On 15 and 16 November 2023, Standish v Standish came before a Court of Appeal comprising King, Moylan and Phillips LJJ.

189 days later, Moylan LJ delivered the court’s unanimous decision: Mrs Standish’s (‘W’) appeal was dismissed, and Mr Standish’s (‘H’) appeal allowed, subject to the matter being remitted for a needs-based assessment of W’s claims.1

The decision reaffirms the broad discretion conferred upon judges in pursuit of fairness by application of Matrimonial Causes Act 1973, s 25. Title matters not. The source of funds is critical. And matrimonialisation is here to stay.

This case supplements the collection of appellate court decisions on the application of the sharing principle, but is the first since K v L (Ancillary Relief: Inherited Wealth) [2011] EWCA Civ 550 in which the concept of matrimonialisation has come under such close scrutiny. The decision illuminates the evidential burden required to prove an asset has been matrimonialised; emphasises with some force the importance of identifying the source of an asset rather than relying on title; and reformulates, at [163], the much-cited observations of Wilson LJ (as he then was) in K v L.

W’s £45m award was slashed by 44% to £25m to reflect more appropriately the ‘significant’ unmatched non-matrimonial contribution made by H to the family resources. The decision leaves H with £107m. It may, in fact, be the greatest reduction of a financial remedies award ever made on appeal.

The case at first instance: ARQ v YAQ [2022] EWFC 128

The first instance decision of Moor J was reported as ARQ v YAQ [2022] EWFC 128. It was a second marriage for both parties. They started their relationship, as determined by Moor J, in 2003 before moving from Australia to Switzerland in 2004. They returned to Australia when H retired in 2007, but purchased their future family home, Moundsmere Manor, England, in 2008. In 2010, the family (H, W, the parties’ two children and W’s three children from her first marriage) moved from Australia to England where they have remained.

H is British but moved to Australia in 1976. It is there that he made his fortune in finance. He sold his company in the mid-1980s and made A$127m. He became the CEO of that company, owning 20% of it, which was then acquired by UBS, at which point he was earning A$1m per annum. By 1999, H was the Chairman and CEO of the regional division of UBS. By 2002 he was on the executive board, earning A$11m pa from 2002. That year, H purchased a large cattle and sheep farm in Australia called Ardenside Station. With livestock and equipment, this cost c A$12m. The business operating from that land was called Ardenside Angus.

When his relationship started with W in 2003, H was worth c £57m. He was a man of exceptional ability and wealth. W’s assets were comparatively modest. She owned a property, the mortgage on which H repaid – which sold in 2011 for A$5.6m – and some inherited funds (c A$600,000).

There were ‘two financial events’ within the parties’ marriage at the centre of this case. The first was the transfer from H’s sole name into W’s sole name of investment funds then worth approximately £77m (‘the 2017 Assets’). The second was W being issued shares in Ardenside Angus.

The transfer to W of the 2017 Assets was an attempt to avoid punitive inheritance tax upon H becoming domiciled in England. The intention was to transfer the funds to W, who was non-domiciled, before placing the assets in trust for the benefit of the children.

The transfer to W of shares in Ardenside Angus was also the consequence of an ingenious scheme to avoid tax.

The 2017 Assets were never settled into trust. Subsequently, W wrote H out of her will, without telling him. The Forms E disclosed net wealth in W’s name of £83m, and c £23m in H’s name. The total pot was later found to be worth £132m, with £95.7m being held by W and £36.9m by H.

ARQ v YAQ: the decision

Moor J ultimately concluded that, by reason of the transfer from H to W, ‘the only possibility is that [the 2017 Assets] became matrimonial’ and were thus matrimonialised. Many will have agreed with the learned judge and thought that the transfer must have transformed the character of the property, at least in some way. Similarly, the placing of shares in Ardenside Angus in W’s name also matrimonialised those shares. However, in both instances, whilst W was entitled to share in those assets as a result of their matrimonialisation, there was a departure from equality in H’s favour (60:40) to reflect their non-matrimonial source.

