25 October 2018 - Events
The length of the marriage matters. That is the message from the Court of Appeal in Sharp. Prior to this decision, the general approach was that assets accumulated during the marriage should be shared equally between the parties, unless there is a good reason not to. The length of the marriage was not considered to be a good reason, due to Lord Nicholls remarks in the House of Lords’ decision in Miller/McFarlane: ‘A short marriage is no less a partnership of equals than a long marriage.’
However, the Court of Appeal in Sharp were keen to emphasise that Lord Nicholls was a lone voice on that point in Miller/McFarlane and that the other justices were of the view that a short, childless, dual career marriage could be a good reason to depart from equality.
The parties in Sharp had been married for 4 years, but their relationship endured for 6 years. The judge described it as ‘not so desperately short … as some, but still by no means lengthy’. Both parties worked throughout their relationship (save the final year when the husband took voluntary redundancy), they did not have children, and they had to some degree kept their finances separate. Their salaries were broadly similar (c£100Kpa) but the wife had accrued bonuses totalling £10.5m during the course of the marriage. At first instance the judge said that the husband should share equally in the wife’s bonuses. The wife appealed.
The Court of Appeal agreed with the wife; this was one of those cases where there was a good reason to depart from equality.
There are various established reasons why assets are not divided equally on divorce, the most common being ‘needs’. If dividing the assets in half leaves one party with less than they need then the court will address that. This exception did not apply in this case.
Other reasons include that the assets were acquired before the marriage, or that they were gifted/inherited to one party during the marriage and were not then used for a common purpose during the marriage. Those exceptions did not apply in this case either.
However, the Court of Appeal in Sharp reduced the husband’s award, deciding that he should receive £2m, which was calculated on the basis that he receive half the equity in each of the family properties and a further award of £700k to reflect the combination of three factors: the standard of living during the marriage; the need for a modest capital fund in order to live in the property that he is to retain; and some share in the asset held by the wife. He was entitled to an equal share in those assets that the parties had shares during the marriage, and to some share of what the wife had accumulated, but not an equal share.
- There is still some scope for one party to acquire and retain separate property which will not automatically be shared equally.
- The court is obliged to take account of the length of the marriage when determining what is fair.
- How assets were treated during the marriage maybe relevant to how they are treated on divorce.
This result might be considered fair by many – the husband had not contributed to those bonuses so why should he share in them equally? However, my concern is that it opens the door to many more arguments about what people are entitled to on divorce. As a result of this case it is likely that:
- What constitutes a short marriage will become a contested issue as the impact on outcome is potentially hugely significant.
- How the parties organised their finances will become more relevant. However, the idea of parties producing evidence of who paid for what and why during the course of a marriage is not a particularly edifying one.
- In a long, childless, dual career marriage, one side may now argue that equal sharing is not appropriate. Should being married for longer automatically mean an entitlement to an equal share?
This case leaves a lot of scope for further debate and analysis.
What is undoubtedly clear is that if Mrs Sharp had not wanted Mr Sharp to share in her bonuses at all, she would have been better protected had she signed a pre nuptial agreement.