- June 20, 2012
- By Kim Beatson
- 0 comments
Do Family Courts in England and Wales Discriminate Against Husbands?
Since White v White  1 AC 596,  2 FLR 981 the courts have frequently had to grapple with the issue of how to define and divide non-matrimonial property. Two recent cases illustrate this.
K v L: the facts
In K v L (Non-Matrimonial Property: Special Contribution)  EWCA Civ 550,  2 FLR 980, the parties started to live together in 1986. The wife was independently wealthy having inherited shares in her grandfather’s company, one of the largest companies in Israel. When the parties began to cohabit the wife’s shares were worth £290,000. They married first in Israel in 1987; however as the wife was Jewish and the husband Muslim their marriage was not recognised. The couple moved to England in 1991 and married here shortly after their arrival. By that time the wife’s shares were worth £680,000. In 1994 the parties purchased a modest semi worth £225,000 at final hearing. They lived at that property until they separated in April 2007 when the wife and three children (aged between 9 and 16) left the matrimonial home. By the time of the final hearing the property had been transferred to the husband. The wife had purchased a property nearby worth £345,000. Neither party worked at all during the marriage. In 2000 the wife had sold some shares for Elm. Those sale proceeds were used to buy two properties and for living expenses. Between 2000 and 2004 the wife received large bonus issues of shares. This caused her dividend income to increase from £38,000 pa between 1993 and 2001 to £180,000 pa between 2002 and 2008. By 2008/2009 the annual dividend figure was £460,000.
There was a significant increase in the value of shares, from £290,000 when the parties first started living together to £28.3m at the time of separation. By the time of the High Court hearing the shares were worth £57.4m.
The High Court hearing
Bodey J noted that neither party had earned income nor did they have any real earning capacity. By the time of the appeal the wife was 52 and the husband 49. The husband placed his capital needs at £2.5m. He wanted to buy a house in Regents Park for £2m and another property in Israel for £450,000. He placed his income needs at £105,000 pa. However, during the marriage the needs of the whole family had been only £79,000 pa prior to separation. The wife said she was content with her present home worth £345,000. She placed her future income needs at £117,000 pa for herself and the three children. The parties had always had a modest lifestyle having regard to the wife’s wealth. The judge analysed the s 25 factors noting in particular the wife’s contribution of her shares and noted that the husband had made no financial contribution.
The husband’s counsel Mr Pointer QC claimed that this was a long marriage, effectively 21 years. He said the starting point should be around equality with a reduction to reflect the fact that all the wealth came from the wife. Reference was made to the fact that the assets had increased 200 fold since the marriage, with substantial increases since 2000. Mr Pointer also referred to comment in Charman v Charman (No 4)  EWCA Civ 503,  1 FLR 1246 that it was unlikely for a non-contributing spouse to receive less than 30% of the total. He said the wife’s case that the husband should receive 10% would be ‘just not fair’. The husband sought £18m. The wife said that the husband should have his needs generously assessed but no more and she disputed the husband’s need for a £2m house worth 9 times more than the FMH. She offered £5m which she said would enable the husband to re-house at £2m and leave him with £3m which would provide a net income of £130,000 pa for the rest of his statistical life. Indeed this net income was four times the husband’s first budget of just £29,640 pa! The wife placed her income needs at £99,000 for herself and £25,000 for the children. Her schedules showed that during the marriage the parties had expenditure prior to separation of £79,000 (these increased significantly, as is so often the case, by the time of the Forms E). Both had made non-financial contributions to the family.
A point of great relevance was that all the assets were the shares inherited by the wife some 13 years before the parties first married. These assets were the family’s only means of support. The shares were still identifiable and remained in the wife’s name. Their increase in value was entirely due to passive growth. Should there be any sharing beyond that required to meet the husband’s needs generously assessed? Just as in Miller v Miller; McFarlane v McFarlane  UKHL 24,  1 FLR 1186 where the parties’ lavish standard of living was a ‘key factor’, here the modest standard of living was said by Bodey J to be key.
