Cooking up confusion on what counts as family assets

Confusion reigns in the divorce courts over the division of matrimonial assets in England and Wales with the news that the High Court has refused to award a man a half-share of his ex-wife’s lottery prize but elsewhere the Court of Appeal has included a husband’s inherited wealth in a payout to an ex wife.

The two decisions have added to the chaotic English case law on the distinction between matrimonial and non-matrimonial assets and experts are saying that the family courts are so unpredictable in such matters, that it’s difficult to plan ahead.

And the message seems to be that the introduction of outside money, whatever its source, is made at your peril.

In the case of S v AG, a porter claimed half of his wife’s £500,000 lottery win when the marriage broke down.  The wife had bought the lottery ticket with a friend, paid for it out of her own money and without telling her husband. When the two friends won a £1m prize, it was kept secret from the husband, but the wife bought a house in her sole name for £275,000 which became the family home for the next four years until her husband, who was a violent alcoholic, was removed from the house by the police.

When the case went to court, the judge held that the lottery winnings were not matrimonial property because the husband did not participate in any way in the lottery. However, following previous judgments which had set down that the matrimonial home was always a matrimonial asset, no matter whose name it was in and no matter who provided the money to buy it; this made the husband entitled to a share of the house. Taking into account the length of the marriage, when the property was bought, and the age and circumstances of the wife and husband, he concluded that the husband should be awarded £85,000 out of the property, to provide a pension, well short of a fifty per cent half share.

At the other end of the property scale, the Court of Appeal gave its judgment in the case of Grubb v Grubb earlier this month.  Mr Grubb amassed a £12 million fortune, partly in the course of his career as a surveyor, but mostly from inherited wealth. He contributed all the capital during the marriage, but none of it was ring-fenced and so the courts treated it all as family assets.

When the court had to decide what would be reasonable provision for Mrs Grubb’s needs who was 55 with just one of their five children still at school, they awarded her a nine bedroom house with 40 acres – which had been the family home before Mr Grubb came into his inheritance – plus £75,000 to restore it, £1.65 million as a pension pot, and £75,000 per year for child maintenance.

Mr Grubb appealed, but the ruling was upheld, with the judge saying that the award was not unreasonable, a decision which has left Mr Grubb with around two-thirds of his ancestral wealth.

Sam Miles, family lawyer with local law firm Warner Goodman, said:  “The outcome in financial relief cases is becoming very unpredictable.  In the Grubb case, reasonable needs for a divorced wife means about £4.4 million, whereas in S v AG reasonable needs for a 55 year-old porter with no pension provision means £85,000.   What is consistent is that once assets have been put into the family pot, they are there to be counted.  What is not consistent is the ratio in which they will be divided.   For both of these cases, they did not receive a fifty per cent share; rather they had what was judged ‘fair’ in the circumstances.”

The case law behind the judgments was created in 2001 in White v White and further developed in 2006 in Miller and McFarlane, where the judgment said that the matrimonial home should always be designated matrimonial property, whatever its source.

Sam added:  “For those wanting to protect against this sort of outcome, there is no clear way forward.  Pre or post nuptial agreements are increasingly being taken into account by the Courts, but they are not binding in England and Wales.  The other potential route to protect inheritance would be through parents leaving property and assets in trust for their children and that’s not just something for the very wealthy like the Grubbs, since property prices have increased so dramatically.  That would be one way to keep it separate from the marriage pot.”

If you’d like any further information about this article or other family legal matters, please contact Sam Miles by email samanthamiles@warnergoodman.co.uk or by telephone on 02380 639311.

ENDS

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This is not legal advice; it is intended to provide information of general interest about current legal issues.