Breaking the Glass Ceiling – DR v UG [2023] EWFC 68

Published: 17/07/2023 22:45

In a landmark judgment handed down by Mr Justice Moor, a wife has been awarded 50% of the parties’ assets in a £284 million ‘big money’ case, after the husband failed to establish that there should be a departure from equality based on his special contribution and post separation endeavour. DR v UG [2023] EWFC 68 is thought to be one of the only ‘big money’ cases in which a wife has received a 50% share of the parties’ assets. It provides helpful guidance on the current state of post-separation endeavour and special contribution, exemplifying the high thresholds that have been put in place over recent years.

Aptly named DR v UG, the judgment, resulting from a trial in March, centred its focus on the husband’s involvement in a biotech company in the business of drug production. During their c.20-year marriage, the husband had worked for the company in varying and increasingly responsible roles. The parties relocated with their three children on several occasions to support the husband’s work. These business investments were valued at £310,000 in December 2017 and, following the parties’ separation in January 2019, this valuation skyrocketed to over £250 million at the point of sale in late 2022. Remarkably, during this period the business encountered production failures in the batches and the court heard that the business nearly failed in early 2022. However, these issues were later rectified. As a result, the husband claimed that much of this wealth was accumulated because of his ‘special contribution’ and ‘post separation endeavour’ and argued that on these bases, any award should reflect a departure from equality in his favour.

A return to White?

The seminal case of White v White [2000] UKHL 54 stressed that whilst there is no presumption of equal division, an award should be cross-checked against a ‘yardstick of equality’. It then coined the key principle that retains its value as a general guide today: ‘equality should be departed from only if, and to the extent that, there is a good reason for doing so’ [605]. In the vast majority of cases over the 22 years post-White, this has incentivised the ‘moneyed’ parties entering financial proceedings to search for and put forward good reasons to facilitate a departure from equality. White did not go into significant depth in exploring what a ‘good reason’ might be. However, two particularly good reasons have since evolved to protect the generator of wealth, presenting well-established grounds for a departure from equality; wealth generated through post-separation endeavour (Cowan v Cowan [2000] 2 FLR 192), and special contribution (Miller; McFarlane [2006] UKHL 24 at [66]–[68] and [146]). Consequently, for 22 years, post-separation endeavour and special contribution have formed persuasive arguments as to why the yardstick of equality should not apply with full rigour. Historically, in almost every case in which either of these arguments were deployed, the court sanctioned a departure from equality in favour of the generator of wealth. It has therefore been an inevitable consequence that when faced with financial remedy proceedings in a big money case, a non-moneyed party (in most cases, a wife) will be reluctantly forewarned by her lawyers that an award of 50% of the assets is a distant possibility. She faces a ‘glass ceiling’ – an award that has never been expressly ruled out, but one that is very rarely made in practice. However, it’s arguable that the thresholds for establishing these arguments have elevated in recent years, culminating in the decision of DR v UG [2023] EWFC 68 and the implicit finding that there was no good reason to depart from equality.

Post-separation accrual and the concept of a ‘new venture’

In providing a helpful review of post-separation endeavour, DR v UG [2023] EWFC 68 cemented the ‘new venture’ analysis, further restricting the scope of the concept and its application in practice.

Particular wealth generated by a party following separation has, in the past, been recognised as a good reason to depart from equality. However, it is recognised that between separation and trial, the parties’ assets are still mingled. In Cowan v Cowan [2001] 2 FLR 192, Thorpe LJ placed emphasis on the fact that ‘the bulk of the assets was in the meantime the husband’s and under his control. He could do with it as he wished. She had no opportunity to use the assets or to increase them in the meanwhile’ and as a result, ‘the husband traded his wife’s unascertained share as well as his own between separation and trial … the wife’s share went on risk, and she is plainly entitled to what in the event has proved to be a substantial profit’. For this reason, for post-separation endeavour to warrant a departure from equality, the court initially held that the wealth generated had to be ‘attributable to an extra investment of time, effort and money’ (N v N [2001] 2 FLR 69, per Coleridge J). This was to be contrasted with the ‘financial continuum, the ground-work for which was laid, and the seeds sown during the parties’ married life together’ (CR v CR [2007] EWHC 334 at [41] by Bodey J). DR v UG [2023] EWFC 68 reiterated the ‘non-exhaustive’ list of circumstances which may evidence this further time and effort, including ‘cases where there is still more to do after the date of the trial to harvest the asset (e.g. Evans v Evans [2013] 2 FLR 999); cases where there has been a long and unjustified delay in bringing the application (e.g. S v S [2007] 1 LR 2120); earn outs or lock-ins (e.g. where the payer has to continue to work in the business in the future, despite the sale)’. However, in a relatively simple case where there is no undue delay, a business has been sold, there is no lock-in or earn-out, and there is no more to do than harvest the asset, the court must scrutinise the nature of the endeavour itself.

