Post-Separation Accrual in CG v DL – Are We Back to an Arbitrary Approach?

Published: 18/07/2023 22:39

Practitioners will be more than familiar with the authorities that underly the principle of non-matrimonial property. It is a judicial construct created to give effect to a ‘good reason’ to depart from the ‘equal sharing principle’ as developed through cases from White v White [2000] 2 FLR 981 through to Miller/McFarlane [2006] 1 FLR 1186 and thereafter. It is ‘a contribution made to the welfare of the family by one of the parties to the marriage’1 that is unmatched by an equivalent contribution by the other party. Such property ‘has little to do with the endeavour of the partnership and the equal sharing principle … just cannot apply to it on any moral or fair basis’.2

In respect of pre-marital property, the nature and value of the property, the time when and circumstances in which the property was acquired, the duration of the marriage, and the use made of the property by the parties (including consideration of whether has been mingled with the produce of the parties’ marital endeavours) are amongst the relevant matters to be considered.

In respect of post-separation accrual the key consideration is:

‘whether and to what extent the new work and new investments created by [one party] in the period after the parties separated falls to be considered in the character of matrimonial property in which the [other party] should be entitled to a share or whether some or all of it falls at a point too distant from the essential character of the matrimonial partnership to qualify.’3

As Mostyn J has observed4 'Continuum versus new ventures' rightly captures the essence of the debate.

In carrying out this exercise consideration may be given as to whether the matrimonial property existed at the time of separation. If so the competing arguments are whether one party has traded with the other party's undivided share and so should share with that party the profit that has been generated5 or the second party has not contributed to the industry or endeavour that gave rise to the profit or growth and so it is unfair that the second party should share to the same extent in that profit as the first who made all the effort.

In an effort to bring a formulaic approach to this issue in Rossi v Rossi [2007] 1 FLR 790 Nicholas Mostyn QC (sitting as a Deputy High Court Judge) stated at [24.4] that when considering a post-separation bonus or other earned income that ‘[a]lthough there is an element of arbitrariness’ he would not allow a post-separation bonus to be classed as non-matrimonial ‘unless it related to a period which commenced at least 12 months after the separation’.

Such an approach received a mixed reaction. In S v S (Ancillary Relief After Lengthy Separation) [2007] 1 FLR 2120 Singer J cited paragraph [24] in full before stating at [111] that ‘I regard that formulation as a helpful and accurate analysis, and adopt it’. However in H v H [2007] 2 FLR 548 Charles J at [57] described an approach ‘that is acknowledged to be arbitrary, and which, therefore, does not have regard to the realities and circumstances of a given case’ as being ‘not correct’.

Mostyn J returned to the fray in JL v SL (No. 2) (Appeal: Non-Matrimonial Property [2015] 2 FLR 1202. After citing paragraph [24] of Rossi at [33] he noted (at [34]) the approval of Singer J and ‘at least in one respect’ the disagreement of Charles J. He then noted that in Jones v Jones [2011] 1 FLR 1723 Wilson LJ at [46] had approved one aspect (albeit not this aspect) of his decision and that in Kan v Poon (2014) 17 HKCFAR 414 the Court of Final Appeal of Hong Kong per Ribeiro PJ had approved his summary. At [36] Mostyn J then said that ‘[p]erhaps unsurprisingly, I remain satisfied that my summary of the relevant principles is correct’.

In C v C (Post-Separation Accrual) [2019] 1 FLR 939 Roberts J took a less rigid view. She stated at [68]:

‘I do not accept that, in terms of the date of receipt of funds, proximity to the effective end of the marriage has any determinative effect per se on a decision as to whether property received post-separation is matrimonial or non-matrimonial.’

Undaunted Mostyn J returned to this issue in E v L (Financial Remedies) [2022] 1 FLR 952 when considering (at [71]) ‘the question of the point in time when the clock stops for the purposes of calculating the acquest’. After observing (at [73]) that ‘[t]he law needs to be transparent, accessible, readily comprehensible and should propound simple and straightforward principles’ he stated that ‘save in cases where there has been undue delay between the separation and the placing of the matter for trial before the court, the end date for the purposes of calculation of the acquest should be the date of trial’, that ‘[this] rule of thumb should apply forcefully to assets in place at the point of separation’ and:

‘[f]or new assets, such as earnings made during separation, I would apply the yardstick in Rossi v Rossi … at [24.4] where I stated: “I would not allow a post-separation bonus to be classed as non-matrimonial unless it related to a period which commenced at least 12 months after the separation”.’

And now in CG v DL [2023] EWFC 82 (Fam) – 25 May 2023 - Sir Jonathan Cohen has agreed with Mostyn J. H sought to ringfence £2.433m as being net post-separation income (i.e. £2.026m by way of profit allocation in the year from 1st January 2021 and £407,000 in respect of the year from 1st January 2022). At [45] Sir Jonathan was ‘in no doubt’ that he should not accede to the argument in respect of the year beginning 1st January 2021 stating that he agreed with para [24.4] of Rossi. He also cited at [46] that he had ‘borne in mind’ Cowan v Cowan per Thorpe LJ at [70] referred to above.6 For this reason he refused to exclude monies earned in a period which began only five months after the date of separation stating at [47] that ‘[i]t would be completely artificial to draw a line in the sand on the date of separation and to say from that moment onwards wealth is not to be shared at all’. At [48] Sir Jonathan stated that the second period was ‘more difficult’ as it commenced some 17 months after separation. Although H was still building up his investments in the business with funds built up during the marriage it was accepted that the business activities inevitably over a period of time become that much more distanced from the end of the marital partnership. Sir Jonathan therefore determined that he should exclude from the sharing principle 50% of the second year’s profit share, namely £203.6k.

It is interesting in the context to consider whether (and if so why) a post-separation but pre-determination financial contribution is considered differently to post-separation and post-determination non-financial contribution. Both of course are made after the marital partnership has come to an end. However the former is potentially relevant whereas the latter is not as Mostyn J observed in A v M [2021] EWFC 89 at [17]:

‘I divert at this point to dismiss, briefly but emphatically, a submission … that the wife should be entitled to share in carry generated by the husband after the date of trial by virtue of her “contributions to the family” in caring for the parties’ 12 year old daughter who is at boarding school. This argument crops up from time to time and is completely untenable. The concept of the sharing of the acquest is predicated on the parties being in an economic partnership. The decision of the judge at trial is to dissolve the partnership and to distribute fairly, which means normally equally, the partnership assets. The idea that a valid claim can be made to share assets which have already been divided and distributed, or to share earnings or profits which have been generated after the dissolution of the partnership, is completely unprincipled. It would be a good thing if this argument were finally to bite the dust.’

Is it not at least arguable that this approach may give rise – as Mostyn J observed in E v L (Financial Remedies) at [46] – ‘to the Orwellian oxymoron that all contributions are equal but some are more equal than others’?

©2023 Class Legal
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