Non-Matrimonial Assets – Assets Acquired Post-Separation

28 May 2024

I have written twice previously on this website about non-matrimonial assets but, the authorities referred to therein tended to have some emphasis upon assets acquired prior to the marriage whereas recently there have been two cases that focus on post-separation acquired assets.

As I said before, it is always worth emphasising that the phrase “product of the marital endeavour” has become the key phrase in this area.

Logically then, assets acquired post-separation are unlikely to be a product of the marital endeavour but then, that gives rise to the question of what amounts to “separation” and “marital” in this context.

DR v UG [2023] EWFC 68, Moor J:

This matter was, as is so often the case with the reported decisions, a big money case, in fact if anything that is an understatement in this case, where the main asset was the husband’s business interest that had sold, 3¾ years post-separation, for about £400m. The husband argued that the sharing principle and equal division did not apply because the husband’s business interest had been expertly assessed as being worth about a mere £33m at the time of the separation and that therefore he alone had generated the increase in value after the end of the marriage and, that that amounted to a special contribution.

Not unusually therefore this was a case where a special contribution argument overlapped with a non-matrimonial asset argument.

The special contribution argument failed because both parties had worked hard in their separate ways throughout the marriage and the husband’s work had not been particularly exceptional, with there being an element of windfall and just being in the right place at the right time that caused the company to achieve such a high price.

The non-matrimonial property argument also failed in this case, as arguably it was bound to do, because the business had existed and been developed throughout the marriage and, as per the contributions finding, the husband’s interest had greatly increased in value post-separation more by windfall than endeavour.  However, His Lordship clearly accepted that post separation endeavour could well be a good reason to depart from equality and, in the context of this case spoke by way of example of  situations with  more to do to “harvest” the (otherwise marital) asset or where the husband must remain part of the business to acquire the asset or if there had been a substantial and unreasonable delay by wife or, of course, if the asset was the result of a new venture by the husband which had created and developed since the breakdown of the marriage, which was this husband’s main argument.  This latter argument failed because there was no new venture as the business was trading and producing the product throughout the marriage that ultimately led to its very profitable sale and, it was due to the specialists within the company perfecting that product that the sale price was achieved, not the husband’s particular endeavour [71-77].

FT v JT [2023] EWFC 250, Recorder Nicholas Allen KC:

W’s current business was the main and valuable asset with the main issue being what the husband’s interest in it was going forward. It seems that there was no valuation of the business before the court but figures from about £30m to the low hundreds of millions are mentioned as the possible gross value of the business at the time.

There were factual disputes about the date of the separation and as to whether there had been a separation agreement but the latter was found not to have occurred, leaving the date of separation and post-separation endeavour as the main issues to decide what share H should receive in W’s business.

W was arguing for the date of separation being 16/8/20 when H left the FMH and went into rental accommodation, whereas H said that this was a trial separation and contended for the date of the wife’s Petition, 27/3/21.

The Learned Judge considered the authorities on date of separation [38-43] commenting that whilst there are multiple authorities on cohabitation there are less on separation, although “it is in many senses the obverse of cohabitation” and focusing on MB v EB (Preliminary Issues in Financial remedy Proceedings) [2019] 2 FLR 899 where Cohen J [51] cited Williams J in IX v IY (Financial Remedies: Unmatched Contributions) as looking for “the time at which the relationship had acquired sufficient mutuality of commitment to equate to marriage … the accumulation of markers of marriage which eventually will take the relationship over the threshold into a quasi-marital relationship” and stated that “that analysis can be applied to an attempt to define the date of the end of the marriage as much as to its commencement” before going on to say that “in most cases it is clear when one, if not both parties, to a marriage emotionally and physically disconnect from it” [54] (my emphasis).

The Learned Judge then looked at Mostyn J’s decision in B v S (Financial Remedy: Marital Property Regime) [2012] 2 FLR 502 in which the parties moving house together, making W a beneficiary of a trust, entertaining at their house together and going on holiday with the children together pointed towards the marriage continuing, and then at Santos v Santos [1972] Fam 247 in which Sachs LJ in considering the meaning of “living apart” said that that state of affairs did not exist ““while both parties recognise the marriage as subsisting. That involves considering attitudes of mind; and naturally the difficulty of judicially determining that attitude in a particular case may on occasions be great.” (the Learned Judge’s emphasis) and commented “In other words one or the other or both of the parties had to cease to recognise the marriage as subsisting for the state of affairs to exist.”

What is not clear entirely from that analysis is whether it was considered enough that one party ceases to recognise the marriage as subsisting but, that seems to be the case and, the Learned Judge concluded that although there had been some talk of a trial separation in early August 2020, by about the end of that month the separation had occurred, citing amongst other things that the husband had taken out a 12 month tenancy, that he only returned to the FMH to have contact with the children and that the wife wanted to delay formalising matters because of concerns about what would be said to the children, so that “it may not therefore be possible to identify a precise date when W decided that the marriage was permanently over but, even if it is not possible to identify such a date, I am satisfied that it took place far closer to the date of physical separation than the date of W’s divorce petition. Even if H held subjective views to the contrary for several months subsequently (which I do not consider to be the case) the necessary qualities of a relationship did not endure over that time.”

In considering post-separation endeavour, the Learned Judge considered DR v UG (above) and Hart v Hart [2018] 1 FLR 1283 (referred to in my previous articles) where Moylan LJ spoke of it not always being possible to make a clear identification of what is and is not matrimonial property, of assets that are both partly the product of marital endeavour and partly the product of a source external to the marriage, and of the exercise being more an art than a science.  The Learned Judge concluded that the wife’s business interests were partly the product of marital endeavour and partly the product of a source external to the marriage “namely unmatched post-separation endeavour”[71] (my emphasis).

The Learned Judge then determined that, as he had concluded that the separation was at the earlier date, the marital element was a relatively small one, because by then the business was “largely a different business to that which had previously existed” [72] (again my emphasis).

The end result was that the Learned Judge concluded 35% of the value of the wife’s business interests were matrimonial [82] and that H should receive a half share of that i.e. 17.5% of W’s business up to and including 2038 and 10% thereafter [99].

The following conclusions are suggested:

(i)      post separation endeavour is certainly capable of creating non-matrimonial assets that may well be treated as not subject to sharing;

(ii)     the date of separation is a factual issue to determine when the essential attributes of the marriage ceased to exist on evidence of the cessation of the necessary qualities of a marriage including emotional and physical disconnection from it from at least one party;

(iii)    to be a non-matrimonial, or part non-matrimonial asset, the post-separation endeavour in relation to that asset, or that part, will need to be shown as not arising from the marital endeavour.

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