The distinction between matrimonial and non-matrimonial property

Family Law|March 23rd 2016

How should property or assets owned by one of the parties prior to the marriage be treated by the court in a financial remedies claim following divorce? This is a common area of dispute in such claims, the essence of the argument being that the party who owned the property or assets maintains that it/they should be treated as ‘non-matrimonial’, and should not therefore form part of the ‘pot’ for division between the parties.

Robertson v Robertson, decided by Mr Justice Holman in the High Court on 8 March, is an example of the argument in action.

In chronological order, the essential facts of the case were as follows:

  1. In 1996 the husband founded a company, which eventually became known as ‘ASOS’.
  2. ASOS was floated on the London Stock Exchange in October 2001, at 20p per share, valuing the company at about £12.3 million.
  3. The parties began to live together at some time in 2002, at which time the shares were trading at about 12p each.
  4. The parties married in December 2004. They have two daughters, now aged eight and seven.
  5. The marriage broke down and the parties eventually separated around the end of 2013, by which time the shares in ASOS were trading at around £67 each.
  6. After the separation the husband sold some of his shares in ASOS and invested the proceeds in three properties in Wimbledon, purchased in his sole name, whose aggregate net value is about £20.1 million.
  7. The wife petitioned for divorce in May 2014 and subsequently issued a claim for financial remedies.
  8. By the time of the hearing the shares in ASOS were worth £29 each, giving the husband’s shareholding a net value of £141 million. The total assets of both parties were valued at £219.5 million.

The husband’s argument was, quite simply, that he should retain the net value of the shares and the Wimbledon properties, leaving the wife with £29.2 million, being one half of the remaining assets.

The wife, on the other hand, argued that most of the increased value of the shares since the parties began to cohabit should be treated a matrimonial assets, and therefore included in the pot for division. She conceded that the value of the shares when the cohabitation began, uprated by an assessment of so-called ‘passive growth’ (i.e. the amount that the shares would be expected to have increased in value without any input from the husband), should be non-matrimonial, but the rest of the ‘active growth’ of the shares should be divided equally. The accountant’s assessment of the net value of the shares uprated for passive growth since the cohabitation began was about £4.84 million. Accordingly, the wife argued that that sum should be deducted from the total assets, with the balance being divided equally. That would leave her with about £107.33 million.

So, there was a very considerable difference between the parties. It is perhaps therefore unsurprising that the parties were unable to settle the case, despite Mr Justice Holman’s encouragement.

Mr Justice Holman was therefore left to adjudicate the matter. He considered that a settlement along the lines proposed by the wife would be unfair to the husband. He said that much greater allowance must, in fairness to the husband, be made for the history of the matter in order to reflect the amount of work done by the husband in connection with the company before the marriage. However, he went on, the pre-existing shares could not, in fairness to the wife, be “carved out”, and left out of account altogether. In particular the husband had, during the course of the marriage, sold some of his shares and utilised the proceeds for the benefit of the family, including purchasing the final matrimonial home. The shares could not therefore accurately be described as “ring fenced”, as the husband’s counsel had submitted. In Mr Justice Holman’s view the only fair way to treat the remaining pre-existing shares (and the three Wimbledon investment properties) was to treat them as to half as the personal non-matrimonial property of the husband, and as to half as the matrimonial property of the parties, to be evenly shared.

One half of the net value of the remaining ASOS shares was some £70 million. One half of the net value of the three properties in Wimbledon was some £10 million. Deducting the total of those sums from the total assets left some £139 million. The wife should receive half of that, amounting to some £69.5 million.

This left the wife with 31.66 per cent of the total assets, a figure which Mr Justice Holman considered to be “neither unjustifiably high, nor unjustifiably low”. He emphasised that his decision was not an arbitrary one, but was a result of his judicial discretion. i.e. “the product of a weighing of all relevant factors and wise, considered and informed decision making by an experienced adjudicator after hearing argument”.

The full report of Robertson v Robertson can be read here.

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  1. Andrew says:

    They will both manage. As they would have done on her figures. Or his.

  2. Andrea says:

    It is not a case of ‘managing’ – it is what is judged as ‘fair and equitable’.

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