Unilateral Assets and Short Marriages after E v L – Another White Leopard?

Published: 03/07/2023 08:00

It was made clear by the Court of Appeal in Miller v Miller [2005] EWCA Civ 984, [2006] 1 FLR 151 that none of the pre-White v White [2000] UKHL 54, [2000] 2 FLR 981 so-called short marriage cases1 had survived the change in judicial approach that White heralded.

As Thorpe LJ stated (at [32]) the principle drawn from those cases ‘was that the award should be enough to get the unhappy applicant back on her feet’. At [33] and following he identified a number of ‘very good reasons’ why this was no longer ‘the modern approach’ namely: (1) it originated and developed during ‘long years’ in which the yardstick for measuring the applicant’s claim was an assessment of her (and is was usually her) reasonable requirements; (2) a marriage is not to be equated to a purely financial venture where the court may redress breach of contract or the disintegration of a partnership by an award of damages or other financial relief and MCA 1973, s 25 requires a more sophisticated evaluation of the extent of the wife’s commitment to and investment in the marriage emotionally and psychologically; and (3) reliance on the old cases was precluded by the Court of Appeal’s decision in Foster v Foster [2003] EWCA Civ 565, [2003] 2 FLR 299.

Wall LJ (as he then was) took a similar approach (at [70] and following) and was ‘in no doubt at all’ that the earlier decisions had not survived White concluding (at [76]) that all these cases ‘are all liable to attack on the basis that they are discriminatory’.

On appeal to the House of Lords (Miller v Miller, McFarlane v McFarlane [2006] UKHL 24, [2006] 1 FLR 1186) Lord Nicholls of Birkenhead affirmed this conclusion stating (at [55]) that:

‘In the 1980s cases attention was directed predominantly at the wife’s needs. There may be cases of short marriages where the limited financial resources of the parties necessarily mean that attention will still have to be focused on the parties’ needs. That is not so in big money cases. Then the court is concerned to decide what would be a fair division of the whole of the assets, taking into account the parties’ respective financial needs and any need for compensation. The court will look at all the circumstances. The general approach in this type of case should be to consider whether, and to what extent, there is good reason for departing from equality. As already indicated, in short marriage cases there will often be a good reason for departing substantially from equality with regard to non-matrimonial property.’2

The ‘equal sharing’ principle, explicitly introduced in Miller/McFarlane by which each party is entitled to an equal share of the assets of the partnership unless there is a good reason to the contrary, is therefore clearly now applicable as much to short marriages as to long marriages. As Lord Nicholls stated (at [17]) ‘[a] short marriage is no less a partnership of equals than a long marriage. The difference is that a short marriage has been less enduring. In the nature of things this will affect the quantum of the financial fruits of the partnership’ and (at [19]) ‘[t]o confine the White approach to the “fruits of a long marital partnership” would be to re-introduce precisely the sort of discrimination the White case was intended to negate.’

So far, so straightforward.

But then came Sharp v Sharp [2017] EWCA Civ 408, [2017] 2 FLR 1095 – the wife’s appeal from JS v RS [2015] EWHC 2921 (Fam), where Sir Peter Singer had awarded the husband £2.725m being one half of what he found to be the ‘matrimonial acquest’. The wife’s central ground of appeal was that her marriage fell squarely within the confines of the kind of case Baroness Hale of Richmond had envisaged in [153] of Miller/McFarlane (namely, the genuine dual-career family, where both parties have worked throughout the marriage and not all assets have been pooled and where family assets should be divided equally but it would be fair to leave undisturbed ‘whatever additional surplus each has accumulated during his or her working life’) and that, as a consequence, there should have been a departure from the sharing principle.

The Court of Appeal agreed, albeit not to the extent that the wife had hoped, reducing the husband’s award to £2m based on their repeated phrase – a ‘relaxation of the sharing principle’ – in relation to what has become known as ‘unilateral assets’ (a phrase coined by Burton J in S v S (Non-Matrimonial Property: Conduct) [2006] EWHC 2793 (Fam), [2007] 1 FLR 1496 at [29] and picked up in Charman v Charman (No 4) [2007] EWCA Civ 503, [2007] 1 FLR 1246 at [82] to describe ‘non-business partnership, non-family asset cases’ as referred to by Baroness Hale in Miller/McFarlane at [150]).