The husband was awarded £5m which gave him total assets of £5.3m plus his costs. To the writers this seems unfair to the husband, bearing in mind that the shares had increased in value from £290,000 when the parties started living together to over £57m by the time of trial. Moreover the increase in value of the shares was due entirely to passive growth rather than any positive action by either party either in terms of a contribution to the business or
astute investment decisions.
A further issue surrounded the date for calculating the pot. The wife’s counsel said it should be the date of separation in 2007. At that time the shares were only worth £28.3m as opposed to £57m at the time of the trial. The court disagreed, saying that Mr Pointer’s submission that it should be the value at the date of trial was in accordance with the authorities. This meant that the husband had received only 10% of the assets. Not surprisingly the husband appealed.
The husband contended that the award to him should have been in the sum of £18m. The question raised by the appeal was whether the judge erred in principle in ruling that the award to the husband should be limited to a generous assessment of his needs.
A number of arguments were put forward on behalf of the husband. First, it was argued that the judge’s reasoning betrayed discrimination prohibited by the modem principles of ancillary relief. Mr Pointer said Bodey J put great store on the fact that it was the wife who provided the family income; namely that the wife would do all she could by the provision of income and by performance of some of the household functions while the husband was relieved of the need to go out and earn an income and would perform other household functions. Mr Pointer said it would be invidious to rate one contribution as more significant than the other, which seems a perfectly reasonable point. However the Court of Appeal thought that Mr Pointer had ‘misread’ a paragraph in the judgment. They felt that Bodey J had found that it was the wife’s contribution of the shares as capital, rather than just as generators of past income, which was significant because it was only out of the proceeds of sale of the shares that the award to the husband could be made.
The Court of Appeal felt that Mr Pointer’s complaint of discrimination was based on a misunderstanding. They said classic exposition of the principle which outlaws a certain form of discrimination in the law of ancillary relief is that of Lord Nicholls in White v White  1 AC 596,  2 FLR 981 at 989, as follows:
‘But there is one principle of universal application which can be stated with confidence. In seeking to achieve a fair outcome there is no place for discrimination between husband and wife and their respective roles. Particularly a husband and wife share the activities of earning money, running their home and caring for their children. Traditionally the husband earned the money, and the wife looked after the home and the children. This traditional position of labour is no longer the order of the day. Frequently both parents work. Sometimes it is the wife who is the money earner and the husband runs the home and cares for the children during the day. But whatever the division of labour chosen by the husband and the wife, or forced upon them by circumstances, fairness requires that this should not prejudice or advantage either party. . . If, in their different ways, each contributed to the family, then in principle it matters not which of them earned the money and built up the assets. There should be no bias in favour of the money earner and against the homemaker and the child-carer.’
Wilson LJ gave the leading judgment in the Court of Appeal and said that what Lord Nicholls found unacceptable was discrimination in the division of labour within the family. They went on to say that Bodey J was careful to stress that in the present case neither party went out to work and their work in the home, although different, should be taken to be a contribution of equal value to the purpose of the award. However, did the House of Lords in White really intend to limit the non-discrimination principle to income only? Wilson LJ said robustly at para :
‘But the law does not adjure all discrimination. On the contrary it is of the essence of the judicial function to discriminate between different sets of facts and thus between different claims. What was outlawed was discrimination on the ground of superficial differences which, on analysis, do not reflect substantive differences – such, of course, as the grounds specified in Article 14 of the ECHR and, in the present context on the ground that the effort made by one party to the marriage, unlike that made by the other, seems to have resulted in financial reward. To find that on top of efforts equal value made by each party in the home the wife made financial contribution to the marriage of great importance is not to discriminate between parties in any unacceptable way; on the contrary it correctly recognises a substantive difference.’
However, with respect is this just semantics on the part of the learned judge?
