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Court of Appeal departs from ‘blind application’ of equal sharing principle

Couples may take more relaxed attitude towards pre-nuptial agreements

13 June 2017

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Divorcing couples whose marriage was short and involved no children may be able to depart from the long-standing principle of sharing matrimonial assets equally, following a Court of Appeal ruling.

‘An automatic or blind application of a 50/50 split in every case can only be an impermissible judicial gloss on the statute [Matrimonial Causes Act 1973], which expressly requires the court to consider all the circumstances of the case,’ said McFarlane LJ in Sharp v Sharp [2017] EWCA Civ 408.

Energy trader Mrs Sharp, who had been the main earner, was awarded a greater share than her husband after the court decided that a combination of relevant factors – short marriage, no children, dual incomes, and separate finances – was ‘sufficient to justify a departure from the equal sharing principle in order to achieve overall fairness between the parties’.

Forsters head of family Jo Edwards, however, warned that while there will be ‘a degree of sympathy’ towards Mrs Sharp the ruling raised almost as many questions as it answers.

‘How long does a marriage have to be to be defined as ‘short’ and at exactly what stage is someone entitled to share the wealth generated by their spouse,’ she asked.

Edwards added that couples may now take a more relaxed attitude towards pre-nuptial agreements where their marriage is short, childless, and both are in work because one of them can cite the decision as a reason not to share assets built up during the marriage.

‘This decision moves us some way closer towards the Law Commission’s recommendation of a clearer definition and treatment of matrimonial and non-matrimonial property, though the best advice remains to have a pre-nuptial agreement which sets out clearly your intentions on divorce.’

The ruling may also encourage arguments based not just on the duration of the marriage but of the relationship, according to Graeme Fraser, a partner at Hunters Solicitors.

‘Increasingly, couples will live together before they get married or enter into civil partnerships, and this has resulted in effectively increasing the length of the marriage when the court exercises its discretion about how much to award each spouse,’ he said.

‘The courts may expect more arguments about when a couple have started to cohabit in future cases following Mrs Sharp’s success. This is particularly relevant for same-sex couples, for many of whom same-sex marriage and civil partnership was not available until the relatively recent introduction of legislation.’

In November 2015, the High Court awarded Mr Sharp exactly half of the total matrimonial assets (£2.725m). However, after Mrs Sharp appealed, the Court of Appeal has now reduced this to £2m.

Mrs Sharp’s assets were boosted by substantial annual bonuses she received as a trader, which amounted to £10.5m on top of her salary during the central five years of their relationship. Her husband, who worked for an international company involved with IT, received a similar basic annual salary but his bonuses were comparatively trivial.

After cohabiting for one year, the couple purchased their first home in 2008, which Mrs Sharp exclusively paid more than £1m for. After marrying in 2009, the couple purchased a second home for £2m. Mr Sharp started an affair by at least February 2013, which became the grounds for the divorce petition filed by Mrs Sharp later that year.

‘The husband made no contribution to the source of the wife’s bonuses and this is not a case where, save in the final year, the husband is said to have contributed more to the home life or welfare of the family than the wife,’ McFarlane LJ said. ‘This case is, therefore, a “on-business partnership, non-family asset case” where the bulk (indeed effectively all) of the property has been generated by the wife.

‘Mrs Sharp received bonuses way beyond the level of her previous earnings purely as a result of her employment and without any contribution, either domestic or business, from her husband.’

Macfarlane LJ and the two other justices allowed Mrs Sharp’s appeal, set aside the High Court’s order as to the division of capital, and replaced it with a property adjustment order allocating their first home to the husband and the second to the wife, with an additional lump sum payment of £900,000 to the husband.

Matthew Rogers is a reporter at Solicitors Journal

matthew.rogers@solicitorsjournal.co.uk | @lex_progress

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Family Divorce

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Short marriage COHABITATION Equal sharing Prenups