The appeal

Both parties appealed. Each contended, for different reasons, that the 2017 Assets were non-matrimonial property. W argued that, upon transfer into her sole name, H’s non-matrimonial property became her ‘separate property’;2 that the source was irrelevant in a ‘partnership marriage’, and the court should respect the parties’ autonomy to regulate their finances and how they chose to hold their assets. H argued that the 2017 Assets were, and remained, non-matrimonial. He sought to persuade the court that the source of the 2017 Assets and Ardenside (i.e. his 32 years of pre-marital endeavour) was the magnetic feature of the case and one which had not been given sufficient weight by Moor J in his distribution of the assets.

Both appeals, therefore, flowed from Moor J’s first instance conclusion at [75] that, by virtue of the transfer, ‘the only possibility is that [the 2017 Assets] became matrimonial property’. This was a proposition with which the Court of Appeal ultimately disagreed.

W’s second ground of appeal concerned the court’s treatment of Ardenside. Moor J could not have been clearer that Ardenside Station was not matrimonial. It was the product of pre-marital endeavour and that did not change during the marriage, despite W’s attempts to persuade the judge that holidaying at that property during the marriage rendered it a matrimonial asset.

Standish therefore presented an opportunity to re-affirm the foundations on which the sharing principle has been built and, if it was necessary, the definition of matrimonial and non-matrimonial property. As Moylan LJ observed on appeal at [162], sharing applies to matrimonial property, but not non-matrimonial property. A party’s entitlement is to share in the fruits of the marriage borne from common endeavour, not the fruits of personal pre-marital effort.

On the other hand, there remains confusion as to the difference between ‘reflecting’ a non-matrimonial source within a matrimonialised asset, and seeking to identify, with such particularity or generality as may be appropriate in the case, the non-matrimonial element and dividing the residual matrimonial property equally. It is argued that the latter is more intellectually rigorous, avoids generic or conventional departures from equality and should clearly be favoured. It would also promote certainty if it were to confirm matrimonial property should always shared equally, save for arguments relating to needs, compensation, special contribution or nuptial agreements. There is certainly an understanding that matrimonial (rather than matrimonialised) property can be shared unequally, but as will be seen, the authority supporting that proposition in the context of assets other than the family home is less firm than one might think. Given the family home is ‘in a category of its own’ ([163]), this is significant.

Although Moylan LJ seems to have endorsed the latter approach, he explicitly preserved the former for reasons explored below.

Paragraphs [108]–[147] of the judgment traverse the development of appellate jurisprudence concerning matrimonial and non-matrimonial property from White v White [2000] UKHL 54, through Miller v Miller; McFarlane v McFarlane [2004] UKHL 24, Charman v Charman (No 4) [2007] EWCA Civ 503, [2007] 1 FLR 1246, Granantino v Radmacher [2010] UKSC 42, [2011] 1 AC 534, Jones v Jones [2011] EWCA Civ 41, [2012] Fam 1, K v L (Non-Matrimonial Property: Special Contribution) [2011] EWCA Civ 550, [2012] 1 WLR 306, Gray v Work [2017] EWCA Civ 270, [2018] Fam 35, Hart v Hart [2018] EWHC 548 (Fam), [2018] 2 FLR 506, and XW v XH (Financial Remedy: Non-matrimonial Assets) [2019] EWCA Civ 2262, [2020] 4 WLR 22.

The Court of Appeal added little, if anything, to the established understanding that matrimonial property is the financial product of the parties’ common endeavour (Miller) and/or the fruits of the matrimonial partnership (Charman) and such property should, ordinarily, be shared equally.

Dismissing W’s appeal

The Court of Appeal was critical of W’s case. Moylan LJ described it as running ‘counter to the principles established since White’ and ‘undermin[ing] the attainment of a fair outcome’ ([151]). To give determinative weight to title would be, as Moor J said, ‘both discriminatory and unfair’, placing ‘undue weight on legal and beneficial title’ which may not ‘reflect whether the wealth has been generated during the marriage’ when ‘such wealth will often be largely or significantly in the name of the “money-maker”’ ([152]).

