The phrase non-matrimonial property has been used increasingly in financial remedy cases. Last week it also featured in the Law Commission’s latest consultation paper, so let’s take a closer look.
In 2000, the case of White v White brought the concept of sharing assets sharply into focus. Until then, there had been no equality between the parties when dividing the assets in a marriage. Typically, wealthy wives would leave a marriage with about 30 per cent of the wealth – or in some cases, far less. There was the spectacular case of Dart v Dart in 1996, when the wife left her marriage with £8.5 million, out of a fortune of £400 million.
In White v White, the House of Lords introduced the sharing principle. Thus when both parties’ financial needs had been met, the starting point for the division of any surplus would be an equal division between the two parties, even if one party was the breadwinner and the other a homemaker. The House of Lords did not, however, divide the assets of Mr and Mrs White equally. The Whites were a farming family. Their Lordships gave Mr White credit for the introduction of capital into the marriage by his father. The assets were divided 62:38 in Mr White’s favour, even though Mr and Mrs White owned their farm equally.
The decision to make that award was arbitrary, but reflected the non-matrimonial contribution by Mr White’s father. The relevant law is paragraph 2(f) of Section 25 of the Matrimonial Causes Act 1973. This provides for the Court to “have regard to the contributions which each of the parties has made to the welfare of the family”, and it is up to the judge to decide what weight and importance to attach to the asset or assets in dispute.
Here, once again, we see the value attached to judicial discretion. It is for the judge to decide how to account for all the assets in a case, and how to divide them fairly between the parties in any given case.
The Law Commission is currently examining the case for change. On the subject of non-matrimonial property, the Commission has published the following statement:
We provisionally propose that non-matrimonial property, defined as property held in the sole name of one party to the marriage or civil partnership, and:
(1) Received as a gift or inheritance; or
(2) Acquired before the marriage or civil partnership took place
Should no longer be subject to the sharing principle on divorce or dissolution, save where it is required to meet the other party’s needs.
Since White v White, the practice of ring-fencing non-matrimonial assets, after needs have been met, appears to have grown. However this is not the law.
In Charman v Charman, Sir Mark Potter, the President of the Family Division, made it clear that all property is available for sharing. Using a short marriage as an example, however, non-matrimonial property is unlikely to be shared. Is that unfair? Is too much property therefore available to a spouse who was never intended to share in it and should not do so?
Here are some more questions. How easy is it to create a catch-all definition of non-matrimonial property, when it can be transformed into matrimonial property? For example, take an inheritance of £250,000, used to buy a house in joint names. The house is later sold at a profit, and the proceeds are used to buy another house in joint names. So how much remains as non-matrimonial property?
Consider the position if non-matrimonial property, such as pre-acquired shares in a public company, simply increases in value during the marriage. Does the other spouse get to share in that increase because it happened during the marriage?
What if a spouse owns a company prior to the marriage, and keeps working in that company throughout the marriage, supported by the other spouse, both of them substantively increasing that company’s value from the date of the marriage? Is the company entirely a non-matrimonial asset?
Then there is the family home. In Miller v Miller and Mcfarlane v Mcfarlane, it was stated that the family home should normally be treated as a matrimonial asset. However times have changed and, according to the definition above, there would also seem to be a change of law. The Law Commission has considered this, and the prospect of injustice if the family home was not able to be shared. So the Commission is asking consultees if the family home should be excluded from the definition of non-matrimonial property.
At the time of writing, all the assets are available for sharing but it is up to the judge, using his discretion, to decide how much each spouse will get.
So the issues to consider are these:
- What is fair in relation to non-matrimonial property?
- Should the law change to ring-fence non-matrimonial assets?
- If so, how – particularly when the character of the asset has changed and is used by the family?
Some countries do not recognise non-matrimonial property at all. They include Sweden, the Netherlands and South Africa. However these countries have a default regime, which permits couples to contract into an acquest regime and separate their property before marriage.
Other countries have strict community of law, with separate property and definitions. In New Zealand, for example, there is the New Zealand Property (Relationships) Act 1976, and Sections 8-11 are worth a look.
The various arguments and recommendations are all detailed in the Law Commission’s lengthy paper, which makes for interesting reading.
In truth, however, the questions surrounding non-matrimonial property are resolved, it is unlikely that the vast majority of divorcing couples will be even slightly affected. In the majority of divorce cases, there simply won’t be enough to go around to meet needs – let alone leave a surplus.