However, he nevertheless argued that, because he had actively managed these funds for the wife, including negotiating their “exit” from a family-trust company and relocation into a tax-efficient offshore structure, they should be treated as having been mingled.
The judge rejected the husband’s argument: there was no indication at all that the wife had intended they be treated as family assets; they were outside the financial arrangements put in place to manage the family’s domestic economy.
That the husband had acted as “any loving husband” would, by looking after the wife’s financial interests, did not alter the assets’ character.
As a result, the husband retained his recent £1.7m inheritance and the wife her £14m family assets, and the matrimonial assets of £39m were divided equally.
This left the husband with assets of around £21m and the wife with assets of around £33.5m. The wife therefore emerged from the marriage significantly wealthier than the husband.
The husband’s frustration was perhaps understandable: his successful career and willingness to use the significant income it generated, as well as his pre-marital assets, for the benefit of the family, had enabled the wife to keep her family assets separate, retaining their non-matrimonial character.
The husband’s barrister went so far as to refer to the outcome sought (and largely achieved) by the wife, as “grotesque”.
Yet the outcome is a direct consequence of the legal distinction between matrimonial and non-matrimonial property.
The law means that where one party to a marriage has private wealth that they choose to keep separate, and the other works during the marriage to build up assets, only the latter will have to share their wealth in the event of divorce.
It seems likely that during the marriage neither party appreciated the potential future significance of their decisions as to how to manage their finances – nor indeed could they have done so during the earlier part of their marriage, when the law applicable to financial claims on divorce was very different.
Many factors will often be at play for a married couple when they are deciding how to fund a particular transaction, or how to hold their assets; the potential implications of the decision should they divorce many years in the future is not usually one of them.
Yet this case illustrates the consequences of failing to have regard to this issue. Financial advisers and others involved in advising on wealth management may wish to flag the issue so clients can take specialist advice.
While considering how assets may be treated on divorce prior to or during a marriage may seem unromantic, it can help avoid unpleasant surprises or unintended results.