W’s argument about autonomy and her portrayal of the transfer of the 2017 Assets as a binding agreement was ‘without substantive merit’ and would require a ‘very significant’ extension of the principles identified in Radmacher ([153]). It could not be said that a decision made during the marriage governing the parties’ finances while married, even if made autonomously, could have been made with a ‘full appreciation of its implications’ such that it would regulate their finances on divorce.

Reinforcing Sharp v Sharp [2017] EWCA Civ 408 and agreeing with Moor J at first instance, the absence of a pre-nuptial agreement was irrelevant and did not imply a willingness to share ([156]).

With similar ease, Moylan LJ at [172]–[173] despatched the issue of Ardenside Station. Arguments about Ardenside Angus featured little in the appeal and the information about the financial history of the business was ‘scant’. In that regard, the court observed that the outcome may have been generous to W but there was insufficient evidence to say that the decision was wrong. It was matrimonial, but Moor J found that ‘much of [the value of the shares] may have generated during the marital partnership’. Moylan LJ concluded that 20% was non-matrimonial; the rest was shareable.

Outcome

Although the Court of Appeal agreed with much that Moor J decided, they disagreed that the ‘only possibility’ was that the 2017 Assets had become matrimonial property. This was because ‘the conclusion was based, and solely based, on the fact that those assets were transferred by H into W’s name … making title the determinative factor when deciding how the wealth is to be characterised rather than the source’ ([169]).

Moor J made various findings regarding the 2017 Assets. At [75] he said that ‘at least in significant part, this is money that was generated before the marriage’; at [81], he said ‘to a significant extent, this money was pre-marital’ and referred to ‘the pre-marital origin of most of this sum’; at [82], he said that ‘an element of the sum of £80m is not pre-marital’ because ‘at least a part of this figure was generated during the parties’ relationship’; at [83], that it was ‘almost impossible to say what proportion of the £80m was earned’ during the marriage; and, at [177], that all ‘I can do is say that I find a part of the sum of £80m is money that was earned during marriage’ (emphases in the original).

Those findings ‘did not support the actual division of the 2017 Assets … namely … by awarding [W] £29m or 36% of their value’ ([178]), nor did the division ‘adhere to the approach set out in Jones and Hart, namely to award W such percentage “as makes fair allowance for [it] in part comprising or reflecting the product of non-marital endeavour”.’ The Court of Appeal held that the ‘source of this wealth had not changed as a result of the transfer’ and that, as a consequence, Moor J should have concluded ‘at least 75% was non-marital’ ([178]).

For those reasons, £20m of the £80m was added to the matrimonial pot totalling £50.48m, of which W was entitled to half.

Matrimonialisation: to exclude and share, or matrimonialise and reflect?

Matrimonialisation is the process by which non-matrimonial property acquires a matrimonial quality because of the way property has been used or treated. The consequence being that the matrimonialised property falls to be shared, but not necessarily equally. It represents a derogation from the principle that sharing applies to matrimonial property and not to non-matrimonial property. It must, therefore, be applied narrowly.

This concept is addressed between [160] and [166]. Those paragraphs are essential reading for practitioners. Despite W inviting the court to ‘remove [matrimonialisation] from the lexicon of the law of financial remedies’ ([71]) and H suggesting that ‘the court might consider whether this concept merits being maintained at all’ ([93]), it seems it is here to stay.

Central to the discussion on matrimonialisation are the common law techniques developed to assist judges to identify non-matrimonial property which has been mixed or mingled with matrimonial property: see Jones v Jones [2011] EWCA Civ 41 (historic value uprated for passive growth and springboard); Robertson v Robertson [2016] EWHC 613 (Fam) (half of a half); FZ v SZ [2010] EWHC 1630 (Fam), [2011] 1 FLR 64 (historic value only); and Martin v Martin [2018] EWCA Civ 2866 (straight line apportionment). These were described by Moor J in ARQ v YAQ as constituting a ‘detailed assessment’ compared to the ‘broad-brush’ approach approved in Hart.