The second point made by Mr Pointer was that the judge failed to have regard to the principle that ‘the importance of the source of the assets diminished over time’. These words come from the speech of Baroness Hale in Miller v Miller; McFarlane v McFarlane  UKHL 24,  1 FLR 1186. As authority for that proposition Baroness Hale referred to a passage in the speech of Lord Nicholls in White where he said: ‘The initial cash contribution made by Mr White’s father in the early days cannot carry much weight 33 years later.’
Wilson LJ indicated that there Lord Nicholls was referring to an interest free loan of £11,000 made to the parties in 1963 which had enabled Mr and Mrs White to purchase the farm upon which, until 1994, they had both worked and which by the time of the trial in 1996 was worth £3.5m. The Court of Appeal in K v L asked whether those comments justified the absolute terms of Baroness Hales’ proposition. Wilson LJ quoted further from Lord Nicholls in Miller/McFarlane as follows:
‘Non-matrimonial property represents contribution to the marriage by one of the parties. Sometimes as the years pass the weight fairly to be attributed to this contribution will diminish, sometimes it will not. After many years of a marriage the continuing weight to be attributed to modest savings introduced by one party at the outset of the marriage may well be different from the weight attributable to a valuable heirloom intended to be retained in specie.’
Wilson LJ therefore comments:
‘Thus with respect to Baroness Hale, I believe the true proposition is that the importance of the source of the assets may diminish over time. Three situations come to mind:
a) over time matrimonial property and such value has been acquired so as to diminish the initial contribution of one spouse of non-matrimonial property.
b) over time non-matrimonial property initially contributed has been mixed with matrimonial property in circumstances in which the contributor may be said to have accepted that it should be treated as matrimonial property or in which, at any rate, the task of identifying its current value is too difficult.
c) the contributor of non-matrimonial property has chosen to invest in the purchase and matrimonial home which, although vested in his or her sole name has – as in most cases one would expect – come over time to be treated by the parties as an essential item of matrimonial property.’
Wilson went on to say that there was nothing in fact in the present case which justified the conclusion that as the long marriage in K v L continued, there was a diminution in the importance of the source of the parties’ entire wealth at all times ring fenced by share certificates in the wife’s sole name which to a large extent were kept separately and left to reproduce themselves and to grow in value.
Mr Pointer’s third point was that the judge failed to follow the guidance given by the Court in Charman v Charman (No 4) [2007) EWCA Civ 503,  1 FLR 1246 that fair allowance or special contribution within the sharing principle would be most unlikely to give rise to a departure from equality further than to 66.6% to 33.3%. One third of £57m is, of course, £19m so the husband’s claim to £18m was well pitched. However the Court of Appeal said that the phrase ‘a special contribution’ is now a term of art, which was used to describe a contribution entirely different of that of non-matrimonial property. The Court of Appeal said in Charman at para :
‘The notion of a special contribution to the welfare of the family will not successfully have been pledged on inherent gender discrimination unless it is accepted that such a contribution can, in principle, take a number of forms; that it can be non-financial as well as financial; and it can thus be made by a party who has been exclusively that of a home maker. Nonetheless in practice the claim to has made a special contribution seems so far to have arisen only in cases of substantial wealth generated by a party’s success in business during the marriage.’
Thus the Court of Appeal said in K v L that the special contribution arises in circumstances in which a spouse’s contribution, direct or indirect, is a creation of matrimonial property has been so extraordinary as to dictate a departure within the sharing principle from the ordinary consequence of equal division. However this is not a good point. Either the wife’s contribution is a special contribution and the husband should receive say one third or it is not, in which case the assets should be shared more equally.
Mr Pointer’s final point was that in relation to wards in 11 other reported decisions ‘involving’ non-matrimonial property and beginning with White in 2000, the award of only 9.3% of the parties’ assets is appealably disproportionate. However the Court of Appeal in K v L said enquiry into the facts of those cases (White, GW v RW, C v C) reveals that in each case there was a substantial element of matrimonial as well as non-matrimonial property. In only one case cited by Mr Pointer was the award made solely out of non-matrimonial property, ie the decision of Baron J in NA v MA  EWHC 2900 (Fam),  1 FLR 1760 where the award was 23%. In NA v MA the assets had a value of £40m and the applicant’s needs were estimated at £9.3m the amount of her award. The Court of Appeal said, in K v L: ‘That it there amounted to 23% demonstrates nothing’.
