Background
The case involved significant assets totalling £132.6 million, which largely derived from Husband’s successful career. Husband (aged 72) had retired in 2007. Wife (aged 57) was a homemaker with modest pre-marital assets.
Husband was born in the UK and Wife was born in Australia. Consequently, in 2017, Husband transferred, amongst other things, £80 million in investment funds (the ‘2017 assets’) to Wife for tax reasons, in the light of Wife’s non-domiciled status. It had been intended that those investment funds would be placed into discretionary trusts in Jersey for the benefit of the parties’ children. However, at the time of the court proceedings, this had not been done and the assets remained held in Wife’s sole name.
First instance decision
Consequently, at the time of the first instance decision (ARQ v YAQ [2022] EWFC 128), £95.7 million of the £132.6 million assets were held in Wife’s name, with the remaining £36.9 million being held in Husband’s name.
The first instance judge determined that £112.6 million was matrimonial property, with a £20 million farm belonging to Husband being non-matrimonial property. Accordingly, the Judge awarded Wife £45 million (or 40% of the matrimonial property/36% of the total assets), with Husband receiving £87.6 million (or 60% of the matrimonial property/66% of the total assets). The Judge held that Husband was entitled to more than 50% of the matrimonial property because the 2017 assets etc. were transferred to Wife towards the end of the marriage.
Both Husband and Wife appealed to the Court of Appeal.
Court of Appeal
Whilst Wife’s appeal was dismissed, the Court of Appeal allowed Husband’s appeal, finding that the first instance decision was incorrect in finding that the entirety of the 2017 assets were matrimonial property. Instead, the Court of Appeal found that only 25% of the 2017 assets could be said to be matrimonial property (25% amounting to Husband’s earnings between 2004 and 2007, during which period Wife contributed towards the family as homemaker). Thus, the remaining 75% of the 2017 assets were non-matrimonial in nature.
Wife’s award was consequently reduced to £25 million, with Husband receiving around £107 million.
Wife further appealed to the Supreme Court, arguing that the Court of Appeal had placed too much emphasis on the source of the 2017 assets, rather than their title.
Supreme Court
The Supreme Court dismissed Wife’s appeal and determined that the source of the assets are important in distinguishing between matrimonial and non-matrimonial property.
Whilst non-matrimonial property can become matrimonial property through the process of matrimonialisation, this involves the parties treating the property as shared over a sufficient period of time to enable those dealings to be treated as ‘settled’. Transferring property between spouses for tax purposes is not by itself sufficient to show matrimonialisation. Indeed, the Supreme Court noted that the intention of saving tax was to benefit the children (who would otherwise be the ones having to pay that tax in the future), rather than Wife.
Importantly, the Supreme Court also made it clear that it is only matrimonial property (rather than non-matrimonial property) which is subject to the sharing principle. Non-matrimonial property may still be utilised where, for example, a party’s needs require it. However, non-matrimonial property is not subject to the sharing principle of equality as the starting point in seeking to resolve financial matters arising from divorce.
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