Of note, in each of these cases, the matrimonial element once identified was divided equally, supporting the proposition this article advances: the sharing principle applies equally to all matrimonial assets; whereas matrimonialised assets should fall into a different category in which the non-matrimonial source may more generally be reflected by a departure from equality.

In support of her argument that once an asset becomes matrimonialised it must be shared equally (slightly different to that argued above), W submitted that that the cases relied upon by H, and by Moor J at first instance, purporting to demonstrate a departure from equality within the sharing principle are, in fact, ‘simply means to assessing what is matrimonial and non-matrimonial’ ([75]).

In S v AG [2011] EWHC 2637 (Fam), Mostyn J divided the matrimonial home unequally to reflect the non-matrimonial and unmatched contribution made by W. In so doing, the judge relied on the decision of Burton J in S v S [2006] EWHC 2793 (Fam), [2007] 1 FLR 1496 who said:

‘there is room for recognition of a substantial financial contribution, derived from pre-marriage sources, by a man who had previously worked successfully for 30 years, and not just in relation to a very short marriage such as in Miller, as can also be seen from the approval by Lord Mance, in para 171 of Miller, of the words of Mr Mostyn QC as a deputy High Court Judge in GW v RW [2003] 2 FLR 108 at para 51.’

Paragraph [51] of GW v RW [2003] EWHC 611 (Fam), [2003] 2 FLR 108 reads:

‘H also brought to the marriage a developed career, existing high earnings and an established earning capacity. I cannot see why this should not be treated as much as a non-marital asset as the provision of hard cash. In argument I suggested that H here was in terms of his career “fledged” at the time of the marriage, rather than being the fledgling, which is so often the case. Mr Marks QC stated that his client was far more than fledged: he was fully airborne. I tend to agree, and in this aspect also I find that H made a contribution unmatched by any comparable contribution by W.’

Although GW v RW was subsequently overruled by the Court of Appeal in Jones for trying to capitalise an earning capacity, and that was the basis for a departure from equality, the fact remains that both Nicholas Mostyn QC and Burton J were seeking to give effect to an unmatched non-matrimonial contribution as justifying a departure from equality. The correct approach now, it is argued, would have been to identify, quantify and exclude the non-matrimonial property and share the rest equally, rather than seeking to depart from equality within the sharing principle to reflect a non-matrimonial contribution.

In Vaughan v Vaughan [2007] EWCA Civ 1085 at [49], Wilson LJ observed that ‘the husband’s prior ownership of the home carried somewhat greater significance than either the district or circuit judge appears to have ascribed to it’ but a departure from equality was ultimately justified to achieve a clean break. Again, this is not evidence of the sharing principle being applied unequally. Had fairness enabled Wilson LJ to depart from equality to reflect the non-matrimonial source, although pre-dating K v L, this would have been appropriate because the family home had been matrimonialised (K v L at [18(c)]).

In FB v PS [2015] EWHC 2797 (Fam) the husband owned the family home prior to the marriage and had, in fact, grown up in the property. Again, a departure from equality was justified to reflect the non-marital contribution to a now matrimonialised family home and does not support the proposition that purely matrimonial property can be shared unequally.

It is important to clarify the difference between: (1) ‘reflecting’ the non-matrimonial element of a matrimonialised asset (often) with a modest but conventional departure from equality; and (2) attempting ‘with the degree of particularity or generality appropriate in the case’ to identify and quantify the non-matrimonial element, applying either a specific methodology or by adopting a broad brush, and sharing the residue equally. It is argued that these are two distinct circumstances: the former is, or should be, the product of matrimonialisation; the latter is simply the application of the sharing principle to mingled assets. Mingling does not automatically result in matrimonialisation. The argument is more nuanced.

