Today, the UK Supreme Court has handed down the highly anticipated judgment in the appeal case of Standish v Standish. The case concerns whether the significant assets involved had been “matrimonialised” and, therefore, capable of being shared between the parties, bearing in mind the courts’ overall aim of achieving fairness.

Background

The husband in this case is 72 and was born in the UK before moving to Australia in 1976. He has three children with his previous wife (they separated in 2002) and he had a very successful career in the financial services industry. The wife is 57 and was born in Australia. She has three children with her previous husband (their marriage ended in 2004). The parties also have two children together. In 2003 the husband moved to Switzerland for his job and the wife and her three children moved to Switzerland to join him in June 2004. The husband retired in 2007 and the family returned to live in Australia on 1 July 2008 before purchasing a home in England in 2009. They moved into the property in 2010. Their marriage ultimately broke down in early 2020.

Due to his successful career, the husband had accumulated very significant wealth by the time the parties married. He said his assets were worth £57 million in June 2004 and would have been worth £155 million when the matter was heard by the court at first instance in 2022 (the first court to hear this matter). It was found that that the husband earned US$40 million gross between 2004 and 2007 (when the family were living in Switzerland). The home that was purchased in England cost approximately £9.6 million and it was agree that, as at 16 February 2022, it was worth £21.6 million. The wife, on the other hand, had fairly modest assets at the time of marriage, which largely comprised of a property in Melbourne, which she later sold in 2011 for AUS$5.6 million. She later also inherited AUS$626,340.

The 2017 transfer

In 2017, the husband transferred from his sole name to the wife’s sole name investment funds worth (at that time) approximately £77.8 million. When the matter came before the court in 2022, those assets, which were then held solely by the wife, were worth £80 million. The wife was also issued shares in the husband’s Australian farming business. The effect of these two events was that the wife ended up holding the vast majority of the of the wealth (£95.7million) and the husband held £36.9 million. The purpose of the 2017 transfer of the investment funds was to avoid a potentially huge inheritance tax (‘IHT’)bill in the event the husband died in the UK after April 2017 (which is when he would have been deemed domiciled here). The IHT bill would have been approximately £32 million. The husband’s intention was for the wife to establish two offshore trusts in their two children’s names, but the wife never did this and the assets remained in her sole name.

Outcome at first instance

At first instance, the court held that most of the investment funds in the 2017 transfer were non-matrimonial in nature (i.e. they were the husband’s assets and were not capable of being shared). However, the 2017 transfer changed this and they became matrimonial property and could be shared. The court found that the total matrimonial property amounted to £112,631,062 and awarded £45 million to the wife, which was 34% of the assets. The court did not award her 50% of the assets because it still had to consider the fact that the funds initially came solely from the husband and, therefore, it was not appropriate to divide the assets equally. The court did not consider what the wife’s needs were because it was clear that she could live very well on the sum she received.

The Court of Appeal

Both parties appealed to the Court of Appeal following the above outcome. The Court of Appeal determined that it was incorrect to determine that the 2017 transfer of assets were the determinative factor in deciding how the assets were characterised and that the source of the assets (i.e. the husband) was the determinative factor, rather than who held them. It also found that the 2017 transfer had not matrimonialised the transferred assets and 75% of them remained non-matrimonial and were therefore not capable of being shared. As a result, the wife’s award was reduced to approximately £25 million (half of the matrimonial assets).

Supreme Court appeal and judgment

The wife then appealed to the Supreme Court and was given permission to appeal on 17 October 2024. She claimed that the Court of Appeal was wrong to conclude that the 2017 transfer of assets did not result in their matrimonialisation and that, when properly analysed, the transfer was effectively a gift.

Having considered the law as set out in Sections 23, 24 and 25 of the Matrimonial Causes Act and previous case law (White v White [2001] 1 AC 596 and Miller v Miller and McFarlane v McFarlane [2006] UKHL 24; [2006] 2 AC 618),the Supreme Court said the essential question was whether the assets transferred in 2017 were matrimonial property and therefore subject to the sharing principle. In determining this, it was said that it was important to consider how the parties have been dealing with the assets and whether that showed that, over time, they had been treating them as shared between them. In this case, the source of the assets was solely the husband and there was nothing to show that the parties were treating them as having been shared between them. As the transfer in 2017 was to save tax and was for the benefit of the children, the Court determined there was no matrimonialisation of the assets. Therefore, none of the non-matrimonial proportion of the assets (75%) were matrimonialised and capable of being shared. The wife’s appeal was dismissed.

The judgment handed down by the Supreme Court is regarded as one of the most important decisions in the last decade. It provides essential guidance about when assets may be regarded as being matrimonialised (or not, in this case!) and that it is the source of the assets, not the legal title, and how those assets that have been treated which will be the key factors. The decision does not necessarily mean an end to protracted litigation about non-matrimonial property because of the inevitable discussion about the intention of the parties with regards to sharing. Now more than ever, legal and independent financial advice is essential prior to making any major financial decisions whether involving wealth acquired by one party prior to or during the marriage.  

If you require any advice on the above, please contact the team at Burgess Mee on mail@burgessmee.com.

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