30 June 2015

JL v SL: The treatment of non-matrimonial property in the English Courts


Katharine Landells
Partner | UK

The law in relation to the treatment of non-matrimonial assets in the English Family Courts continues to evolve and JL v SL [2015, EWHC 360] is the latest to join the alphabet of cases dealing with this issue. There had been two different schools of thought about how non-matrimonial assets should be treated. On the one hand, some judges have favoured a broad brush approach, effectively putting all the assets in a case on the balance sheet and then using their assessment of fairness to arrive at a division that reflects the fact that some of those assets arise from a source external to the marriage. On the other hand, some judges have adopted a more arithmetical approach, effectively separating non-matrimonial assets and matrimonial assets, dividing the matrimonial assets equally, and then considering the extent to which non-matrimonial assets should be divided by reference to the facts in each case. The award is then 'cross checked' to make sure it is fair. The latter of these approaches seems to be the one gaining most traction as this recent case demonstrates.

In his Judgment, Mr Justice Mostyn started by revisting Lord Nicholls's Judgment in the case of White v White [2000]. In that case, in the context of a discussion of the possible reasons for a departure from sharing assets equally at the end of a marriage, Lord Nicholls said, 'the nature and value of the property and the time and circumstances in which the property was acquired, are among the relevant matters to be considered'. This statement was followed by Sir Mark Potter's Judgment in the Court of Appeal in Charman v Charman [2007] where he made it clear that sharing would apply to all property and not only to matrimonial property when he said, 'We [the Court of Appeal] consider the answer to be that the principle applies to all the parties' property but, to the extent that their property is non-matrimonial, there is likely to be better reason for departure from equality'. Examining both of these statements in this case, Mr Justice Mostyn acknowledged the inherent difficulty in their application and the interrelationship with an assessment of fairness. He agreed that 'fairness' lies in the eye of the beholder, commenting that that it was an elusive concept and an instinctive and intuitive response to a given set of facts. He emphasised the need for consistency from one case to another as otherwise the law would be but a 'lawless science'.

Mr Justice Mostyn's preferred approach is, therefore, to avoid the intuitive scaling of the asset division down from 50/50 but instead to apply a more regimented approach in first determining the matrimonial and non-matrimonial property, dividing the matrimonial property equally and then only invading the non-matrimonial property insofar as is necessary to meet needs. His approach can be summarised as follows.

  1. Determine first whether the existence of non-matrimonial property should be reflected at all. This, he says, depends on the duration of the marriage and the extent to which non-matrimonial assets have been mingled with matrimonial assets.
     
  2. If it is fair to reflect it, then the Court should decide how much of the non-matrimonial property should be excluded: i.e. an actual sum, perhaps less if there has been much mingling, or perhaps more to reflect the fact that the non-matrimonial property was a seedcorn that then grew.
     
  3. The remaining matrimonial property should then normally be divided equally.

Mr Justice Mostyn's decision also touched on whether assets accrued post-separation should count as matrimonial or non-matrimonial property. His view was that such assets may be matrimonial if it can be said that they were acquired or created by a party by virtue of his or her use of an asset created during the marriage in respect of which the other party can assert an unascertained share. Where a post-separation asset is a bonus or other earned income, then it depends on whether it was earned during the marriage or after it. The further away the separation from the bonus coming in, the more likely it is to be non-matrimonial but at this point Mr Justice Mostyn himself admits that there is an element of arbitrariness.

He goes on to say that the Court will consider whether the Applicant has proceeded diligently with his or her claim (so there has been no delay designed to catch further assets falling into the net), whether the party who has had the benefit of the accrual has treated the other fairly during the period of separation, and whether the money making party has the prospect of making further gains and whether those further gains are going to be shared. However, it seems at this point that 'lawless science' begins to creep in again. Whilst the position on matrimonial and non-matrimonial property appears to have become clearer, the approach to post-separation accrual is still variable.

Katharine Landells
Partner, Family law

Katharine Landells Partner | London

Category: Article

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