A ‘reflection’ of a non-marital source lacks intellectual rigor: a criticism made on H’s behalf of Moor J’s 60:40 split at first instance. It should, it is argued, be invoked only where it would be unfair to give full reflection to the non-matrimonial source of an asset. One example would be the matrimonial home, where to apply one of the ‘detailed assessment’ techniques identified above would lead to unfairness because the property has become ‘part of the economic life of [the] marriage … utilised, converted, sustained and enjoyed during the contribution period’.3 Moylan LJ clearly felt that he had the evidence (in the form of findings made by Moor J) to identify, quantify and exclude the non-matrimonial assets, without having to resort to the concept of matrimonialisation to achieve a fair outcome.

The character of a property truly transforms once it becomes the home for a married family; its status is unique and the role it plays in the family economy, central. In all other cases involving the mingling of matrimonial and non-matrimonial assets, the court should seek to identify the non-matrimonial property with ‘with the degree of particularity or generality appropriate in the case’4 – there may be a sharp dividing line; there may be a complicated continuum5 – then share the matrimonial property equally. The effect of which would be an award to one party of a lesser percentage than 50% (satisfying Jones), and will reflect the non-matrimonial source, but would be the product of a more intellectually rigorous, and therefore fair, assessment of the facts of the given case. It is advanced that matrimonialisation should only be invoked where to give full weight to the source of an asset would result in an unfair outcome. Those circumstances are set out at [18] of K v L, reformulated at [163] of Standish and should be applied narrowly.

Arguably, this issue has not been articulated by the Court of Appeal with sufficient clarity. It would be easy to interpret Standish as a decision about, or promoting, matrimonialisation; Moylan LJ retains the concept, but chose not to apply it. It may be no more than a stay of execution, only time will tell. His Lordship stated at [162]:

‘[I]t would be wrong to state, as a matter of principle, property which has a non-marital source can never be subject to the sharing principle. There may well be situations when, as referred to above, fairness justifies this. However because, as Mr Bishop submitted, it is a derogation from the principle that sharing applies to matrimonial property and does not apply to non-matrimonial property, it should be applied narrowly. This is so that it is not used by parties in a way which would undermine the clarity of the sharing principle, namely that it is the sharing of property generated by the parties’ endeavours during the marriage.’

There is no doubt that the scope for invoking the concept has been narrowed significantly.

Reformulation of K v L

Moylan LJ reformulated [18] of K v L to reflect subsequent developments in the jurisprudence. His Lordship set out three scenarios:

‘(a) The percentage of the parties’ assets (or of an asset), which were or which might be said to comprise or reflect the product of non-marital endeavour, is not sufficiently significant to justify an evidential investigation and/or anything other than equal division of the wealth;

(b) The extent to which and the manner in which non-matrimonial property has been mixed with matrimonial property mean that, in fairness, it should be included within the sharing principle; and

(c) Non-marital property has been used in the purchase of the former matrimonial home, an asset which typically stands in a category of its own.’

Although well-established, (a) is most aptly rooted in the facts of White where Mr White’s father made the parties an £11,000 loan to purchase the family farm. Thirty-two years later, when the matter came before Holman J in 1996, the farm was worth £3.5m. Applying Moylan LJ’s reformulation of K v L [18(a)], although the non-marital contribution had been dwarfed by the subsequent marital acquest, when uprated for RPI the £11,000 would have been worth £123,000 at the time of the trial and the ‘evidential investigation’ would have been minimal. It is unlikely that the importance of the source of those funds would be given any weight, even post-Standish, but if there was no matrimonialisation in Standish it is foreseeable that parties will seek to place determinative weight on the importance of the source of an asset.

