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Financial settlements: equal sharing is not automatic

Date: September 11th, 2017 - Written by: Brookman Solicitors

 

A recent case involving a fairly short, childless marriage and dual incomes has established that equal sharing is not automatic.

The Judgment of Lord Justice McFarlane in Sharp v Sharp [2017] EWCA Civ 408 considers why the application of the concept of unilateral assets would justify departure from equality in a short, childless marriage involving dual earnings.

Actually, the marriage was not all that short. The couple started living together in 2007, married in June 2009 and began divorce proceedings in December 2013. In other words, they were together for some 6 years, which in some cases can be interpreted as medium length. They were in their early 40s. The total assets were £6.9 million. The Wife had £4.17 million in her bank accounts. This was because although they had earned approximately similar basic salaries, the Wife had earned £10.5 million of bonuses during the marriage. They had always kept their finances separate and did not know the detail of each other’s. They often divided up their restaurant bills for meals out and they paid half of all household bills.

The first instance Judgment said that there was “no sufficient reason… for parting from equality of division”.

However, the Court of Appeal held that it was wrong to say that there was an automatic application of an equal division in every case. McFarlane LJ said “if… the equal sharing principle of 50/50 allocation is now applied… without exception… this would seem to be a very significant and wholly unjustified development…”. “An automatic or blind application of a 50/50 split in every case can only be an inadmissible judicial gloss on the statute, which expressly requires the Court to consider all the circumstances of the case”.

The Court’s conclusion was that fairness may require a reduction from a full 50% share or the exclusion of some property from the 50% calculation.

The Husband’s share was then reduced, being made up partly from a 50% share of certain properties and another lump sum to deal with future needs.

This case is especially important for two reasons. First, of course, the emphasis that it is wrong to apply an automatic 50/50 presumption to any case, every case depends on its facts. The important second aspect, though, is where McFarlane LJ talks about “the exclusion of some property from the 50% calculation”. Up to now Judges have been required, fairly strictly, to look at the whole pool of assets and apply a global percentage to them, but where appropriate to vary that percentage to reflect other factors. So far so good. Generally, they have been told it is wrong to “ringfence” certain assets. However, the case of Sharp v Sharp gives the first indication that in some cases it might be appropriate to carry out the calculation by ringfencing, because every case depends on its own facts.

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