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Court of Appeal departs from equal sharing principle for successful business woman

14th June 2017 - Emma Williams
Court of Appeal departs from equal sharing principle for successful business woman

The Court of Appeal has taken the significant step in departing from the sharing principle established by the House of Lords in White v White in a divorce between a very successful energy trader, Julie Sharp, and her IT consultant husband.

Back in 2015, High Court judge Sir Peter Singer found that there should be a 50/50 division of the assets, which amounted to Mr Sharp being awarded £2.725 million of the marital assets on a clean break basis. Mrs Sharp appealed this ruling on the basis that there were two related, but distinct, features marked out by the House of Lords in Miller v Miller for a different approach to that of equal division. The first being that this was a short, dual career, childless marriage and the second that the parties had kept their finances separate. It was therefore Mrs Sharps case that her ex-husband should only be awarded £1.3 million (half of the combined value of the two properties only). However, it was Mr Sharps case that marriage is an equal partnership and the principles established in White v White were intended for universal application.

Providing a brief background to this case, the parties began living together at the end of 2007 and married in June 2009. Mrs Sharp petitioned for divorce in December 2013, after Mr Sharp had, by at least February 2013, started a clandestine affair. Despite Mrs Sharps suspicions, he only admitted to this affair when giving oral evidence in May 2015. This amounted to a six-year relationship in total, a period which Sir Peter Singer described as not so desperately short … as some, but still by no means lengthy.

When the parties first married, they had relatively modest finances, earning around £100,000 each per annum. However over the central five years of the relationship Mrs Sharp received a very significant £10.5 million in bonuses in her role as a wholesale fuel trader. Both of the properties purchased during the course of the relationship where paid for exclusively by Mrs Sharp, although they were both held in joint names. Mr Sharp worked as an IT consultant during the majority of the relationship but took redundancy in October 2012 in order to project-manage the extensive renovations undertaken on the second house. Further, the couple kept their finances mostly separate during the relationship, often paying half of any utility bills and not infrequently splitting restaurant bills between them. Although the husband was aware that the wife received substantial bonuses during the period, he was never privy to the details and, in addition to providing the total purchase price of the two houses, the wife fully funded the couples various holidays and bought a series of three Aston Martin cars for the husband.

In his discussion on the case, Lord Justice McFarlane stated that:

Nothing that is said in this judgment is intended in any manner to unsettle the clear understanding that has been reached post-White on the approach that is to be taken to the vast majority of cases. The focus of the present appeal, which is very narrow, is upon whether there is a fringe of cases that may lie outside the equal sharing principle.

He was keen to emphasise that consistent and established principles are the welcome fruit of a jurisdiction founded upon clearly understood principles and that he was not looking to rock the boat in this area of law. This statement at the outset of this judgment is crucial to note when considering the implications of this decision going forward.

In coming to his conclusion, Lord Justice McFarlane considered the passages in White, Miller, Foster and Charman where what has become known as the sharing principle was established. He considered the Equality section of Lord Nicholls speech in White, commenting that Lord Nicholls expressly disavowed the establishment of a presumption or starting point of equality and considered his use of the word yardstick when discussing equality as an indication that fairness will sometimes require an outcome not based on equal shares. When addressing Lord Nicholls comments about there being no bias in favour of the money-earner over the home-maker, Lord Justice McFarlane said that this was only relevant in this case in the final few months of the marriage when Mr Sharp left work to project-manage the renovation work of their new home. In addition to this, Lord Justice McFarlane considered Lord Nicholls judgment in Miller where he said that the yardstick of equality is to be applied as an aid, not a rule… A short marriage is no less a partnership of equals than a long marriage. The difference is that a short marriage has been less enduring. In the nature of things this will affect the quantum of the financial fruits of the partnership. This is crucial as, while it recognises the principle of an equal partnership in all marriages, it highlights where judicial discretion can be exercised in short marriage cases where the facts merit a departure from the sharing principle in order to achieve fairness.

Moving on to discuss Hale LJs speech in Foster, Lord Justice McFarlane noted that she said the consideration should be what each of the parties had contributed to the assets. The assessment of the contributions highlights the fact that both parties worked during the majority of the marriage and did not have any children. This meant there was an equal level of contribution to the welfare of the family for most of the marriage. Considering that Mrs Sharps financial contributions to the marriage were so much greater than Mr Sharps, the minimal difference in contribution to the welfare of the family was not seen as enough to offset the financial disparity, along with the fact that the husband had an affair. Lord Justice McFarlane held that in this case:

The husband made no contribution to the source of the wifes bonuses and this is not a case where, save in the final year, the husband is said to have contributed more to the home life or welfare of the family than the wife. This case is, therefore, a non-business partnership, non-family asset case where the bulk (indeed effectively all) of the property has been generated by the wife.

This judgment is significant in the law of financial remedy proceedings as it undertakes a thorough analysis of the precedent establishing the sharing principle and reinforces that this principle underpins the law when considering the division of a marital assets. However, the most significant impact of this decision is that the Court of Appeal has provided some guidance for cases which merit a departure from equal division, notably where there are two bread-winners in a childless marriage. This is important as there will be more and more cases coming before the courts where there are two bread winners as it becomes more common for women to be financially independent and to remain in employment after marriage.

McFarlane LJ allowed Mrs Sharps appeal and Mr Sharp was awarded £1.3 million (half of the two properties) plus an additional amount of £700,000 to account for three factors: (a) the standard of living enjoyed during the marriage; (b) the need for a modest capital fund in order to live in the property that he is to retain; and (c) some share in the assets held by the wife.

This judgment should not be seen as a radical move away from the established sharing principle, but as providing additional guidance in situations which require a departure from this in order to achieve fairness, which is the overarching principle upon which all of our law sits. Lord Justice McFarlane echoed this in concluding his judgment:

Mr Feehan is therefore right that the combination of potentially relevant factors (short marriage, no children, dual incomes and separate finances) is sufficient to justify a departure from the equal sharing principle in order to achieve overall fairness between these parties.

To read the Sharp v Sharp judgment in full, click here.

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