There have been a few articles in the newspapers about the latest judgment in Hart v Hart, a long-running case about the financial outcome of Mr and Mrs Hart’s divorce proceedings.
Elsewhere on the Transparency Project, Mena Ruparel has criticised the inaccuracy of the reports about this case, which relied upon a press release by the wife’s firm that said that the case left the law in ‘a state of flux’ because after a long marriage the wife did not get half of the assets.
However, Hart v Hart simply reflects long-standing principles about how to divide assets on divorce. Let’s consider it further.
In June 2015 His Honour Judge Wildblood QC made a financial remedy order which determined who got what assets at the end of the Harts’ marriage. Mr Hart was then aged 80 and Mrs Hart 59. They lived together from about 1983 and married in 1987. Courts can take into account a period of cohabitation before the marriage where it has segued into a marriage but by any standards this was a long period of time together.
They separated in 2006 but divorce proceedings were not started until 2011. The parties have therefore been litigating for a very long time. This is not only because of the delay in starting proceedings but the length of time they took to get to that first decision by HHJ Wildblood and then the appeals afterwards.
Judge Wildblood’s decision
Their total assets were £9.38 million. This was made up of:
- Joint assets £1.64 million
- Assets in Mr Hart’s name £490,000
- Assets in Mrs Hart’s name £1.75 million
- £5.5 million in a trust. The trust had four beneficiaries: Mr and Mrs Hart and their two adult children
There were several key issues that HHJ Wildblood had to decide:
- Was the trust an asset that they could use? The judge held that Mr Hart used the trust as if it was his own money and the trustees would do whatever he said. This meant it was really to be treated as an asset that was available for distribution. So, the whole £5.5 million was treated as a matrimonial asset.
- What importance should be given to the fact that the husband had significant wealth before the marriage? The judge held that Mr Hart had about £2.6 million at the start of the relationship – it was very difficult to work this out some 30 years later and the case was complicated because Mr Hart did not provide the court with accurate or full information. This £2.6 million was non-matrimonial money and Mr Hart should keep that.
- Should all of Mrs Hart’s money be taken into account? The court held that £928,000 of it was non-matrimonial – it was not built up during the marriage. (Perhaps it was an inheritance.) Mrs Hart should keep that.
Non-matrimonial assets usually come from outside the marriage: a pre-owned asset, or an inheritance, for example. Here, both Mr and Mrs Hart had differing amounts of non-matrimonial assets. HHJ Wildblood excluded these from consideration. He valued them (£2.6 million for the husband and £928,000 for the wife) and ignored them.
This meant that the matrimonial assets were £9.38 million less £2.6 million less £928,000 = £5.852 million. He divided everything else – the matrimonial assets – equally. Matrimonial property should be shared equally unless there is good reason not to do so. That gave each of them £2.926 million.
On top of that, Mr Hart would have his £2.6 million (giving him a total of £5.526 million) and Mrs Hart would have her £928,000 (giving her a total of £3.854 million).
The judge asked himself whether each could live on their amounts. He held that in order for Mrs Hart to buy a suitable house (bearing in mind their location and house prices, and their standard of living during the marriage), and for her to have a lump sum from which she could draw an income, she would need £3.47 million. So she could meet those needs with the assets above.
So should she get £3.854 million (half the matrimonial assets) or £3.47 million (what she needed)? The judge decided she should get £3.47 million plus some arrears of spousal maintenance that had accumulated (another £92,000 so £3.56 million in all).
He explained this by saying that he felt that using her needs as the basis was more principled than giving her an equal share of the matrimonial assets, particularly because assessing the amount of the money Mr Hart came into the marriage with was difficult to do accurately. The figure of £2.6 million was really an educated guess. The needs basis also reflected the fact that the origins of the matrimonial assets came from the non-matrimonial assets Mr Hart had built up before the marriage. However, the fact that (relatively speaking) the two figures were so close would have given the judge some comfort that he was being fair.
Mrs Hart’s cohabitation
Mrs Hart was, at the time of the final hearing, cohabiting with a Mr Chubb. In some cases, the fact that a party is living with someone else will reduce their needs because they can get financial support from that other person, or share a mortgage borrowing capacity. But judges are cautious about this. Cohabiting relationships have a higher break-up rate than marriages and at the end of them there is not entitlement to a divorce-style settlement. So courts do not want to put someone in a position where they get less on a divorce because they are cohabiting but then their cohabiting relationship comes to and end and they are therefore worse off. HHJ Wildblood said “I do not consider that the presence of Mr Chubb in the life of Mrs Hart should in any way diminish her needs.”
