Husband seeks deviation from sharing principle, claims wealth is pre-marital

    In the case of MCJ v MAJ [2016] EWHC 1672 (Fam), a husband sought to deviate from the sharing principle on the basis that his wealth had accrued before the marriage and that the wife should be left with just her needs met.

    The husband and wife married in 2000. At the time of their marriage the husband was aged 68 and the wife was aged 47. This was the husband’s second marriage, the first having lasted almost 30 years before his first wife died in 1987.

    The case involved total wealth of between £10.5 and £11.6 million. The husband advanced his case on the basis that he established the majority of his wealth prior to his second marriage. It was the husband’s position that his wealth had been built up over a long working life whilst married to his first wife.

    The wife’s claims were advanced on the basis of a full sharing entitlement. She relied not only on the existence of clear promises from the husband that she says were made to her at the beginning of their relationship but also many years of hard work helping the husband run two care home businesses. It was the wife’s position that the two care homes were on the brink of insolvency when she met the husband and she orchestrated their turnaround. The wife’s contribution towards the success of those companies was disputed by the husband.

    Sitting in the Royal Courts of Justice, Roberts J held that she accepted the rigorous approach of (1) whether the existence of any pre-marital property should be reflected in the outcome given the length of the marriage and any “mingling”; (2) if so, the extent to which pre-marital property should be excluded from the sharing principle; and (3) the equal division of the remaining property subject to cross-check of fairness and need. Roberts J sought guidance from the recent Mostyn J case of JL v SL (No 2) (Appeal: Non-Matrimonial Property) [2014] EWHC 360 (Fam). However, Roberts J held that sometimes there will be cases where there is simply not enough reliable information to establish the crystallised value of a company at a certain point in time. Roberts J felt this case was a perfect example of the conundrum.

    In reaching her judgment, Roberts J also sought guidance from N v F (Financial Orders: Pre-acquired Wealth) in which Mostyn J established that the court should ask whether it could be said that such financial ‘mingling’ provides a foundation for an argument that a party’s pre-martial property has become part of the economic life of the marriage. In N v F (Financial Orders: Pre-acquired Wealth) the £2 million the husband had brought into the marriage was well and truly ‘mingled’ and the “bedrock on which the marriage was founded”. Roberts J did not reach the same conclusion here.

    Roberts J felt that income generated from a capital assets – thereby providing ready expenditure to the couple – does not change the fundamental nature of that asset. Roberts J compared such a capital contribution to marriage to that of inheritance. If one party receives substantial inheritance prior to their marriage and the parties then use some of the income generated by that asset to fund their lifestyles, that itself does not cause the asset to become matrimonial. Roberts J was careful to note that the asset itself must be preserved from the marriage for this to apply.

    In respect of the parties’ arguments, Roberts J was unable to find that the husband had specifically agreed to transfer the wife a 50% interests in one of the properties, prior to the marriage and that it was even more unlikely that he would have agreed to part with 50% of his entire wealth. Roberts J believed the wife’s evidence that she played a substantial role in the turnaround of the two care homes and that the husband had failed to properly acknowledge this.

    Accordingly, Roberts J established that a distinction needed to be drawn between the wife’s strict entitlement to her share of the company proceeds and her claim to 50% of the value of the matrimonial pot.