The facts of Sharp are somewhat exceptional: at the time of separating, both parties were in their early 40s. They did not have children. When they met, each was earning around £100,000 pa. During the central 5 years of the marriage, the wife entered an unparalleled period of earnings – her bonuses in that period totalling around £10.5m. It was common ground that from a financial perspective the £6.9m of assets derived almost entirely from the wife’s bonuses.

The ratio of Sharp can be distilled from the following four paragraphs of the judgment of McFarlane LJ (as he then was) (emphasis added):

‘[92] In the present case the wife’s bonuses were not “family assets” as categorised by Baroness Hale and, in contrast to Foster, they had not been generated by the joint efforts of the parties (Foster being a case which was held to be “all about contribution”). It is hard to justify holding that this case is not one where “there is still some scope for one party to acquire and retain separate property which is not automatically to be shared equally between them” (Baroness Hale para 153). By Baroness Hale’s analysis at paragraph 152 the court is obliged to take account of the duration of the marriage with a view to considering reducing the husband’s share to reflect the period of his domestic contribution. Further, in a case where, in contrast to the more traditional “bread-winner” / “home-maker” model, each partner worked full time for most of the marriage, and where there are no children, it must be necessary for the court also to evaluate the extent, if any, by which the husband’s domestic contribution exceeded that of the wife.

[97] The inescapable conclusion from this analysis of the speeches in Miller, in terms of the possibility of some alteration from, rather than a strict application of, the equal sharing principle in relation to short, childless marriages, where both spouses have largely been in full-time employment and where only some of their finances have been pooled, is that fairness may require a reduction from a full 50% share or the exclusion of some property from the 50% calculation. Of the five members of the Judicial Committee, only Lord Nicholls suggested a contrary view and even on his analysis the potential for some form of relaxation can be seen.

[113] It is, therefore, my conclusion that the division of the assets determined by Sir Peter Singer in this case does not accord with the approach dictated by the majority of the House of Lords in Miller. Further, as a matter of law, the decision of the House in Miller established that departure from the principle of equal sharing may occur in order to achieve the overarching goal of fairness in a particular case. This case is, therefore, one of the “very small number of cases” (Baroness Hale, para 152) where the factors that I have identified justify departure from the equal sharing principle.

[114] On the facts of this case, Mr. Feehan is therefore right that the combination of potentially relevant factors (short marriage, no children, dual incomes and separate finances) is sufficient to justify a departure from the equal sharing principle in order to achieve overall fairness between these parties …’

The concept was considered further by Moylan LJ in XW v XH (Financial Remedies: Business Assets) [2019] EWCA Civ 2262, [2020] 1 FLR 1015 (hearing the wife’s appeal from the earlier decision of Baker J (as he then was) and reported at [2017] EWFC 76, [2019] 1 FLR 481). Upon considering the case law on unilateral assets, he noted at [106] that:

‘we were referred to no authority in the approximately 13 years since the decisions in Miller and Charman in which the concept of “unilateral assets”, in other words, assets that are the product of one party’s endeavour during the marriage, has been applied to support an unequal division of such assets beyond short, childless marriages.’

Later Moylan LJ observed at [135] that although what was said by Lady Hale in Miller could be given a ‘broad application … which can be seen to be concerned not to close doors which should remain open to enable the court to achieve a fair outcome’, the ‘substantial practical experience the courts have acquired of the application of the sharing principle since Miller was decided and to developments in the jurisprudence since that decision’ meant that the court is ‘able further “to keep the room for application of the concept (of unilateral assets) closely confined” (Charman, at [86]) …’

Thereafter he continued as follows:

‘[141] Returning to Miller, in my view, the substantive focus of Lady Hale’s observations, at [147] to [153], is short, childless, marriages. However, even if she left open that they might apply in other than such marriages, we can now see that to apply them in those cases would be discriminatory in the same way that special contribution initially risked being applied in a way which would have significantly undermined the progress made by White.

