeal took a hard line view. What had been built up between separation and the ancillary relief proceedings was to be divided equally, or very nearly so. It was H gambling with W’s unascertained share. Cowan, straight down the line.
But Wilson LJ did not think it right to share these assets equally. However, the evidence was that, at the time of the proceedings, the assets amounted to £25m and the expert evidence was that the company had been worth £2m at the time of the marriage. And despite the fact that H had been working for 30 years prior to the marriage, only 10 of those years had been in his own company. And their Lordships agreed with the objections of Lord Mance in Miller/MacFarlane to the capitalisation of a spouse’s earning capacity at the date of the marriage.
So Wilson LJ did this. He agreed (with me!) that the assets of £25m should be divided into the parts reflective of matrimonial and non-matrimonial assets in the first instance, and he said that there was no justification for dividing the matrimonial share other than equally.
But what of the £2m valuation at the date of the marriage? First he adopted the Charles J’s concept of “the springboard effect”. The argument went something like this: Although the company was only worth £2m at the date of the marriage, the evidence was that there was an offer for the company only a year later of between £6m and £7m. That can only have been because H’s pre-marital input into the business allowed that £2m to jump to £6m-£7m in one year. So it wasn’t a real £2m, it was more like a sort of £4m, including the springboard effect.
Then one had to allow for the passive economic growth of that £4m during the course of the marriage. The Judge invited me to suggest an index to measure that passive growth. He accepted our suggestion of the FTSE All Share Oil and Gas Producers Index which suggested an increase of 116% over the relevant period.
Which made the rest of the case easy. About £4m inflated by about 116% is about £8.7m, which taken away from about £25m leaves about £16m, divided by a yardstick of equality is £8m and standing back, about 32%. Bingo.
And so, nearly finally, to K v L, one of the most interesting cases I have ever done. The parties were Israeli born, she Jewish, he Muslim. They married in Israel in 1987, in a Muslim ceremony which was not recognised in Israel. In due course, they moved to England, where they lived in a very modest house in a very modest suburb. They had 3 children, who attended state schools. They had no chattels of any value. Their house was worth about £230,000.
When W was a child, she had inherited a parcel of shares, which remained virtually intact throughout the marriage. Neither party worked, and they lived off part of the income from the shares. Modestly. I mean, really, really modestly. At the time of the divorce, the shares were worth about £60 million – that’s about HK$720 million. The children were unaware that their parents had any substantial wealth at all.
The husband said: I know our house is only worth £230,000 but I want to live in Regent’s Park, and spent £2m on an apartment (9 times the value of the former matrimonial home). And I know we only spent about £70,000 a year as an entire family, but I want to spend £130,000 pa just on my own. And, he said, I want another £450,000 to buy myself a house in Israel. W said OK to the £2m house, and OK to the £130,000 pa, and OK to the house in Israel. And, she said, those 3 together will cost £4.5m, but I will give you £5m. And H said no, I have been married to you for over 20 years, and we have had 3 children, and there is to be no discrimination and I want £18m – not even a third, but it recognises your special contribution.
Special contribution? Didn’t I say that special contribution more or less died a death after Sorrell? And wasn’t a special contribution something which happened in a marriage, and not apt to describe a pre-marital inheritance. Yes, said the Judge, awarding H the £5m W had offered.
H appealed. This was, he said, discrimination. So what if the income which supported the parties had come from her? Not so, said Wilson LJ. “Lord Nicholls makes clear that what is unacceptable is discrimination in the division of labour within the family, in particular between the party who earns the income and the party whose work is in the home, unpaid. Bodey J was careful to stress that, in that in the present case neither party went out to work, their work in the home, although different, should be taken to be a contribution of equal value for the purposes of the award. But the law does not abjure all discrimination. On the contrary it is of the essence of the judicial function to discriminate between different sets of facts and thus between different claims … To find that, on top of the efforts of equal value made by each party in the home, the wife made a financial contribution to the marriage of great importance is not to discriminate between the parties in any unacceptable way: on the contrary it correctly recognises a substantive difference.”
