This article was first published by Solicitors Journal on 21/03/17, and is reproduced by kind permission.
The recent decision of Mr Justice Bodey in X v X is a prime example of a judgment where we find several legal and financial hot topics bundled together. Should discretionary trusts be available assets during a divorce? Is the ‘stellar contribution’ argument really a fair and just one?
In this case, the husband not only argued that he had made an outstanding contribution to the family finances, but he also insisted that he had outshone his wife in the domestic sphere as well by looking after the couple’s children and home due to his wife’s alcoholism. Naturally, the wife resisted these claims.
The husband had co-founded a business and was later involved in the establishment of two separate family trusts. During the divorce proceedings, each side argued over whether these trusts were properly resources available to him in spite of the other beneficiaries, and it was eventually concluded, on the basis of such precedents as Charman, Whaley, and Thomas, that the husband was the primary beneficiary.
The other beneficiaries were recognised in the partition of 50 per cent of the capital as an asset belonging solely to the husband. The wife’s legal team sensibly put forward this proposal and it was accepted by the judge.
The sharing principle is now a firmly established norm in matrimonial finances cases and those arguing for a departure from it face an uphill struggle. The husband’s arguments for a higher share of the matrimonial assets in this case were, perhaps predictably, only partially successful. The funds he had brought into the marriage were taken into account in the eventual division but the judge did not believe his boardroom endeavours qualified for a ‘stellar contribution’ argument, because he had enjoyed business success by simply improving on the status quo in his field, and not by creating something genuinely new.
Set against this was the fact that the husband had driven a turnaround in the fortunes of the company on which much of the family’s assets were based – and had done so after the couple separated. Bodey J concluded that this must be taken into consideration in the settlement.
On the other hand, the judge was unconvinced by claims that there should be further adjustment because the husband had played a bigger role in domestic life. What he had done was because of his wife’s problems with alcohol and she had done everything she could, Bodey J decided, and should not be penalised for this.
In the end, the judge granted the husband an 8 per cent discount in the value of the shares that would be subject to division in the settlement, in order to reflect uncertainty regarding the value of the husband’s shares at the point he eventually sold them. This compared with the wife’s suggested 2 per cent discount and the hefty 40 per cent suggested by the husband.
Ultimately, the wife received 37.5 per cent of the family’s assets, including a multimillion-pound income fund.
This is a long but instructive judgment that I would encourage every family lawyer to read. The principles of the special contribution argument are still evolving and I expect further developments this year.