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Division of financial assets on divorce: sharing principle now unfair in short marriages?

The Court of Appeal has this week allowed an appeal by Mrs Sharp, a city trader, who challenged a divorce judgment which awarded her husband exactly 50% of the matrimonial assets after a marriage and cohabiting relationship of 6 years, and where she had generated the majority of the matrimonial wealth.

The Court confirmed that in the circumstances of this particular case, it was appropriate to depart from the principle of an equal division of marital assets, and Mr Sharp’s award was reduced from £2.7 million to £2 million i.e. from a 50% share to circa 33%.

In any case where the court is asked to separate a couple’s finances, it considers the discretionary factors set out in section 25 of the Matrimonial Causes Act 1973. One of these is the duration of the marriage. Others include their respective contributions to the marriage (whether financial or otherwise), and their financial needs for the future.  In each case the court has to balance the various factors in determining how to divide the assets and income.

Mrs Sharp argued that the length of the marriage was the dominant factor in her case which had to be considered by the Court when determining how to split assets fairly between her and her husband, and as a short marriage it was appropriate to depart from the cross check imposed by the case of White v White of the “yardstick of equality”, so she should keep more than 50%.

Mr and Mrs Sharp’s marriage was deemed to be short in duration, with the parties having been married for 4 years and having lived together for the previous 2 years.  The case gave rise to some very detailed discussion by the judges as to how assets should be divided in shorter marriage cases. However, it is important to note that there was no clear guidance given as to what constitutes a short or a long marriage, and as such this issue remains open for debate in future cases.

The length of the marriage was not the only relevant factor in this successful appeal. Mr and Mrs Sharp did not have children, they were both high earners and had careers in their own rights and, perhaps unusually, they had kept their finances separate throughout the marriage.

Although both parties earned at a high level, Mrs Sharp received exceptional bonuses throughout the marriage which amounted to approximately £10 million. She was able to demonstrate that the way the couple had run their financial affairs meant that these bonuses were considered separate from their other marital assets. Mr Sharp’s reduced award was therefore calculated on the basis of him receiving one of the parties’ two properties (worth £1.1 million) and a lump sum of £900,000 reflecting the standard of living during the marriage, a modest capital fund for his living costs and “a share in the assets held by [Mrs Sharp]”.

The judgment is interesting in that it reinforces the view that the length of the marriage can be a very dominant factor in the separation of assets on divorce, but as ever the specific facts of the case make it hard to derive a universally applicable principle that can be applied in all cases.

Whilst Mrs Sharp successfully argued that her husband should not share equally in her wealth, the legal costs of so doing were significant. The most effective way to avoid the issue remains to enter into a prenuptial or postnuptial agreement tailored to your particular circumstances setting out clearly how assets are to be dealt with on divorce.

The Clarke Willmott family team are experts in all areas of family law, including financial settlements on divorce and prenuptial and postnuptial agreements. Please contact us today if you have any queries in relation to the issues raised above or any other aspect of family law.