Standish v Standish: the landmark judgment that protects pre-marriage wealth

The Supreme Court recently delivered a long-awaited judgment in the case of Standish v Standish. The Court upheld the Court of Appeal’s decision, delivered almost a year ago, that in financial proceedings on divorce, assets which were acquired in their entirety by one party before the marriage would not be subject to the sharing principle.

Standish v Standish: what happened?

In Standish, the total assets available to the parties were approximately £132 million. Of this, £80 million was accrued by the husband before the marriage. Shortly before the couple separated, these funds were transferred into the wife’s name for tax reasons and held on trust for the benefit of their children.

The specific question for the court was whether the assets acquired by the husband before their marriage should be ring-fenced or shared between the parties.

In the first instance, the court held that, although most of the invested funds belonged to the husband before the marriage (and were therefore non-matrimonial), the fact that they had been transferred to the wife meant that they had become ‘matrimonialised’ and were therefore subject to the sharing principle. Ultimately, the court ordered that the total ‘pot’ should be divided between the parties 60/40 in the husband’s favour.

Both parties appealed the court’s decision, with the wife seeking equality and the husband seeking that the pre-marital assets should be ring-fenced entirely (protected from being divided).

Court of Appeal decision: pre-marital assets should be ring-fenced

The Court of Appeal agreed with the husband that the pre-marital assets should be ring-fenced, and determined that the vast majority of the funds transferred to the wife remained non-matrimonial, irrespective of the transfer. It stated that the question for a court when determining whether an asset should be matrimonial or not was its source rather than its ownership.

Lord Justice Moylan, the lead judge hearing the appeal, stated that “The concept of matrimonalisation should be applied narrowly” and set out three criteria for a court to assess in determining whether assets accrued in their entirety before a marriage would become matrimonialised, and thus available for sharing.

1. Whether the percentage of the assets said to be non-matrimonial is not significant enough to justify investigation by the court.
2. Whether, and the extent to which, the non-matrimonial property has been mixed with matrimonial property.
3. Where the non-matrimonial property was used in the purchase of the family home (it is a long-established principle that the family home is a matrimonial asset irrespective of its source).

The Court of Appeal’s decision meant the wife’s share of the assets was limited to £25 million (approximately 50% of the marital assets), although this award was subject to an assessment of whether the lower award was still capable of meeting her needs. The wife appealed the decision.

The Supreme Court’s decision

The Supreme Court dismissed the wife’s appeal and upheld the decision of the Court of Appeal.

Lord Burrows and Lord Stephens delivered the judgment, stating: “There is a conceptual distinction between matrimonial and non-matrimonial property… non-matrimonial property is typically pre-marital property brought into the marriage by one of the parties, or property acquired by one of the parties by external inheritance or gift. In contrast, matrimonial property comprises the fruits of the marriage partnership or reflects the marriage partnership or is the product of the parties’ common endeavour.” And, “The time has come to make clear that non-matrimonial property should not be subject to the sharing principle (although non-matrimonial property can be subject to the principles of needs and compensation).”

The key principles clarified within the Standish v Standish judgment are:

• There is a distinction between matrimonial and non-matrimonial property based on the source of the assets, rather than who has the title to the assets.
• Non-matrimonial property should not be subject to the sharing principle (though it can be subject to needs and/or compensation), and the distinction between the two is meaningless if the sharing principle is applied to both.
• The sharing of matrimonial property should normally be on an equal basis (this is the starting point), but there can be justified departures (based on needs).
• What starts as non-matrimonial property may become matrimonial property, i.e., matrimonialisation. The important question about any facts is whether that transformation has occurred.

The end of ‘matrimonialisation’?

The effect of the Standish v Standish decision on cases dealt with by the financial remedy courts on a day-to-day basis remains to be seen. Standish, following the Court of Appeal’s decision, has been good law and relied on by practitioners for almost a year.

Most cases in the financial remedy court are ‘needs’ cases. These are cases in which a court may need to consider an order for an unequal division of the available assets to ensure both parties can meet their housing and income needs. It is long established that ‘needs’ cases can involve assets worth in the low millions.

Arguably, the Standish ruling affects only larger money cases in which the marital assets can unquestionably meet both parties’ needs when simply divided equally.

In lower value cases, there will almost certainly be cases that judges will, whilst paying lip service to Standish, still be able to make the same decisions as they would have done previously.

What does the Standish v Standish judgment mean for me?

It is important to bear in mind that the Supreme Court’s decision does open the door to the possibility that judges will be more willing to undertake an analysis of whether a given asset belongs to both parties or just one of them.

Separating couples may find themselves increasingly having to consider how they treat assets they bring into a marriage, if they wish to avoid them being ’matrimonialised’, by, for example, being used to purchase, or reduce the mortgage balance on, the family home. The parties must also be aware that it is the source of that asset, rather than the title, which is relevant. Funds, or property, acquired in their entirety by one party before their marriage, transferred to the other for tax reasons and estate planning, do not become ‘matrimonialised’.

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