Recently, there has been an apparent shift in the terminology applied by the judiciary when referring to post-separation accrual. On the back of Rossi v Rossi [2006] EWHC 1482, which queried whether the assets were acquired because of the husband’s ‘personal industry’, the concept of ‘new venture’ has since emerged as a signifier of post-separation endeavour. In JL v SL (No 2) [2015] 2 FLR 1202, Mostyn J defined post-separation endeavour as a ‘truly new venture with no connection to the marital partnership or matrimonial assets’. This was similarly applied in G v T [2021] 1 FLR 57 at [53] by Mr Cusworth QC sitting as Deputy High Court Judge. This ‘new venture’ appears to take a more restrictive approach than the simple investment of extra time and effort, placing an additional burden on a party to demonstrate that it was wholly unconnected with the marriage.

DR v UG [2023] EWFC 68 reinforced the ‘new venture’ test. In applying this, Moor J concluded that the trading company was a producer of the product during the marriage and the company was sold as such – it was the product that the purchaser wanted. The judge then stressed that ‘it is not the husband, however, who has developed new ground-breaking specialised therapies. It will be the scientists at the purchaser, or other competitors, who, hopefully, will do so’; [75]. When addressing the husband’s point that he steered the company into specialised therapy as a form of new venture, Moor J stated that ‘I am prepared to accept that the husband first sent the trading company in this direction but, even then, the work was done by others’. As a result, he concluded that ‘the business, as sold, was not a new venture. It remained first and foremost a producer of the product’. Moor J also noted that ‘the argument that he was trading his spouse’s undivided share is particularly relevant here’ because ‘there had been no ring fencing of that sum to protect her from disaster’ and ‘they were sharing the risk’ [77], particularly considering the previous batch failures and the near failure of the business during the currency of the proceedings.

Special contribution

Special contribution may be thought of as an inherently discriminatory concept. It may be for this reason that it has lost judicial favour. Mostyn J stated in E v L [2021] 1 FLR 952 at [28] that ‘the doctrine of special contribution has to all intents and purposes been consigned to history’. After all, there have been very few cases in which special contribution has been successfully argued and upheld – the latest of which occurred in 2014. Whilst Moor J in DR v UG [2023] EWFC 68 did not seek to comment upon the future of the special contribution concept, he highlighted the elevated hurdle that a party would have to clear in making this argument. Moor J reiterated the three elements from the first instance decision of Work v Gray [2017] 2 FLR 1297, cited at [49]:

‘(a) The characteristics or circumstances which would result in a departure from equality have to be of a wholly exceptional nature such that it would very obviously be inconsistent with the objective of achieving fairness for them to be ignored.
(b) Only if there is such a disparity in the respective contributions of the parties to the welfare of the family that it would be inequitable to disregard it should this be taken into account in determining their shares (thus if the court completely fails to undertake a comparative evaluation of each party’s respective contribution [as Baker J failed to do in XW v XH [2020] 1 FLR 1015], a finding of special contribution will be flawed); and
(c) The amount of the wealth alone may be so extraordinary as to make it easy for the party who generated it to claim an exceptional and individual quality which deserves special treatment. Often, however, he or she will need independently to establish such a quality, whether by genius in business or some other field. A windfall is not enough.’

In Moor J’s analysis, although the husband was ‘undoubtedly a very good businessman’ and played a significant role in renegotiating contracts and steering the business towards the very lucrative area of specialised therapy, he concluded that:

‘the purchaser needed a product producer. They may have paid over the odds to acquire one, but it will be the purchaser who will develop these specialised technologies, with or without the use of the product. It will not have been the Husband who will have developed them. I can see nothing sufficiently exceptional to justify this as a special contribution.’

It was also noted that, although the husband worked to turn £310,000 into over £250 million, this ‘did not involve making billions of pounds’ and Moor J considered that there was ‘an element of windfall in achieving such a high price so quickly compared to the [previous] valuations’. It was emphasised that the business nearly failed in 2022 and in working to rescue the business, he had been supported by a strong team as well as external consultants who he had hired in order to resolve the issues in the business. Another point made was that from 2019 onwards, he was only working three days per week and the wife had additional homemaking and childcare responsibilities, with the husband away from home for around 100 days each year.

50% of the assets and no good reason to depart from equality

Neither post-separation endeavour nor special contribution amounted to a good reason for the court to order a departure from equality in favour of the husband. The case provided a helpful analysis of the current state of the law with regard to these concepts and demonstrated the high hurdles which a generator of wealth must clear when making these arguments. The court is understandably reluctant to discriminate against a party because of their marital role. As a result, special contribution appears to have taken a backseat in financial remedy cases, and with the threshold to establish post-separation endeavour increasing, these good reasons appear to be narrowing in their application so it will be particularly interesting to see how they develop (or retreat) in the future. The financial outcome of DR v UG [2023] EWFC 68 echoes the spirit of White and the yardstick of equality and sharing. After 22 years of finding good reasons to depart from equality, it represents a landmark judgment in that it remains to be one of the only reported ‘big money’ cases in which a wife has broken through the ‘glass ceiling’ to acquire a 50% share of the parties’ assets.

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