Standish v Standish: What’s mine is mine, and what’s yours is yours?
Following two months of deliberation, the Supreme Court has released its judgment in the landmark appeal case of Standish v Standish. The Supreme Court found in favour of the husband who had argued that the source of funds was determinative where there is no feature to justify matrimonialisation in light of that. Or as the court explained it, the ‘matrimonialisation’ of an otherwise non matrimonial asset depends on the parties to a marriage, over time, treating an asset as shared between them.
The sharing principle and source of assets
To provide a brief legal overview, when it comes to the division of assets of a couple upon divorce, the English and Welsh Family Courts make a determination by consideration of a number of principles established from case law and the factors listed under section 25 of the Matrimonial Causes Act 1973.
The three most important such principles are needs, compensation and sharing. Of these, and of significance in this case, is the sharing principle, established in White v White [2000] UKHL 54 and Miller v Miller; McFarlane v McFarlane [2006] UKHL 24. This principle confirms that spouses are equal parties in the marriage and therefore should share the “the fruits of the matrimonial partnership”. In practical terms, this usually means the starting point for financial division of assets upon divorce is 50:50. However, while the sharing principle often provides a useful starting point for separating couples, the other principles, and factors considered by the court may often influence the balance of assets, resulting in an unequal division between the parties.
One factor for consideration is the source of assets. The family court broadly divides a couple’s assets into ‘matrimonial’ and ‘non-matrimonial’. Matrimonial assets are those which are the financial product of, or are generated by, the parties, during the marriage, whereas non-matrimonial assets are those which have not been. While matrimonial assets will always be subject to the sharing principle, non-matrimonial assets fall outside of a marriage and therefore, as the Supreme Court has confirmed, will not be. Non-matrimonial assets may include, for example, assets acquired before the marriage and inherited wealth.
Parties must also be alive to the risk that although some assets may begin in the marriage as non-matrimonial, they can become ‘matrimonialised’ through their use, integration with other assets and understandings of the parties. For example, if one party owns a home before the marriage and this later becomes the family home, the asset will generally be considered part of the marital pot.
Standish v Standish
The key dispute between parties in the matter of Standish v Standish, was this very issue. In other words, whether significantly valuable assets which were brought to the marriage by the husband were matrimonial or had later become matrimonialised. In effect, the parties disagreed as to how the sharing principle should be applied and the overall division of assets.
For background, Mr and Mrs Standish began their relationship in 2003, later marrying in 2005. They separated in 2020. At the time the relationship began, Mr Standish (“the husband”) already had a very successful career in the financial services industry. The husband had accumulated very significant wealth through this employment, broadly comprising of financial investments in bank accounts, a farm and farm business in Australia and a property in Melbourne. In 2004 these assets were valued at £57 million which, adjusting for inflation, today would be worth £155 million. At the time, comparatively, Mrs Standish’s (“the wife”) assets were very modest, consisting of a property in Melbourne, inheritance and some funds in bank accounts.
There were two significant financial events which took place in 2017. Firstly, £77 million of investment funds were transferred from the husband’s sole name to the wife’s sole name. Secondly, the wife was issued shares in the farming business. The husband’s decision to make these transfers were for tax planning reasons, taking advantage of his wife’s UK non-domicile status. The husband had received financial advice that by making this transfer, the assets would escape UK inheritance tax. Following this and a suitable period of time elapsing, the parties intended for the wife to place the assets in a discretionary trust in Jersey, for the benefit of their children. The choice to transfer the shares in the farming business were too for tax planning, to avoid the profits being taxed. Despite the parties’ intentions to put the investment funds into a trust, the wife never took those steps, meaning upon separation of parties these funds, representing the majority of the couple’s assets – were held in the wife’s sole name.
It was the husband’s position that the magnetic feature of the case was his overwhelming and unmatched contribution to the marriage by way of premarital wealth. Therefore, he said, the case should be dealt with on the basis of meeting the wife’s reasonable needs only, with the remainder of the assets to be held by him. In contrast, it was the wife’s position that the assets were matrimonial from the very outset of the marriage, but the transfer into her sole name in 2017 made those assets hers, because they had been transferred into her sole name and were therefore her non-matrimonial property.
