When a couple gets divorced, they must split their assets fairly, bearing in mind 3 principles set out by the Supreme Court in two joined cases, Miller v Miller and McFarlane v McFarlane. These 3 principles are:
- On divorce, each party’s needs must be met. Broadly, this means suitable housing and enough money to live on. What a party needs depends on the available money, so where the parties are wealthy their needs are assessed very generously. For most people, meeting needs takes up all the money they have, so there is no extra to consider compensation or sharing.
- Compensation for relationship-generated disadvantage, such as giving up a high-flying career to have children, which will permanently limit your earning potential. There is an overlap with needs but as a separate rationale for giving one party some of the assets compensation has died a death since Miller/McFarlane as most judges and barristers think it lacks logic.
- This is about sharing marital assets on the basis that marriage is a joint endeavour. As Lord Nicholls said in Miller/McFarlane, ‘the “equal sharing” principle derives from the basic concept of equality permeating a marriage as understood today…The parties commit themselves to sharing their lives….When their partnership ends, each is entitled to an equal share of the assets of the partnership, unless there is a good reason to the contrary.’
Where you would get more by sharing assets equally than you both require to meet your needs, you should get the (bigger) equal share.
Sharp v Sharp
In Sharp, the wife argued that her case was one where there were good reasons why there should not be equal sharing of assets. You can read yesterday’s judgment of the Court of Appeal here : Sharp v Sharp  EWCA Civ 408 (13 June 2017)/
Julie and Robin Sharp moved in together in December 2007 and were married in June 2009. The divorce petition was issued in December 2013 so including cohabitation as it moved directly to marriage, this is a 6 year relationship. They have been arguing over the money since then. They are both in their 40s and they have no children. Mrs Sharp is a wholesale fuel trader and Mr Sharp worked in IT before taking voluntary redundancy. Although they each earned about £100,000 per year when they started living together, by the time of the divorce Mrs Sharp had been receiving bonuses totalling £10.5 million, compared to much lower bonuses for Mr Sharp.
The total assets at their final hearing at the High Court was £6.9 million. Mr Justice Peter Singer said the wife should keep £350,000 of the money she had before the marriage but everything else should be split equally under the sharing principle, either because it was acquired during the marriage or because it had been used for marriage uses, such as to buy a matrimonial home. This meant that it was considered marital property.
Even though the marriage was short, Mr Justice Peter Singer thought that there was no reason for there not to be equal sharing of the marital assets.
Mrs Sharp appealed to the Court of Appeal.
Why has Sharp got lawyers talking?
Lower courts have to follow the principles set out in higher courts’ cases. The highest court in England and Wales is the Supreme Court, and when they decide a family case the principles they lay down are important. Sometimes, however, the judges agree on the outcome of a case but give slightly different reasons for doing so. This leads to confusion as lower courts try to understand what the Supreme Court judges meant.
In the Supreme Court case Miller/McFarlane, Lord Nicholls and Lady Hale disagreed about what marital or family assets were. They agreed that the matrimonial home is normally a marital asset. But while Lord Nicholls defined marital property as everything except what the parties ‘bring with them into the marriage or acquire by inheritance or gift during the marriage’ (so most assets would be marital assets), Lady Hale thought that there were some assets that you could acquire during a marriage that stayed non-marital even though they were not gifts, inheritances, or pre-owned. And in respect of those assets, ‘the duration of the marriage may justify a departure from the yardstick of equality of division’.
She went on to say that:
The nature and the source of the property and the way the couple have run their lives may be taken into account in deciding how it should be shared. There may be other examples. Take, for example, a genuine dual career family where each party has worked throughout the marriage and certain assets have been pooled for the benefit of the family but others have not. There may be no relationship-generated needs or other disadvantages for which compensation is warranted. We can assume that the family [marital] assets, in the sense discussed earlier, should be divided equally. But it might well be fair to leave undisturbed whatever additional surplus each has accumulated during his or her working life.
Mrs Sharp argued that what Lady Hale said applied to her situation. She argued that this was a short marriage and that she and Mr Sharp were ‘a genuine dual career family’ and that they did not pool most of their money together. For example, they split utility bills equally, they went Dutch on restaurant bills, and she did not discuss how much her bonuses were with Mr Sharp. She also said that the fact that she bought Mr Sharp 3 Aston Martins as gifts showed that she had and was spending her own separate money not matrimonial money.
The Court of Appeal agreed with Mrs Sharp’s arguments and held that ‘where both spouses have largely been in full-time employment and where only some of their finances have been pooled, …fairness may well require a reduction from a full 50% share or the exclusion of some property from the 50% calculation’. The Court excluded Mrs Sharp’s savings from the marital assets and awarded Mr Sharp one of their two marital homes and a lump sum of £900,000
What does this mean for future cases?
This case had an unusual combination of facts. In most cases, the sharing concept is irrelevant because you can’t share what you don’t have. You have to meet each party’s needs first. In a ‘normal’ case giving each party somewhere to live and ensuring they have enough money to live on takes up all your assets – especially if there are children.
The case also doesn’t really apply to long marriages. There may be assets that have been kept separate and are not marital, but in a long marriage more assets are likely to have become mingled and marital and the source of those assets becomes less important over time. Moreover, in a long marriage both parties are more likely to have contributed equally, and whether that contribution is financial or though home-making or child-rearing, both are judged to be of equal value.
Feature Pic courtesy of Aaron Shumaker on Flickr – thanks!