Both Mr and Mrs Hart appealed the decision.
In order to appeal the decision of a circuit judge such as Wildblood, you first need to get permission (known as ‘leave’) from a single judge in the Court of Appeal. The court will only give you permission if it thinks that you have a real prospect of success. If it thinks you do, your case will go to a full appeal hearing, usually before three judges. You can then make your arguments more fully.
Mr Hart’s appeal
Mr Hart argued that the judge should have placed more importance on the fact that Mrs Hart was cohabiting, and should not have included the trust assets. The Court of Appeal (Munby P) refused Mr Hart permission to appeal.
Mrs Hart’s appeal
Mrs Hart argued that she should have received £5.1 million: her own £928,000 and half of everything else (including everything HHJ Wildbood had held was the husband’s non-matrimonial assets). She said that, first, HHJ Wildblood had not accurately assessed the husband’s premarital wealth and because the husband had not cooperated in providing information the judge should not have been so formulaic about excluding a specific amount. Instead, he should just have given her half.
Second, she said that the award should not have been based on her needs. Instead, it should have been based on the sharing principle – the idea that marriage is a joint, equal partnership. Under this principle, marital assets should be shared equally unless there’s a good reason not to do so. (I’ve written about these principles before).
The important case of Charman says that where the sharing principle gives you more than you need, you should get that bigger amount. Instead, she got the smaller needs-based amount.
Mrs Hart was granted leave to appeal, i.e. a judge held that she had a real prospect of success on these arguments. That means she got a full appeal hearing.
However, at the full appeal hearing she did not succeed after all.
Why her appeal did not succeed
In the case of Charman, the Court of Appeal said that the sharing principle applies to both matrimonial and non-matrimonial property ‘but, to the extent that their property is non-matrimonial, there is likely to be better reason for departure from equality.’ So, although the sharing principle applies to non-matrimonial assets, it applies less forcefully. In fact, since Charman there has not been a single reported case where a spouse has received a share of non-matrimonial property because of the sharing principle (although they have had some if required to meet their needs or if the assets have become mingled with matrimonial assets so that they can no longer be considered non-matrimonial). At the moment what we have is a statement of principle but not a case applying it.
Judges therefore need to think about how to take account of the existence of non-matrimonial assets. Some judges take a rigorous approach of calculating them, setting them to one side, and then sharing what is left. That is what HHJ Wildblood did. Yet calculating what is matrimonial and what is not can be really difficult. What if an inheritance was used to buy the matrimonial home? What if the parties lived off a gift one had received? What if a small amount of non-matrimonial money had increased to a large amount during the marriage? Should fairness be based on how long the marriage is? What if most of the money had come from a company the husband had sold, but which he started before the marriage? Would that be matrimonial, non-matrimonial, or both? The Court of Appeal noted that an asset can be both matrimonial or non-matrimonial, ‘in the sense that it can be partly the product, or reflective, of marital endeavour and partly the product, or reflective, of a source external to the marriage. …Where a property is a combination, it can be artificial even to seek to identify a sharp division…the exercise is more of an art than a science.’ So although this is a valid approach, other judges prefer to take what has been called a more artistic approach of looking at all the assets and then making some allowance for what is non-matrimonial.
Neither approach is wrong.
An appeal can only succeed if the appellant can show that the first court was wrong. Mrs Hart could not show that HHJ Wildblood had been wrong in his approach.
Does this leave the law in a state of flux, as Mrs Hart’s solicitor said?
Mrs Hart’s solicitor said (as reported on her firm’s website press release) that the Court of Appeal ‘leaves the law in a state of flux. It allows a trial judge to find that even where it is not properly evidenced, the financial contribution of one spouse outweighs the family and domestic contribution of the other. This can lead to a result that is unfair and discriminatory, as it has done in this case. More such results are likely to follow, with the potential to set the law back more than 20 years’.
But this case was not about putting different values on their financial and domestic contributions during the marriage (which can indeed be discriminatory against women). It was about how much the court should take into account financial contributions made before the marriage – non-matrimonial assets. Whilst, after a long marriage, it may in some cases be unfair to take account of money one person brought into the marriage, it was not unfair to do so here. The judge used a valid and common approach to try to work out what that contribution was, and how to reflect that in his division of the assets.
HHJ Wildblood’s judgment was not reported, which is commonly the situation for cases decided in the lower courts. What we know about it is taken from the appeal reports. The refusal to permit Mr Hart to appeal is here. The new Court of Appeal decision on Mrs Hart’s appeal is here.
Feature pic : Heart and Ring Camdiluv on Flickr (creative commons – thanks)