Monday, 15 May 2017

When Asset Split on Divorce is Unequal

Whichever side you have the misfortune to be on in a finance case following a marriage or civil partnership breakdown, I humbly suggest that Breaking Law is essential reading for you ("Ethel, he's trying to flog that look of his AGAIN"). I look not only at how to extricate yourself from a broken relationship but how not to be screwed up when assets and income have to be divided up.

When it comes to assets, the court will apply the yardstick of equality: a 50-50 split. But that equal split can be disapplied in favour of a party who has particular needs which make it fair that they should have a greater share, particularly where an equal share would not enable the party with whom the children are to live to reaccommodate satisfactorily. And there are a myriad of other reasons which may be argued in support of what is called a departure from equality. 

In big money cases, it is sometimes argued that because one party has made a special contribution towards the marriage, they should have more than 50% of the assets in recognition of it. It is an argument that has just come under the scrutiny of the Court of Appeal . * There the husband and wife had been together for around 20 years. When they married, each had good but modest jobs. In due course, the husband took employment with a private equity fund working in Dallas and then in Japan and stayed with the company for around eight years. His total earnings with the company exceeded $300 million and by the time of the separation, the marital wealth was approximately $225 million. There were two children. The husband argued for a 61% split of assets in his favour, relying on what he said was his special contribution: an argument which was originally called the genius argument. The High Court judge who heard the case disagreed with the husband and ordered an equal split.

The Court of Appeal has dismissed the husband' s appeal. The High Court judge had been right.  Here are the ground rules. Exceptional earnings can amount to a special contribution but only when it would be equitable to ignore them. A windfall will not be enough and the contribution has to derive from something that the contributor has done. However, non-financial contributions towards the marriage as well as financial contributions can be reckoned.  It is extremely important to avoid discrimination against the home-maker in deciding on the split. There has to be some exceptional and  individual  quality which deserves special treatment but there is no established  threshold at which the special treatment will kick in.    

And last Thursday in the High Court a wife was awarded 41.5% of the assets of £1 billion with the husband failing in his argument that he had made a special contribution. The split was unequal for other reasons.

So, my friends, the grabbing of every second of overtime which is available and working through your allocated holidays may be very commendable but when it comes to a special contribution argument, I fear you will have to forget it.

*The case is Work v Gray [2017] EWCA Civ 270 in which each party was represented in court by three barristers and before the appeal was launched, the parties had between them spent £3 m on legal fees and associated costs.