When a spouse’s wealth has been inherited rather than earned, it cannot be regarded in any sense as truly “matrimonial”. So if the couple divorces, to what extent should one party share in the assets of the other?
This is an area of the law frequently highlighted by advocates of legislation for prenuptial agreements. They cite the uncertainty of “judicial discretion”. They argue that it shouldn’t be up to the judiciary to decide, but that it should be for Parliament to legislate in statute form.
Critics of this inflexible stance, myself included, would argue that if prenuptial agreements are upheld, reasonable needs should be met. Nobody should be required to leave a marriage destitute. I would argue that ideally, the criteria from section 25 of the Matrimonial Causes Act 1973 should still be taken into account and considered by the court.
If this didn’t happen, I predict that we would see cases challenging the validity of prenups. Although the nature of the risk would alter, there would still be a likelihood of litigation from litigants who were desperate to be released from the agreements. What then? Prenuptial legislation would have become law, but there would be a need to avoid satellite litigation. Then there would be arguments about how prenups could circumvent such litigation, and how reasonable needs should (or shouldn’t) be taken into account. Round and round we would go…
In his recent speech to the charity Care, Mr Justice Coleridge called for a Royal Commission, the first since 1950, to consider changes to the law in relation to divorce, prenuptial agreements, cohabitation and ancillary relief.
He said: “The world we inhabit today is not the same world as we inhabited in 1950. Socially, society is unrecognisable. The norms of behaviour, the stigmas and the taboos have all changed or evaporated…When the last major reform was introduced there was no such thing as cohabitation outside marriage.” The current law is “a dead parrot” – it is “no longer fit for purpose”.”
Then again, inadequate legislation doesn’t seem to have put off Sir Paul McCartney or Prince William, both of whom apparently have no need of prenups, despite having a great deal that could be lost in the event of divorce.
As a practising family lawyer, I am satisfied with what we have. I am a great believer in our current requirements for fairness and discretion. Far from being out of touch, our judiciary has a strong grasp of the situation.
Consider the elegant judgment, reported in The Times on Saturday, of the newly-appointed Supreme Court Judge, Lord Justice Wilson. This was possibly his last Court of Appeal judgment; for this blogger, it was a pleasure to read. The case, which was also heard by Lord Justice Laws and Lord Justice Jacob, concerned a divorce and a wife’s inherited fortune of £57 million. Her husband argued that he should be given £18 million, but the judges dismissed his appeal.
Straightforward, comprehensible and mercifully brief (“in the light of the general need for the delivery of much shorter judgments upon applications for ancillary relief”), Lord Justice Wilson gave a reliable explanation of how applicants can expect to share in inherited wealth. He did so sensibly and without drama. The judgement gave a fillip to all those of us who believe that attempts to apply inflexible statute law cannot work within our English system, which has fairness and judicial discretion at its heart.
In this case the husband was awarded 9 per cent of the total assets, a sum of £5 million. This was because all the assets had been inherited by the wife from her grandfather, and because during the marriage, the family had lived modestly on income derived from her inherited assets. It was decided that the sum of £5 million, which had already been openly offered by the wife, more than met his reasonable needs. The husband was also permitted to “share” in the assets of the wife, to the tune of an additional £1- 1.5 million.
Lord Justice Wilson did a swift, cogent, demolition job of the ingenious arguments put by the husband’s formidable counsel to share in a greater proportion of the wife’s wealth:
- He found it was not a discrimination to make such an award out of inherited, non-matrimonial monies.
- He found the importance of the source of the assets may diminish over time, in given circumstances, but that in this case, that had not occurred.
- He found that the argument as to “special contribution” did not apply to non-earned assets, and therefore did not fall to be shared in the same way.
In answer to the argument that the amount was “appealably [sic] disproportionate”, he pointed to the inability of counsel to show the court any reported decision at all, in which the applicant had received anything other than reasonable needs out of non-matrimonial assets, in accordance with the sharing principle set out in White v White.
And that was it. Clear. Concise. From now it will help all of us who advise on inheritance cases.
For those terrified of losing inherited assets to a “gold digger”, I suggest reading this case for comfort. Once needs have been met, even generously met, non-matrimonial assets can remain intact.
I think that sits very well with our system of justice, and I look forward to future judgments from the new Supreme Court judge. I think he is going to make a much-needed, real and reliable difference to the practice of English family law.