Of note in (b) is that property which does not fall into category (a), and is not the family home ((c)), cannot be matrimonialised absent mingling. It does not account for broader circumstances where the court may infer an acceptance that the property has become matrimonial because of how the parties used, treated and dealt with the property. That is despite, at [99], Moylan LJ suggesting they are two separate issues:

‘[t]he 2017 Assets had not been appreciable “mixed” with matrimonial property and there was no evidence to suggest that the husband had accepted that they should be treated as matrimonial property’ (emphasis added)

Although the trio of scenarios in K v L feels exhaustive, they were never intended to be so. It would be wrong to circumscribe the circumstances in which matrimonialisation may occur. The list provides a useful guide and may indicate the cases in which the argument is more likely meritorious, but it cannot be exhaustive. There will be circumstances where an acceptance of matrimonialisation may be inferred from the parties’ conduct, absent mingling, as was envisaged by Roberts J in WX v HX [2021] EWHC 241 (Fam) at [117]:

‘There are other more complex situations which fall into sub-categories (a) and (b) above where the court will need to analyse carefully whether the evidence will support a finding that property which was originally non-matrimonial has been treated, or dealt with, in such a way as to bring it within a sharing claim made by the other spouse. If the evidence leads the court to conclude that one of the parties has indeed through words, actions or deeds manifested an acceptance that it should be treated as such, it must then go on to determine the extent to which that property falls to be shared as between them.’ (emphasis added)

As a result of this decision, litigants will be keen to emphasise the non-matrimonial source of their property; to proclaim that it is unconnected to common endeavour and remains the fruit of work undertaken before they ever met their spouse. In some cases, those arguments will find more favour than they would have done previously. The preservation of matrimonialisation, despite not being applied by Moylan LJ, is to keep the court equipped with the tools necessary to effect a fair outcome where a slavish following and unwavering recognition of the non-marital source would be otherwise. However, with flexibility comes uncertainty. The decision could be subject to criticism by those advocating for more certainty in this area of law. The issue with the decision in Standish is that this was not a short marriage (it was found to be 15 years and 9 months) and the transfer of the 2017 Assets was a significant event but failed in any way to warrant some matrimonialisation.

Departing thoughts

It is likely most will consider that the Court of Appeal’s decision to be thorough, detailed, but nonetheless foreseeable. It is unusual to see such trite and established law repeated in decision of such authority. ‘Why … should a spouse be worse off simply by virtue of being married?’ was a point made on W’s behalf. A submission which, if made on behalf of a husband trying to protect wealth held in his sole name, would, quite rightly, be despatched out of hand. It would be discriminatory, set a dangerous precedent and leave (mostly) wives vulnerable and disadvantaged. It is difficult to see how that argument was ever going to find favour with the court.

W’s case ran contrary to post-White jurisprudence. It was novel, but totally without authority. For that reason, Standish reaffirms principles already established. It raises the bar for successfully establishing that the character of an asset has changed, or at least emphasises the evidential burden on parties taking that course, but otherwise changes little.

This decision could not be clearer as to the broad discretion afforded to financial remedy judges in pursuit of fairness. But has the pendulum swung too far? Is the family court paternalistic? Is the purpose of s 25 to rescue parties from their own, autonomous but ‘monumental folly’6 in circumstances where the parties’ needs would have been met comfortably? It is certainly arguable that the transfer should have matrimonialised the asset, even if only to a modest extent.

Had the intention been for W to hold the assets but apply them for the benefit of the family, it may be that the outcome would have been different. But if fairness is the ultimate aim, it could be argued that such a strict interpretation of matrimonial and non-matrimonial property is unfair, especially when the very endorsement of matrimonialisation as a concept demonstrates an ability to depart from judge-made principles in the pursuit of a fair outcome. Some may feel that for the transfer to have had no effect on the outcome of the case is also unfair, paternalistic and unduly generous to H. The outcome being that H has been able to retrieve an asset it was found, and he accepted, would never return to him.

It may be that this is an issue with which the Supreme Court, unfurnished with a family practitioner, will have to grapple. As the law stands, the decision in Standish is sound and helpful. It reaffirms the importance of the source of the generation of an asset when assessing a party’s entitlement. Parties must be entitled to the fruits of their partnership, without discrimination, but marriage does not, and should not, entitle a spouse to share in the fruits of endeavours far removed from the partnership. These debates are relevant only to cases in which there is a surplus to needs. If needs are met, non-matrimonial endeavour must be respected and the wealth arising therefrom protected.