I wrote here recently about the important financial remedies case of White v White. This introduced the ‘sharing principle’, whereby, as a general guide, an equal division of assets between husband and wife should be departed from only if, and to the extent that, there is good reason for doing so. I said then that the sharing principle remains the basis of all financial remedy decisions to this day, at least in respect of the division of capital assets. It has not taken long to find another reported case demonstrating this.
In SK v TK the husband wanted to show that there was a good reason for him receiving more than half of the assets. Briefly, the facts were as follows:
- The parties married in 1994 and have two teenage children.
- The wife is aged 52. She is a nurse by profession, but since the birth of the youngest child she has been a housewife and mother.
- The husband is aged 49 and is described as a ‘technology engineer’. He has had two business ventures, the first of which, ‘Vision’, was formed in 1992 and was sold in 2000. The husband received around £12 million from the sale of Vision. His second business is a technology company known as ‘Limelight’, which he formed in 2004 and in which he holds a 50.25 per cent share.
- The marriage broke down in 2011 and the husband left the former matrimonial home. Divorce proceedings were issued and a decree nisi was pronounced on the 10th of May 2012.
So far as the financial settlement was concerned, the wife’s position was simple: she said that all of the assets were accrued during the marriage. Each party had made an equal contribution, albeit in different ways, and the assets should therefore be divided equally. The husband, on the other hand, argued that he should be entitled to 60 per cent of the assets, for three reasons:
Firstly, he had made a ‘special contribution’, in terms of his business skills and the money that he had brought into the marriage.
Secondly, that his interest in Vision should be treated as a ‘pre-marital contribution’, i.e. a valuable asset that he had brought into the marriage.
Thirdly, that by keeping the entire shareholding in his company, Limelight, he was taking on greater financial risk than the wife, who will retain largely risk-free assets.
Mr Justice Moor dealt with these three arguments.
The cases in which fairness requires a departure from equality based on contributions during the marriage are exceptional, he said. This was not such a case. Whilst the extent of the husband’s business success was rare and something to be applauded, it could not be said to be “exceptional”. Although it had been very successful, it could not be said that it had generated truly vast wealth. It was therefore quite impossible to say that his contribution in this regard got close to justifying a greater share of the wealth than that of the wife, who contributed herself in an equally valuable way to the best of her ability.
The pre-marital contribution argument was dismissed quite quickly, for two reasons. Firstly, Vision had no significant value as at the date the parties’ relationship became permanent. Secondly, the husband had not, at that stage, made sufficient contribution to Vision to justify any such claim.
Finally, with regard to the issue of risk, Mr Justice Moor concluded that this argument was not sound. His reasons for this included the following:
(a) That whilst the husband took on the risk in relation to Limelight, he also took on the opportunity that it represented.
(b) That Limelight only represented about a quarter of the assets, so the husband did not ‘have all his eggs in one basket’.
(c) That the husband has a significant earning capacity and the wife does not.
(d) That in so far as there is risk in relation to the future of Limelight, that was something Mr Justice Moor should factor into his valuation of the company, rather than giving the husband an increased share of the net assets.
In the circumstances, Mr Justice Moor came to the conclusion that this was a clear case for an equal division of the net assets. He said:
“The parties had no assets of significance at the beginning of their relationship. All the assets have therefore been built up whilst they were together. Their contributions have been equal.”
This was another clear demonstration, then, of the strength of the sharing principle, and of the difficulties too, associated with showing that there is a good reason to departing from it.
Photo by Patent and the Pantry via Flickr under a Creative Commons licence