In the first instance in the High Court (ARQ v YAQ [2022] EWFC 128), Mr Justice Moor held that the financial assets and shares in the family business were both to be treated as matrimonial property. Mr Justice Moor rejected the wife’s suggestion that upon transfer to her in 2017 the assets became separate property. Instead, he found, although the portfolio began in the marriage as non-matrimonial, they were matrimonialised by the tax planning exercise. Despite the assets being found to be matrimonial, Mr Justice Moor was careful not to ignore the pre-marital origins of most of the assets, consequently awarding 34% of the overall assets to the wife while the husband received 66%. The value of the wife’s awarded assets were £45 million.
The Court of Appeal
The parties cross-appealed Mr Justice Moor’s judgment. The husband’s position remained that the assets had not become matrimonialised by the 2017 transfer and that the critical factor to consider in the matter was the source of the assets. The wife’s position remained that the assets had not been matrimonialised and therefore were hers, with title being the critical factor. In the alternative that the assets were found to be subject to the sharing principle, the wife argued that Mr Justice Moor was unfair in not dividing the assets equally, given they were generated during a marriage of partnership.
The case went before the Court of Appeal (Standish v Standish [2024] EWCA Civ 567) in 2024. The court highlighted that in the application of the sharing principle the source of an asset is the critical factor and not the name of the owner, once again rejecting the wife’s submission that the portfolio became non-marital upon transfer to her. Lord Justice Moylan advised it would be nonsense to suggest the wife became the source of this wealth and stressed that source of wealth is a reflection of when and how an asset is generated.
However, where the Court of Appeal departed from Mr Justice Moor’s judgment was his conclusion that the assets became matrimonialised in 2017 upon legal transfer. This was on the basis that matrimonialisation had been determined by Mr Justice Moor by transfer of legal title alone, when legal title is not a determinative factor in deciding how wealth is to be characterised. In the case of Standish, the court pointed out that this was particularly significant, given the reason for transfer was for a tax scheme only. Therefore, the Court of Appeal concluded that there was no relevance of the 2017 transfer of title and therefore those assets remained non-marital and belonged to the husband. As a result, the Court of Appeal held that at least 75% of the 2017 assets were not matrimonial therefore reducing the wife’s total award by 40% to £25 million; that being 50% of the assets found to be matrimonial. 81% of total assets were therefore awarded to the husband while the wife received 19%.
The Court of Appeal decision in Standish was a landmark given that a £25 million reduction in a financial award is the largest reduction to a divorce settlement ever ordered by the English courts.
The Supreme Court
The wife appealed to the Supreme Court over 30th April and 1st May this year. She no longer submitted that the portfolio was her non-marital asset, but rather that the assets had indeed become matrimonialised, thereby challenging the Court of Appeal’s narrow interpretation of this process. The wife argued that once an asset is transferred between spouses without strings attached it should be subject to the sharing principle. Moreover, she argued that undue weight had been given to the source of the funds over intentions and conduct of parties during the marriage.
Key takeaways
The Supreme Court agreed with the outcome in the Court of Appeal. What can be seen from the Supreme Court’s judgment in this case, is confirmation of an increasingly pragmatic approach being taken to the question of matrimonialisation in the Family Courts.
This might be said to elevate source of assets over the importance of ‘mingling’ of non-matrimonial assets into the true family wealth. In fact, what the Supreme Court found to be vitally important was how the parties have been dealing with the asset and whether this shows that, over time, they have been treating the asset as shared between them. In this case, the court felt that the parties had not. So, the husband’s generation of the assets meant that he retained them in entirety, even though they had latterly been transferred into the wife’s hands alone for family purposes.
However, in any case, separating couples need to be cautious when considering the court’s findings in Standish against their own matter. The system used by the family court to determine division of marital assets upon separation is not formulaic and there will always be a number of unique factors in a couple’s case which will influence the court’s judgment. Most notably, Standish is untypically a very high value case, meaning that there was an abundance of assets available to meet both parties’ needs without the needs principle being considered.
If you are separating from your spouse and are wondering how the judgment on Standish may affect the outcome of your financial separation, get in touch with our legal experts at Blake Morgan for a consultation.
Share:
If we can assist you with anything in this article
Speak to a member of our family law team
Arrange A callHOW CAN WE HELP?
To get in touch with one of our legal experts please fill in your details.
Enjoy That? You Might Like These:
articles