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Matrimonial Finances – pre-acquired and post-separation assets

07/04/2017

In long marriages, there may be issues about identifying and valuing assets which one party has brought into the marriage many years before consideration of the consequences of divorce. Valuation issues can be particularly important when non-matrimonial property has changed identity and value during the marriage or has been mingled with matrimonial property.

The treatment of non-matrimonial property in capital awards was considered in JL v SL and N v F (Financial Orders: Pre-Acquired Wealth [2011] EWHC 586 (Fam), where it was concluded that it was important to quantify the matrimonial and non-matrimonial “pots”, dividing the matrimonial property equally and then adjusting the overall percentage awarded to each party to reflect the non-matrimonial proportion. It was also noted that the effect of the length of the marriage on the exercise of deciding whether the existence of pre-marital property should be reflected in its division between the parties, with the overall objective of achieving fairness between them.

When business and personal wealth has been accumulated before marriage, it is considered non-matrimonial in nature. In Robertson v Robertson [2016] EWHC 613, the division of shares in a publicly listed company which originated in a company established by the husband before the marriage was considered. Some of the company shares had been sold during the marriage and invested in family homes so could not be ring-fenced entirely. The judge concluded it was fair to treat half of the shares as non-matrimonial property and half as matrimonial property which was shared equally between the parties.

In MCJ v MAJ [2016] EWHC 1672 (Fam), the principles in relation to an assessment of pre-marital wealth was summarised as follows:
“the stepped and intellectually rigorous approach of (a) deciding whether the existence of pre-marital property should be reflected in outcome at all, depending upon issues of the length of the marriage and … ‘mingling’; (b) if so, the extent of the pre-marital property to be excluded from the sharing principle; and, finally (c) the equal division of the remaining (marital) property subject only to the cross-check of fairness and need.”

The husband had established a portfolio of Central London investment properties before his second marriage worth £7.3 million net, which accounted for just under 68% of his wealth and was the most significant asset in the case. Although income generated by the property portfolio had been used by the parties during the marriage, the “basic integrity of the portfolio as an asset in H’s hands” had not changed during the marriage and the increase of its value was due to passive growth in the Central London property market. The portfolio was an “early unmatched contribution made by the husband” and was not subject to the sharing principle.

These cases are examples of recent cases which have considered the treatment of non-matrimonial assets. In the writer’s view, it is clear that the parties’ needs continue to dominate the court’s approach to the exclusion or otherwise of pre-acquired assets, however in ‘big money’ cases the distinction of pre-marital wealth has a part to play.