Today, 2 July, Lord Burrows handed down the Supreme Court judgement in respect of the wife’s appeal against a decision of the Court of Appeal in the case of Standish v Standish.

The Court has given guidance as to the treatment of assets owned by one party prior to the marriage and circumstances in which they become what lawyers know as “matrimonialised” so as to form part of the pot of assets to be shared on divorce.

In this case, Mr and Mrs Standish married when Mr Standish was already an independently wealthy man after a very successful career in financial services. They married in 2005 and, having had two children, separated in 2020.

Prior to separation for the purposes of reducing the Inheritance Tax bill for his children on his death, Mr Standish transferred in excess of £77million to Mrs Standish on the understanding that the money would be placed into a Trust. Mrs Standish did not place the money into Trust and still had the money invested in her name at the time of the divorce.

At this stage it is important to understand that over recent years principles have been established as to how assets are treated when a couple of divorce , particularly in cases when some of those assets may have been owned by one party prior to marriage or have been received by one party during the marriage, for example, by way of inheritance.

Those principles can be summarised as follows:

1. Needs. It is important that, provided there are sufficient assets to do so, both parties needs are met by the settlement;
2. Compensation. If one of the party has given up valuable earning opportunities as a result of their marriage then they can seek compensation for that;
3. Sharing principle. Assets of the marriage partnership should be shared, and the starting point is that they should be shared equally;
4. There is absolutely no discrimination in favour of the main breadwinner as against the homemaker: “the non-discrimination principle”

When dealing with Mr and Mrs Standish’s divorce settlement the Judge who first dealt with the case said that the monies in Mrs Standish’s name were matrimonial property and, as a result of that, the sharing principle applied to those monies. However, because of the source of those funds (ie Mr Standish’s premarital wealth) the sharing principle would not be applied on a 50/50 basis but rather a 60/40 basis in Mr Standish’s favour.

Neither Mr or Mrs Standish liked this outcome and they both appealed to the Court of Appeal.

The Court of Appeal decided that the proportion of monies in Mrs Standish’s name which represented Mr Standish’s premarital assets (75% of the funds in her name) belonged to Mr Standish and were not matrimonial funds. The remaining 25% of the monies in Mrs Standish’s name were matrimonial and should be shared equally between them. Mr Standish therefore received the first 75% of those monies and half of the remaining 25%. On that occasion the Court of Appeal decided that even though the monies had been transferred into Mrs Standish’s name they did not form part of the matrimonial property. They had not been “matrimonialised”.

The act of transferring the funds did not in itself convert the monies to matrimonial funds.

Mr Standish presumably was content with this outcome because he did not make any further appeal. Mrs Standish however, and perhaps not surprisingly, was unhappy with the outcome and appealed to the Supreme Court. Her argument was that the Court of Appeal put too much weight on the source of the funds and that the transfer of the funds into her name was effectively a gift to her.

Today, the Supreme Court dismissed Mrs Standish’s appeal and although they did not necessarily agree with all of the reasons set out by the Court of Appeal, they agreed with the decision that had been made.

The Supreme Court has now given a really helpful summary of the current legal position and this is something that will make keen reading for all lawyers dealing with family law.

In summary, the Supreme Court today confirmed:

1. There is a distinction between matrimonial and non-matrimonial funds. The distinction turns on the source of those monies. Usually, non-matrimonial funds were owned pre-marriage or received during the marriage by way of inheritance. By way of contrast matrimonial assets were the common endeavour or “the fruits of the marriage partnership”;
2. Non-matrimonial property is not subject to the sharing principle. It can still be subject to the principle of needs and compensation if the facts of the case require it;
3. The sharing of matrimonial property is normally on an equal/ 50/50 basis;
4. It is possible that an asset that starts out as non-matrimonial can be converted to matrimonial property and therefore be subject to the principle of sharing. Lawyers call that process “matrimonilasation”. The Supreme Court have said the question is whether that transformation has actually occurred and that in assessing that it is important to consider how the parties have dealt with the asset over time. Have they treated the asset as shared? If not, then it does not matter whose name that asset is held in, what is important is the source of the monies. Applying that to the case of Mr and Mrs Standish, the Supreme Court concluded that they did not treat that money as shared. The intention behind the transfer to Mrs Standish was to save Inheritance Tax for the benefit of the children and not to benefit Mrs Standish herself. The funds were never treated as shared funds and, as a result, were never matrimonialised.

Whilst most divorce cases do not involve assets of such significantly high value, the principles of matrimonial and non-matrimonial property are dealt with by divorce lawyers on a daily basis. This is becoming increasingly the case as a result of people marrying later in life , often second marriages, after they have already accumulated wealth.

It is important to get expert advice at an early stage in any divorce case so as to fully understand your legal position. In cases where there are non-matrimonial assets, where one party perhaps brought in assets and the other came to the marriage with little, then it is even more important to get expert advice at the outset. Parties considering marriage when they have already accumulated wealth should also consider entering into a Premarital or Prenuptial Agreement. If they have already married and left it too late to do a Premarital Agreement, they can consider a Post Marital Agreement to confirm how the parties agree that assets brought in to the marriage should be treated on divorce.

Here at Taylor Emmet we have a team of expert lawyers who can guide and support you through the process of drawing up a Premarital or Post marital Agreement, or ensure that you get the best advice and representation in divorce settlement negotiations to ensure a fair outcome.