Departing from the equal sharing principle
Emily Davies and Richard Hayes discuss the impact of Sharp on the division of assets after a short marriage
Since Lord Nicholls’s speech in White v White, the court’s task in applying section 25 of the Matrimonial Causes Act 1973 has been to search for a fair result, having recourse to the ‘yardstick of equality’. This approach was developed further in Miller v Miller; McFarlane v McFarlane, in which the House of Lords identified three strands of principle: (1) the concept of needs; (2) compensation for relationship-generated disadvantage; and (3) the equal sharing of matrimonial property.
Few cases progress past a consideration of needs, which often necessitate and justify a departure from equality of division to ensure a fair result. But what if assets are more than sufficient to cover needs and have been built up during the marriage by one spouse alone? Can there be a departure from the sharing principle in such a case? The Court of Appeal in Sharp v Sharp has recently confirmed the answer is yes in the context of a relatively short, childless marriage where there was a degree of separation of the spouses’ finances.
In Sharp, the parties’ marriage lasted six years (including a period of cohabitation) and they did not have children. The parties had similar basic salaries of around £100,000. However, crucially, the wife (W) earned very substantial bonuses amounting to £10.5m during the relationship. The parties bought two properties in their joint names but with funds provided by W. They enjoyed a relatively high standard of living during the marriage. To an extent (although, it would appear, not by deliberately agreed intention) there was a degree of separation of finances.
At first instance, the husband (H) conceded that certain assets should be left out of account as they had been acquired by W prior to the marriage. The matrimonial assets were then valued at £5.45m. Singer J applied the sharing principle to its full extent and awarded H assets worth £2.725m.
On appeal, W argued that two features were present which had been identified in Miller as potentially justifying a departure from simple equal division: (1) the fact that this was a short, childless marriage; and (2) the degree of separation in terms of the way the parties structured their assets.
H argued that Singer J had adopted the correct approach: once needs had been satisfied, then, save in rare instances, the sharing principle ought to apply irrespective of the length of the marriage or other features of the case. Indeed, H argued this was supported by dicta of the Court of Appeal in Charman v Charman which favoured views to this effect of Lord Nicholls in Miller.
In the leading judgment, McFarlane LJ conducted a detailed review of the cases from the decision in White onwards. Crucially, he considered that the majority reasoning in Miller was to be found in the decision of Baroness Hale rather than Lord Nicholls. To the extent that dicta in Charman appeared to prefer the approach of Lord Nicholls, those were wrong and not to be followed. Indeed, to automatically adopt an equal share (once needs were satisfied) would subvert the requirement for the court to consider all the circumstances of the case and the section 25 factors which specifically include the need to have regard to the duration of the marriage.
As a result, the Court of Appeal allowed the appeal and substituted a reduced award to H valued at £2m. Despite the first instance concession, the Court of Appeal considered both properties were matrimonial property and their value should be shared equally. An additional sum was allowed to H to reflect (1) the high standard of living during the marriage; (2) the need for a modest fund for H to continue to live in one property; and (3) some (albeit less than 50 per cent) share of W’s assets.
It is respectfully suggested that the analysis of the case law by McFarlane LJ is plainly correct: the views of Baroness Hale in Miller were clearly those of the majority and permitted a departure from equal sharing in precisely this sort of case; indeed, the approach of Lord Nicholls in Miller was, perhaps, somewhat more nuanced and admitting of the possibility for some relaxation of equal sharing than was painted by H.
The case demonstrates once more the difficult search for principle in this area and the ever present tension between the desire for predictability of outcome on the one hand (not least to assist settlement) and flexibility to reach an appropriate award for the circumstances of each particular case on the other. The decision in Sharp may be said to be something of a corrective push in favour of the latter consideration.
It is worth keeping in mind that Sharp is only likely to apply directly to a limited ‘fringe of cases that may lie outside the equal sharing principle’. Where Sharp may apply, questions remain as to how short a marriage has to be and how separate finances need to be kept before a departure is justified, and how the extent of departure is to be arrived at.
Emily Davies and Richard Hayes are barristers at Lamb Chambers