Standish Vs Standish: What The Landmark Case Means For Divorcing Couples

Claire Davies, Senior Associate Solicitor in JCP’s Family Team, explains the significance of the UK Supreme Court’s case of Standish v Standish, sharing how the ruling has clarified the way Courts should handle non-matrimonial assets during divorce proceedings.

Many people assume that upon divorce, all assets are shared 50/50 between the divorcing couple – known as the ‘sharing principle’ - but this is not always true. In order for an asset to be shared, it has to be considered ‘matrimonial’.

In the recent case of Standish v Standish, a couple went to the Supreme Court in a battle over whether or not their assets had been ‘matrimonialised’, which is a relatively new term used by family lawyers to describe a process by which non-matrimonial property becomes matrimonial property. Non-matrimonial assets are typically pre-marital property brought into the marriage by one party to the marriage, or property acquired by one of the parties during the course of the marriage by inheritance or gift.

What Happened During the Case?

In Standish v Standish, the husband had transferred assets worth £80 million into the wife’s name during their marriage for the purpose of negating a potential future tax liability. He had earned the majority of the money prior to marriage, and so upon divorce, the husband claimed these should be considered his ‘non-matrimonial assets’ – his, and his alone.

His wife disagreed, originally claiming that the assets should be considered as her non-matrimonial assets since they had been gifted to her and the couple did not share the assets afterwards: they remained solely in her name.

She eventually conceded that they should be shared with the husband.

At first instance, the High Court determined that the assets had been ‘matrimonialised’ upon transfer to the wife. This meant that the Court saw the assets as being shared between the couple, meaning all £80 million was subject to the sharing principle.

The Judge ordered that the source of the funds remained significant when deciding how to apply the sharing principle – it mattered that the funds had been built up before the marriage. So, rather than splitting the assets 50/50, he awarded the husband 60% and the wife 40% by awarding the wife £45 million which amounted to 34% of the total assets.

Both parties appealed to the Court of Appeal following this judgment, but the Court of Appeal held that the transfer of the assets to the wife had not ‘matrimonialised’ them and that the source of those assets - rather than the person under whose name the assets were held - was the most important factor in deciding who should keep the assets.

The Court held that the fair outcome on an application of the sharing principle would provide the wife with £25 million, but the matter was to be sent back to the High Court to carry out a ‘needs’ assessment. The ‘needs’ assessment would determine whether the wife’s financial needs could be met with an award of £25 million.

The wife appealed to the Supreme Court, which upheld the decision of the Court of Appeal: the transfer of the assets to the wife for tax purposes only did not result in the assets becoming ‘matrimonialised’. The wife had never used the assets, and so they could not be considered as shared.

How Does This Judgment Impact Family Law?

This is the first case since the high-profile case of Miller/McFarlane in 2006 in which the highest Court has considered the difference between matrimonial property and non-matrimonial property in the context of the sharing principle. The judgment served as a reminder to family law practitioners that the sharing of matrimonial property should normally be considered on an equal basis, and that this should always be the starting point for negotiations.

Through this case, the Supreme Court has clarified that non-matrimonial property should not be subject to the sharing principle upon divorce. It has also highlighted that non-matrimonial property can be subject to the principles of needs and compensation. To give an example, this means that non-matrimonial assets - such as an inheritance held in a sole bank account - could be shared if the matrimonial assets - such as a house - are not sufficient to meet both parties’ financial and/or housing needs.

Ultimately, this shows it is important to remember that the starting point of a 50/50 division of assets does not apply to the sharing of non-matrimonial assets.

The Supreme Court also considered how what started as non-matrimonial property can become ‘matrimonialised’ over time, and stated that the way in which the parties have been dealing with the asset is vital: have they treated the asset as shared? If so, this could mean the asset has been ‘matrimonialised’.

What Could This Mean For Couples?

It is possible to retain separate property during the course of a marriage which will not be subject to the sharing principle in the event of a divorce.

However, in order to ensure that any property/assets are considered separate, and therefore ‘non-matrimonial’, it needs to be clear that there has been no intention to use the asset for the benefit and/or enjoyment of the family.

For example, if an inheritance has been received by one party and used to reduce or clear the mortgage on the family home, this shows a clear intention to use that asset for the benefit of the family. Upon divorce, it will be difficult for the party who received the inheritance to argue that they deserve that inheritance back: they used it for a joint purpose, and so it should be subject to the sharing principle.

If, however, an inheritance is received by one of the parties to the marriage and that money is paid into a bank account held in that party’s sole name, it is possible upon divorce for that party to argue that the monies held in their bank account which came from an inheritance is non-matrimonial.

As a result of this case, questions are going to be raised upon separation and divorce as to what were the parties’ intentions with their assets during the course of their marriage.

With court battles being incredibly expensive and stressful, it is advisable to speak with a legal expert ahead of time. Entering into a pre-nuptial agreement or post-nuptial agreement – meaning you draw up the contract after you are married, for example if one of you receives a sizeable inheritance – can outline your intentions in relation to your assets. This should help to clearly and effectively set out your plans in a legal document, allowing you to avoid any later disagreement as to which assets are subject to the sharing principle and which assets should be considered non-matrimonial.

Always consult a specialist in Family Law when preparing such documents, as we can provide expert legal advice and guidance to get the best outcome for your circumstances.

Claire Davies is an expert Solicitor in JCP’s Family Team. With over 20 years’ experience dealing with family matters, Claire’s expertise covers divorce and complex, challenging financial remedy cases including high net worth cases involving businesses, farms, pensions, trusts and cases with international elements. Claire regularly acts for clients in negotiations to draft pre- and post-nuptial agreements, specialising in asset protection.

For advice and guidance, call our expert team on 03333 208644 or email hello@jcpsolicitors.co.uk.