[142] … I acknowledge, in this discretionary area, that it would be unwise to close doors to the notion that fairness might leave scope for the court to decide not to effect an equal division of marital assets because of a particular factor or combination of factors in an individual case. However, as a matter of general principle, I find it hard to envisage how, in other than short, childless marriages fairness would be achieved if the existence of “business assets” was the basis for justifying an other than equal division.

[145] Accordingly, it is evident that a broader application of a different approach to a marital asset merely because it was a “business” asset would be, as was identified in Charman, at para [83], “deeply discriminatory” and would, therefore, “gravely undermine the sharing principle”. The effect would be the same whether property is excluded from the sharing principle, because it is not treated as marital property, or whether the sharing principle is not applied to such property so as to divide it equally. Indeed, it would seem to me likely to be rare for sufficient wealth to have been generated other than through “business efforts and acumen” for the determinative principle to be sharing rather than need. This is why I have concluded that the application of a different approach to business assets, in other than short, childless marriages, would result in the sharing principle being undermined in the same way identified in Charman and, accordingly, that the judge was wrong to take this factor into account, at para [239].’

In E v L (Financial Remedies) [2021] EWFC 60, [2022] 1 FLR 952, Mostyn J observed [20] that Moylan LJ in XW v XH (Financial Remedies: Business Assets) ‘while seeking determinedly to limit this exception to the equal sharing principle, seemingly accepted, with barely concealed distaste, that it might apply to a short marriage case which was childless’. He went on at [21] to say that he ‘struggled with the logic’ of the unilateral assets exception and asked ‘Why should it make any difference, if there is to be an exception to the equal sharing principle for short marriages, whether the parties had children or not’.

On the distinction between a childless marriage and a marriage with children, Mostyn J concluded:

‘[27] The reason that we do not attempt any valuation of the quality or attributes of a marriage is, as Moylan LJ has explained, that to do so risks subconscious discrimination. It was for this very reason, as will be seen, that Lord Nicholls in Miller … condemned as heretical my opinion in GW v RW … that in order to have equal validity with financial contribution, a domestic contribution needed to be earned over time. For that view, as well as the concept of fledging (to which I will turn below), I freely admit my error and figuratively hold my hand in the flames.

[28] In applying the sharing principle it is not merely invidious, but extremely dangerous, for the court to attempt an evaluation of the quality of a marriage or of the arrangements made within it, as to do so will almost inevitably trigger subconscious discriminatory practices. It is for this reason that the doctrine of special contribution has to all intents and purposes been consigned to history. When the court is undertaking the application of the sharing principle, it should start and almost invariably finish with the proposition that a marriage is a marriage …

[29] In my judgment for the court to start asking why there are no children, and whether this denotes a lesser extent of commitment to the relationship, is to make windows into people’s souls, and should be avoided at all costs.

[30] It is not clear to me from where this factor of childlessness derives. An analysis of Miller v Miller; McFarlane v McFarlane [2006] 1 FLR 1186 shows that childlessness is not part of the reasoning of Baroness Hale of Richmond and Lord Mance. It is true that the Miller marriage was childless. At para [41] Lord Nicholls of Birkenhead referred to the absence of children, but recorded that the couple had been trying for one and that Mrs Miller had suffered a miscarriage. No one suggested that this sad failure denoted “a completely different category of commitment”.

[31] Childlessness was not a reason that the House of Lords upheld the unequal division of the acquest in that case.’

It is worth noting that in VV v VV [2022] EWFC 41, [2023] 1 FLR 170 at [44] Peel J stated that ‘I agree with Mostyn J at para [28] of E v L that it is dangerous for the court to evaluate the quality of a marriage …’.

Moving on from the issue of childlessness and instead looking at the shortness of the marriage, Mostyn J stated at [43] that there was ‘absolutely no logical reason’ to draw a distinction between an accrual over a short period and an accrual over a long period. Mostyn J did however recognise from Miller in the House of Lords at [44] a ‘possible exception for non-family assets generated by one spouse alone during a short marriage where those assets have been kept separate and where both spouses have been financially and independently active.’ He noted the Court of Appeal’s decision in Sharp as having ‘acknowledged the exception’ and the likewise acknowledgment of the principle by Moylan LJ ‘with obvious distaste’ in XW v XH.