What the Court of Appeal did not say is that the wife’s award in NA v MA was perhaps constrained or tempered by a post-nuptial agreement which would have provided the wife with £3m capital and income provision of £240,000 pa for joint lives. It is possible, in the writers’ submission, that there would have been a more generous award if it had not been for the agreement. Baron J did not regard W as bound by the agreement. However counsel on both sides in NA v MA were criticised for the lack of preparation and lack of analysis. There was for example no detailed analysis of the wife’s income needs and the multiplier and multiplicand. She was asked for £450,000 and a multiplier of 15 years. The husband offered through his counsel £240,000 for 12 years.
Returning to K v L, the Court of Appeal said that what was more interesting during the hearing of the K v L case was when ‘we asked Mr Pointer to show us a reported decision in which the assets were entirely non-matrimonial and in which, by reference to the sharing principle, the Applicant secured an award in excess of her or his needs’. He confessed to be unable to do so. Such a decision will no doubt be made – ‘but not in this Court today’. However the writers do question this. None of the assets in NA v MA could be said to be matrimonial in the narrow sense of the word. Most of them comprised the husband’s interests in various companies.
S v AG
In S v AG (Financial Remedy: Lottery Prize)  EWHC 2637 (Fam),  1 FLR 651 Mostyn J handed down judgment in what is thought to be the first English financial relief case involving the distribution of a National Lottery windfall, The court had to firstly determine whether the lottery winnings constituted matrimonial or non-matrimonial property, and then decide how these should be fairly divided, if at all.
This issue had already arisen in other jurisdictions. The problem that such a win would cause was identified by Mance LJ as he then was in Cowan v Cowan  EWCA Civ 679,  2 FLR 192:
‘Should this asset be viewed like any sudden accretion to the value of the joint home or other matrimonial investment due to market movements? Or might it, in some circumstances at least, be more analogous to property brought into a marriage or inherited property. Would it for example make any difference, if the other spouse was opposed to all gaming as a waste of money, or if the very limited money expended came from inherited property?’
The facts can be briefly summarised as follows. The parties were Colombian and had two adult children. They married in 1984. In December 1999, the wife and a friend entered into a written syndicate agreement for the National Lottery Big Draw. The ticket won £1m, the money was shared between the wife and a friend, so a cheque for £500,000 was issued to the wife. The wife used the majority of the money to purchase a property for £275,000 in her sole name in 2000. The property was renovated to the tune of £90,000 and shortly afterwards became the family home. The marriage was an unhappy one, involving alcohol abuse on the part of the husband and incidents of domestic violence. The parties separated in 2003. The husband registered a matrimonial home rights notice against the property in 2006 after he had issued divorce proceedings in the UK. The wife issued for divorce in Columbia and re-mortgaged the property for £300,000 which she paid to the second respondent in the case. Despite the husband obtaining a decree nisi in England it was the Colombian court who dissolved the marriage on the wife’s petition. In 2010, the husband applied under the Matrimonial Finance and Property Act 1984 for leave to apply for financial relief following an overseas divorce and was granted permission.
Matrimonial or non-matrimonial?
The case came before Mostyn J, who cited at length from the judgment in K v L and was also guided by the fundamental principles established in Miller/McFarlane. He reiterated the strong distinction between matrimonial and non-matrimonial property and the fact that the importance of the source of the assets may diminish over time.
After considering the Australian authorities, the judge held the initial receipt of the winnings to be non-matrimonial property as the wife had unilaterally bought the ticket from her own income without the knowledge of the husband. It was akin to an ‘external donation’, much like the inherited shares in K v L. Interestingly, the judge indicated that if the couple had operated a syndicate where both were aware that the tickets had been bought and agreed to this, the prize would have been regarded as matrimonial property.
