Supreme Court Clarifies Matrimonial and Non-Matrimonial Property: Standish v Standish Explained
This week the Supreme Court delivered its judgment in the long running case of Standish v Standish providing important guidance on how family law deals with matrimonial and non-matrimonial property during divorce. The Supreme Court dismissed the wife’s appeal, upheld the Court of Appeal’s decision and clarified application of the sharing principle and ‘matrimonialisation’.
The legal issue at the centre of case was: When does non-matrimonial property become matrimonial property (matrimonialisation) and how should the sharing principle be applied to such property?
This appeal arose from financial remedy proceedings in a high-value divorce case. The husband, now 72, had a successful career in financial services, building substantial wealth before the marriage. The wife, now 57, was a homemaker in the marriage. The parties married in 2005, had two children and separated in early 2020.
The appeal concerned investments (‘the 2017 Assets’) worth approximately £80m at the time of the trial. In 2017, the husband transferred these assets into the wife’s sole name as part of a tax planning strategy, the intention being that they be put into trusts for their children, to mitigate inheritance tax. The wife did not create the trusts and she retained the assets in her sole name.
At the first instance, the judge found that most of the 2017 Assets were non-matrimonial property, pre-transfer, but held that the transfer ‘matrimonialised’ them, making them subject to the sharing principle; albeit warranting an unequal division, due to their source. The judge awarded the wife £45 million, reflecting a 60/40 division in the husband’s favour. On appeal, the Court of Appeal held that 25% of the 2017 Assets constituted matrimonial property to be shared equally, and awarded the husband 75%, plus half of the remaining 25%. The wife appealed, arguing that the Court of Appeal placed excessive weight on the husband’s contribution and that the transfer constituted a gift.
The key takeaways from the Supreme Court decision are that:
The Supreme Court confirmed that the sharing principle applies only to matrimonial property and not to non-matrimonial property. Equal division is ‘the appropriate and principled starting position’ under the sharing principle, but departures from it are permitted where justified.
Applying these principles, the court upheld the Court of Appeal’s finding that 25% of the 2017 Assets constituted matrimonial property which was to be shared equally, while 75% remained non-matrimonial property and, therefore, fell outside of the sharing principle. The pre-marital assets, sourced solely from the husband, were transferred, as part of an inheritance tax mitigation scheme for the children, with no intention that the wife would retain them personally. Crucially, there was no evidence that the parties treated the 2017 Assets as shared over time, which had a significant impact on the wife’s case.
Family law judges have a wide discretion under the law and, therefore, decisions are often very fact specific. As such, caution must be taken when separating couples are looking at cases like Standish against their own, particularly as Standish is an ultra-high net worth case where the needs of the parties did not need to be considered due to the net worth of the assets. Pre-nuptial and post-nuptial agreements remain the route to avoid being subject to the court’s wide discretion. Following Standish, when contemplating any tax‑planning, consideration should be given when thinking about entering into a pre-nuptial or post-nuptial agreement.
If you think that the Standish case has relevance for your circumstances you can book a meeting with us to consider future planning including pre-nuptial or post-nuptial agreements.