Mostyn J noted at [45] that McFarlane LJ in Sharp stated that the exception would apply only in a ‘fringe of cases’ and that Lady Hale in Miller/McFarlane acknowledged ‘the great rarity of the exception’. Likewise, he noted that Moylan LJ stated in XW v XH that the concept ‘will only be capable of being legitimately invoked in vanishingly remote circumstances’. Expressing his own view, Mostyn J stated:

‘For my part I would say (as I have said before when talking about the rarity of sharing non-matrimonial property) that a case where there can be a legitimate non-discriminatory and unequal sharing of matrimonial property earned in a short marriage will be as rare as a white leopard. I have said “earned” to draw a distinction between money generated during the marriage and an asset brought into a marriage which has been “matrimonialised” such as a dwelling used as a matrimonial home. I accept that the law recognises the possibility of unequal sharing of such an asset: see Vaughan v Vaughan

[46] The reason for the rarity is obvious. The exception is founded on the notion that the value of the contributions made by one spouse during a short marriage in generating “business assets” is worth more than the value of the contributions made by the other spouse during that period. Like the now discredited doctrine of special contribution this notion gives rise to the Orwellian oxymoron that all contributions are equal but some are more equal than others. It is very difficult to escape the conclusion that discriminatory forces are underpinning this notion. Hence the need to confine its application to extremely rare situations.’

Even prior to E v L (Financial Remedies) it was possible to argue that Sharp was a case confined to its facts. It is of note that it has been cited in only a handful of reported judgments over the last 6 years (XW v XH (at first instance and on appeal), IX v IY (Financial Remedies: Unmatched Contributions) [2018] EWHC 3053 (Fam), [2019] 2 FLR 449, E v L (Financial Remedies) and ARQ v YAQ [2022] EWFC 128 and not even all of these in relation to the issue of unilateral assets). There will be few marriages carrying the combination of features: short, parties working, no children and a huge disparity of financial contribution. E v L (Financial Remedies) makes this even easier to argue.

Such an approach also has the advantage of stopping parties engaging in the ‘general rummage through the attic of their marriage to discover relics from the past to enhance their role or diminish their spouse’s’ deprecated by Coleridge J in G v G [2002] EWHC 1339 (Fam), [2002] 2 FLR 1143 at [49]. Lord Nicholls spoke to similar effect stating in Miller/McFarlane at [67] that ‘[a] good reason for departing from equality is not to be found in the minutiae of married life’. More recently in WC v HC (Financial Remedies Agreements) [2022] EWFC 22, [2022] 2 FLR 1110 Peel J stated at [1] (ii):

‘By para 11 of the High Court Statement of Efficient Conduct of Financial Remedy Proceedings, s25 statements must only contain evidence, and “on no account should contain argument or other rhetoric”. In this case, W’s over long statement crossed the line and descended into a number of personal, and prejudicial matters, directed at H which, in my view, were irrelevant to the matters at hand. Parties, and their legal advisers, may be under the impression that to describe the other party in pejorative terms, and seek to paint an unfavourable picture, will assist their case. It is high time that parties and their lawyers disabuse themselves of this erroneous notion. Judges will deal with relevant evidence, and will not base decisions on alleged moral turpitude or what Coleridge J once famously described disapprovingly (albeit in a slightly different context) as a “rummage through the attic” of the marriage in G v G (Financial Provision: Equal Division) [2002] 2 FLR 1143, at [49].’

The same is true at all levels of the Financial Remedies Court given that paragraph 22 of the Statement on the Efficient Conduct of Financial Remedy Proceedings Below High Court Judge Level is in similar terms, stating inter alia that witness statements ‘may only contain evidence’ and must not ‘seek to argue the case’ or ‘use rhetoric’. The combination of E v L (Financial Remedies) and these Efficiency Statements may therefore mean there is less need for judicial ‘distaste’ in the future.

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