Crucially, the judge went on to say that when the wife purchased the property which became the matrimonial home, she converted that part of her non-matrimonial asset into matrimonial property. He specifically referred to the remarks of Lord Nicholls in Miller/McFarlane, that the matrimonial home should normally be designated matrimonial property, whatever its source. On this basis, the husband was entitled to a share of the capital.
A fair division?
When determining a fair division, Mostyn J applied the needs principle as a first port of call. This was a long marriage and both parties needed to be able to provide for themselves in old age. The husband worked as a kitchen porter earning £1,217 pm net. He lived in a one bedroom Housing Association flat. The husband’s housing needs were met on his current income, but he had an urgent need to make provision for his retirement. His needs were £937 pm, or £11,250 pa. £11,250 for a man of 65 gave a Duxbury award of £82,020 (making an allowance for the state pension). On that basis, the wife would be left with capital of just over £350,000.
The judge then applied the sharing principle. Given the relatively short period of time that the husband actually lived in the property and the fact that initial receipt of the winnings was non matrimonial, he held that he was not entitled to anything like an equal share. He held that a share of 15%-20% of the asset to the husband would be a fair division. He was therefore awarded £85,000 on a clean break basis. The award was therefore based almost entirely on the husband’s needs and the sharing principle was hardly engaged.
No gender discrimination?
The award in K v L, a long marriage with children, contrasts sharply with the outcome in Miller, where the marriage was less than 3 years and there were no children. Famously in Miller the wife was awarded a lump sum of £5m out of a matrimonial acquest of between £12m and £17m. The husband’s total wealth, taking into account the infamous New Star shares which were brought by the husband to the marriage at its outset, was estimated to be in the order of £30m – £36m. Could the husband’s wealth in Miller comprising as it largely did of shares be said more matrimonial than the wife’s shares in K v L? The authors submit not. Indeed Lord Nicholls said at para : ‘The husband brought substantial wealth into the marriage at its outset. That was
non-matrimonial property’ Lord Nicholls continued at para :
‘Plainly the accretion to the husband’s wealth during the marriage, as a result of work he did during the marriage was very great indeed.’
Would this finding not have justified the court in K v L awarding the husband a larger share on the basis that neither spouse had worked hard to increase the value of the wealth? The husband’s appeal in Miller was based partly on the proposition that the award was way above the wife’s needs and that she would be able to re-establish herself in life within a relatively short time with a much less generous award. She had worked until shortly before the marriage earning circa £85,000 pa. It was probable that she would be able to resume her career. This is in complete contrast to the husband in K v L who had never worked and of whom it was never suggested would return to work. Baroness Hale in Miller acknowledged the award was ‘undoubtedly more than [the wife] would need to get herself back to where she would have been had the marriage not taken place’. Despite this, their Lordships heavily engaged the sharing principle and held that Mrs Miller was entitled to a generous share in the assets. The appeal was, as we all know, dismissed.
The authors consider that it is tempting to draw the conclusion that there is still a degree of gender discrimination within the court system.
As for the lotto
S v AG does raise some interesting. quandaries for the future. The judgment seems to suggest that if the wife had not used the money for the benefit of her family, it would have been deemed non-matrimonial property and she would have been entitled to keep the whole amount. Would that be just? The husband was not an attractive character – the parties had separated after a serious incident of domestic violence against the wife. Is there discrimination here too? Would the decision have been any different had it been the husband who had won the lottery? It might be that the judge lost sympathy with the husband. However the wife was not an especially attractive character either as she had mortgaged the property to a third party who had been joined into the proceedings. Furthermore, is it right that an individual using money to gamble rather than provide for their family should be the sole beneficiary of any windfall arising from that gambling? It will be interesting to see how the court grapples with the next divorce case involving lottery winnings. It could be you!
This article was written with Lehna Hewitt and was published by Family Law (a publishing imprint of Jordan Publishing Ltd) in the June 2012 issue of the journal Family Law.