The Husband is 70. The Wife is 51. They have a 9-year-old daughter. They cohabited from February 2003 and in early 2012 separated due to the wife’s affair. In August 2012 – c.9 months later – they reunited. They married on 8 October 2012. In November 2020 the parties relocated to England from abroad. They came as non-doms to take advantage of the tax regime. The wife applied for divorce in May 2023. They therefore had nearly 20 years together, albeit not seamless cohabitation.

The husband is the beneficiary of a large inheritance from his grandparents – c.£121m gross or so. That is now managed by a private equity investment company on his behalf. The issues in dispute in the case were the amount of the husband’s income from these investments, and whether any of the inherited investments had been ‘matrimonialised’ by him, as the wife asserted the husband’s own endeavours during the marriage had transformed that portfolio, and there was the usual debate of liquidity of such investments – the husband owned his inherited assets mainly jointly with his brother and his brother would not consent to a liquidation (found by the court to be a credible witness at trial).

The husband’s position was that after tax (which would be huge as the original investments came from the 1940s and CGT had rolled over and would be triggered on a sale or disposition), his interest in these inherited portfolio of assets would be c.£12.5m – the wife’s case was it should be valued at £126.7m and no allowance for tax to be applied, as it was unlikely he would sell these assets in his lifetime. In addition, their daughter has $20m of trust funds, contributed by the husband for her benefit. The husband also has liquid funds of some £23m in his own right. Neither party worked during the marriage.

The husband openly offered £11m – largely comprised of a housing fund of £3.5m, £4.744m for a capitalised income claim, £250k costs and a £1.3m contingency fund or settlement premium.

The wife claimed c.£27m in total. Being £18,513,651 of capitalised income claims (on the basis of varying budgets that eventually topped out at £665,728 p.a. reducing by 25% at age 65), child maintenance of £83,351.87 p.a. until the end of tertiary education, a school fees and university fees order, the family home worth c.£4m to be transferred to her, nearly £1m for refurbishment/improvement works to the family home, £3.5m for a second home, and c.£200k to pay her legal fees (as she had a litigation loan).

Just days before the final hearing, and after several SJE valuation reports were received which reduced the capital sum required on the works to the family home, and reduced the tax payable if the wife relocated abroad diminishing her income fund, she reduced her offer to just over £23m – being £14.789m as an income fund, c.£464k works to the family home, £3.5m second home fund, c.£275k to discharge her litigation loan and the £4m family home to be transferred to her.

The judge awarded a lump sum of £13.75m to the wife (far closer to the husband’s offer) which was 91% of the assets to the husband, and 9% to the wife. This was calculated as follows:

• The family home transferred to the husband.
• A sum of £4m to rehouse the wife, including SDLT, renovation, furniture etc.
• A capital sum to meet the wife’s income needs of £8m. That was broadly £320k p.a. for herself, and £30k for the child, with a 10% uplift for contingencies so £385k p.a. – and a 25% reduction at the wife’s retirement.
• An ‘enhancement/contingency award’ of £1.5m to deal with the concept of fairness being elastic, given the husband will have over £100m in his possession and can make financial choices as he likes so the wife, should have some similar freedoms.
• £250k towards the wife’s costs liability (because it is a needs case and she has a litigation loan to discharge).

This case is interesting for practitioners for a number of reasons:

1. It is one of the first cases, if not the first case, to positively cite the Court of Appeal decision in Standish v Standish [2024] EWCA Civ 567 where the source of the assets (here inherited wealth) is important. As a result, the needs assessment of the wife’s claim was more conservative. The judge found the concept of matrimonialisation should be narrowly applied when the source of the wealth is non-matrimonial. Hugely helpful to a spouse seeking to protect their inherited wealth.
2. In a big money case, especially when the source of the wealth is pre-marital and/or inherited, one cannot assume a second home will be awarded as a genuine ‘need’. Even more so if the needs budget has a large holiday claim sought for various holidays abroad – so, going forward, will a party have to decide which they seek – a second home or various holidays? They are unlikely to be able to always have both.
3. The enhancement/contingency award of £1.5m is a bit of a ‘throwback’ in high net worth needs cases to the old ‘lump sum cushion’ from cases back in pre-White v White days, arguably inserted by judges then to err on the side of caution and because one party could easily afford it. The judge here found the husband had large assets in his hands, and as he could afford to make financial choices as he wished, so the wife should have some similar freedoms available to her. This ‘cushion’ allowed for that freedom. That contingency award arguably makes cases like these harder for the lawyers to predict. The Husband made a very well-pitched open offer of £11m which in the light of the actual award was pretty much spot on. Did the judge here award the £1.5m contingency award because the Husband’s open offer had a ‘settlement premium’ of £1.5m in it, or is it a reversion back to needs cases having a lump sum cushion?
4. If there had been a pre-nuptial and/or a post-nuptial agreement in this case (which there wasn’t) would the husband have been ordered to pay less? Probably not, because the case would still have come down to needs and this couple were involved with each other for over 20 years. However, given the weight nuptial agreements now have, a nuptial agreement in this case would probably have prevented the exaggerated needs claims brought by the wife and the case may not have been litigated in the same way by her.
5. Throwing caution to a needs budget being prepared by someone else on a party’s behalf and/or on the standard of living enjoyed by the family several years earlier to the current position. Here the wife’s lawyers engaged Pennywise Consultants to prepare two budgets – one based on their old marital standard of living when they lived outside of England, pre-Covid-19 and one looking forwards, and it was found that those budgets bore no resemblance to the reality of the case or the wife’s oral evidence on the subject. So do make sure the spouse seeking the sums at trial is on board with the needs items sought on their behalf, it bears some familiarity with the same and they are not based on historical standard of living claims but the more recent and current spending.