But, said H, the Judge failed to “recognise that the importance of the source of the assets will diminish over time” according to Baroness Hale in Miller/MacFarlane. Not so, said Wilson LJ: the importance of the assets may diminish over time. For example:
Over time matrimonial property of such value has been acquired as to diminish the significance of the initial contribution by one spouse of non-matrimonial property.
Over time the non-matrimonial property initially contributed has been mixed with matrimonial property in circumstances in which the contributor may be said to have accepted that it should be treated as matrimonial property or in which, at any rate, the task of identifying its current value is too difficult.
The contributor of non-matrimonial property has chosen to invest it in the purchase of a matrimonial home which, although vested in his or her sole name, has – as in most cases one would expect – come over time to be treated by the parties as a central item of matrimonial property.
But here, the portfolio had remained ring-fenced in W’s sole name throughout the marriage; and in such circumstances, there was nothing to justify a conclusion that there was any diminution in the importance of the source of the asset.
And the special contribution?
“[21] Thus a special contribution arises in circumstances in which a spouse’s contribution, direct or indirect, to the creation of matrimonial property has been so extraordinary as to dictate a departure within the sharing principle from the ordinary consequence of its equal division. It is therefore no accident that this court’s reference, at [90], to the unlikelihood of departure from equality further than to 66.6%–33.3% was of ‘division of matrimonial property’. By contrast, although non-matrimonial property also falls within the sharing principle, equal division is not the ordinary consequence of its application. The consequences of the application to non-matrimonial property of the two other principles of need and of compensation are likely to be very different; but the ordinary consequence of the application to it of the sharing principle is extensive departure from equal division, often (so it would appear) to 100%–0%.”
And the fact that this gave H only 9.3% of the assets? So what?
“[22] What was much more interesting was the moment during the hearing when we asked Mr Pointer to show us a reported decision in which the assets were entirely non-matrimonial and in which, by reference to the sharing principle, the applicant secured an award in excess of her or his needs. He confessed to be unable to do so. Such a decision will no doubt be made – but not in this court today.”
So there we have it. Some – including Moylan J – think that the proposition that non-matrimonial property only now falls to be shared in the case of need or compensation is too narrow a statement of the law. But when, in the recent case of AR v AR, a case of inherited wealth, I beat him around the head (metaphorically) with my copy of K v L, he gave the wife what she needed – a house, and an income – and added a little bit on top – but still leaving the wife with only a little over 20% of the assets after a marriage lasting 20 years.
Conclusion
A decade on, and where we are now? If we still carry with us our yardstick of equality, it is mostly measure how far from equality the Court has come.
Save in the most unusual of circumstances, stellar contributions are dead. If a spouse has made an enormous fortune during the marriage, it is probably because he was banker or a hedge fund manager.
But – the party who comes into a marriage with assets, who keeps those assets to himself, and who doesn’t share them with his spouse during the marriage, is now likely to walk away with those assets intact, if the other party’s needs can be met without recourse to those assets. And if needs can be measured, per Robson, and per K v L and per AR by the cost of a house, and the capitalisation of a reasonable budget – then are we staring again at reasonable requirements, and calling them needs generously interpreted, at least in cases of extra-marital wealth?
This is a world away from White. From the broad brush back to the fine sable.
And the future? For now, until Parliament legislates for an alternative solution, any party with assets looking to marry an economically weaker party will, without doubt, want to ring-fence those assets with a pre-nuptial agreement.
But that’s another whole lecture.
© Lucy Stone QC
Queen Elizabeth Building
London EC4Y 9BS
l.stone@qeb.co.uk
Mr Justice Mostyn has said a review of Payne v Payne [2001] 1 FLR 1052 by the Supreme Court is urgently needed. It follows Lord Justice Wall, now President of the Family Division, adding his support last February in 
