WX v HX  ( Matrimonial & non matrimonial property - valuation date, sharing and needs)
Trying to compress a 29,000 word judgement into a soundbite article is like … well, I’ll leave you to fill in the blanks lol.
This was a long marriage (33 years) to which both parties made a full contribution. H being 66 and W 60.
To add a bit of chilli to the mix, the parties two daughters were intervenors, being beneficiaries under a related trust, but they didn’t make it too hot for the purposes of this article.
The available wealth in this dispute was between £50m (H) and £60m (W).
Central to this article is that W inherited during the marriage. The assets were subject to a trust. ‘W is the income beneficiary during her life and there is also a power in the trustees to advance capital.’
H managed the fund and claimed that caused the assets to be matrimonial funds (‘matrimonialisation’ was the un/attractive word used). W claimed the fund was ring-fenced and should be retained intact by her, claiming the money/funds were kept separate and outside the financial arrangements which were put in place to manage the family's domestic economy.
As a preliminary point, Roberts J held that she was proceeding on the valuation date identified in an earlier case management order (ie as at 18th September 2020) and would not allow the husband to rely on updated valuations. ‘The CMO was specifically designed to avoid last minute alterations to the figures driven by volatility in the markets’.
Roberts J reviewed authorities on matrimonial and non matrimonial property and ring fencing (para 255 Baiili) (I mention them to show the thoroughness this judge always displays and for reference,) quoting from :-
- Miller v Miller;McFarlane v McFarlane  UKHL 24.
- Mostyn J in N v F (Financial Orders: Pre-acquired Wealth)  EWHC 586 (Fam).
- Charman v Charman (No 4) .
- Jones v Jones  EWCA Civ 41.
- Hart v Hart  EWCA Civ 1306.
- Waggott v Waggott  EWCA Civ 727.
- Scatliffe v Scatliffe  UKPC 36, Waggott v Waggott, and XW v XH (Financial Remedies: Business Assets)  EWCA Civ 2262, - ‘The application of the sharing principle impacts, in practice, only on the division of marital property and not on non-marital property’
- Mostyn J in S v AG  EWHC 2637 (Fam).
- JL v SL (No 2) (Appeal: Non-Matrimonial Property)  EWHC 360 (Fam).
After reviewing the authorities Roberts J went on to ask ‘What evidence is there before the court which might justify a finding that any part of her inherited wealth has been used to acquire an asset for the wider benefit of H/the family or been mixed with matrimonial property in circumstances where she can be said to have accepted that it should be treated in whole or in part as a matrimonial asset ?’
The judge recalled that ‘H accepted during the course of W’s Counsel’s cross-examination that there had never been an understanding, far less an agreement, that the funds should be shared or that H should acquire any interest in them as a result of his management role.’
She said ‘It is accepted that W's inherited wealth has always been kept separate and outside the financial arrangements which were put in place to manage the family's domestic economy. Whilst she used the income which she received from the family trusts to meet some of the children's and her own personal needs (supplemented by an allowance she received from H), the underlying capital has never been mixed or blended with the family finances generally. For all intents and purposes her funds were ring-fenced.’
The judge reminded herself of W’s evidence ‘She regards them (trust funds) as being principally the vehicle for generating income after her death for the benefit of her own children and grandchildren. On the basis that these funds are likely to be used during W's lifetime to provide her with an income, I propose to proceed on the basis that the funds are primarily an income resource in her hands rather than a liquid capital asset which she is likely to realise as cash in the foreseeable future.’
The judge held that W's non-matrimonial property had throughout the marriage been preserved as her own separate property and had not acquired a matrimonial character, either in whole or in part, as a result of H's activities as investment manager. Mrs Justice Roberts rejected the submission that H's contribution operated to "matrimonialise" W's separate property.
We are the poor rural cousins of the London brigade, normally dealing with needs cases, so what was said that might help us?
At para 229 Roberts J said ’In S v AG  EWHC 2637 (Fam) Mostyn J said this in para :- "Therefore, the law is now reasonably clear. In the application of the sharing principle (as opposed to the needs principle) matrimonial property will normally be divided equally (see para 14(iii) of my judgment in N v F). By contrast, it will be a rare case where the sharing principle will lead to any distribution to the claimant of non-matrimonial property. Of course an award from non-matrimonial property to meet needs is commonplace, but as Wilson LJ has pointed out we await the first decision where the sharing principle has led to an award from non-matrimonial property in excess of needs.”
The conclusion is that where there is a claim by one party that some of the assets are ring fenced, then the first task is to ascertain what the parties needs are and whether they can be satisfied by the undisputed matrimonial assets. If they can, it is then necessary to look at whether it is worthwhile contesting the claimed ring fenced money, focusing on the individual facts. Every case turns on its own facts!