Law Articles

Which assets are non-matrimonial on divorce/dissolution 25/07/2024

In the realm of financial remedy proceedings following the dissolution of a marriage or civil partnership, the classification and treatment of assets play a crucial role. One significant distinction is between matrimonial assets and non-matrimonial assets. While matrimonial assets are generally subject to equitable distribution, non-matrimonial assets may be treated differently, depending on various factors and judicial precedents.

General Principles

The concept of non-matrimonial assets, also known as non-civil partnership assets, lacks a statutory definition, relying instead on judicial interpretation and case law. This distinction is particularly important in determining the division of assets upon the dissolution of a marriage or civil partnership. The foundational principle for asset division is found in section 25 of the Matrimonial Causes Act 1973 and Schedule 5 Part 5 of the Civil Partnership Act 2004, which outline the criteria courts must consider.

In the landmark case of White v White, the House of Lords emphasised that fairness is the guiding principle in financial remedy cases. This case established that, in general, there should be no discrimination between the roles of the breadwinner and the homemaker. However, it also recognised that non-matrimonial property could be excluded from the division if the financial needs of the parties could be met without recourse to such property.

The House of Lords in Miller v Miller; McFarlane v McFarlane further clarified the distinction between matrimonial and non-matrimonial property. It held that the matrimonial home, irrespective of its origin, is always considered matrimonial property due to its role as the family home. However, other non-matrimonial assets, such as inheritances or gifts received by one party, could be excluded from the division if they were not intermingled with matrimonial assets and were kept separate throughout the marriage.

Pre-Marriage or Pre-Civil Partnership Assets

Pre-marriage or pre-civil partnership assets refer to those owned by either party before the union. These assets generally retain their non-matrimonial character unless they have been converted into matrimonial property through use or mingling during the marriage.

In K v L [2011], the Court of Appeal dealt with a case where the wife had significant pre-marriage assets in the form of shares. The court held that these shares retained their non-matrimonial character, as they were not intermingled with the matrimonial assets, and the parties' standard of living could be maintained without recourse to these shares.

Assets Acquired During the Marriage or Civil Partnership

Assets acquired during the marriage or civil partnership are typically regarded as matrimonial property, especially if they were acquired through the joint efforts of the parties. The division of such assets aims to reflect the contributions of both parties, whether financial or non-financial.

The principle of sharing is rooted in the notion that marriage is a partnership of equals. This was underscored in Miller v Miller; McFarlane v McFarlane [2006], where the House of Lords recognised that assets generated during the marriage through the efforts of either party should be shared equally, irrespective of the length of the marriage.

However, the courts have also recognised that some assets acquired during the marriage may retain a non-matrimonial character. For instance, inheritances or gifts received by one party during the marriage are generally considered non-matrimonial unless they have been mingled with matrimonial assets or used for the benefit of the family.

Assets Acquired After Separation

The treatment of assets acquired after separation is more complex and varies based on the circumstances of each case. Generally, assets acquired post-separation through the personal efforts of one party are considered non-matrimonial, especially if they result from endeavours undertaken after the separation.

In Jones v Jones [2011], the Court of Appeal addressed the issue of post-separation assets. The husband had significantly increased the value of his business after the parties had separated. The court held that this increase in value should be considered non-matrimonial, as it was attributable to the husband's personal efforts post-separation. However, the court also acknowledged that a passive increase in the value of assets held during the marriage could still be considered matrimonial.

The approach to post-separation bonuses and earned income has also been considered in several cases. In Rossi v Rossi [2006], the court held that a bonus received by the husband post-separation was non-matrimonial, as it was earned through his personal efforts after the separation. However, in H v H (Financial Relief: Deferred Clean Break) [2010], the court took a different approach, treating a bonus received post-separation as matrimonial property, as it was deemed to be the result of efforts made during the marriage.

Special Considerations

Certain types of assets, such as inheritances, personal injury damages, and lottery wins, require special consideration. The treatment of these assets depends on various factors, including the timing of their receipt and their use during the marriage.

Inheritances

Inheritances are typically considered non-matrimonial, especially if they are kept separate and not used for the benefit of the family. However, if an inheritance is used to purchase a matrimonial home or is otherwise intermingled with matrimonial assets, it may lose its non-matrimonial character.

In Wagstaff v Wagstaff [1992], the court considered an inheritance received by the husband during the marriage. The inheritance was used to purchase a family home, and the court held that the home should be considered matrimonial property due to its use for the benefit of the family.

Personal Injury Damages

Personal injury damages are generally considered non-matrimonial, as they are intended to compensate the injured party for pain, suffering, and loss of amenity. However, if the damages are used for the benefit of the family, they may be treated as matrimonial property.

In S v AG [2011], the court considered personal injury damages received by the wife. The damages were kept separate and not used for the benefit of the family, and the court held that they should be considered non-matrimonial.

Lottery Wins

Lottery wins are typically considered non-matrimonial if they are kept separate and not used for the benefit of the family. However, if the winnings are used to purchase matrimonial assets or are otherwise intermingled with matrimonial property, they may lose their non-matrimonial character.

In S v S (Ancillary Relief: Lottery Prize) [2006], the court considered a lottery win received by the wife during the marriage. The winnings were used to purchase a family home, and the court held that the home should be considered matrimonial property due to its use for the benefit of the family.

Practical Considerations

The practical considerations in determining the classification and division of assets in financial remedy cases are multifaceted and require careful analysis. These considerations include the date of valuation, the need for evidence of pre-marital assets, and the approach to bonuses and earned income.

Date of Valuation

The date of valuation of assets can significantly impact their classification as matrimonial or non-matrimonial. In some cases, the court may consider the value of assets at the date of separation, while in others, the date of trial may be more appropriate.

In Hart v Hart [2017], the Court of Appeal considered the date of valuation for a business owned by the husband. The court held that the business should be valued at the date of trial, as this reflected the current value and the efforts made by the husband post-separation.

Evidence of Pre-Marital Assets

The need for evidence of pre-marital assets is crucial in establishing their non-matrimonial character. Documentary evidence, such as bank statements or property deeds, may be required to substantiate claims of pre-marital ownership.

In Christoforou v Christoforou [2009], the court considered the need for evidence of pre-marital assets. The husband claimed that certain assets were acquired before the marriage, but he failed to provide adequate documentary evidence. The court held that, in the absence of such evidence, the assets should be considered matrimonial.

Approach to Bonuses and Earned Income

The approach to bonuses and earned income varies based on the timing and effort involved in their acquisition. Bonuses earned through efforts made during the marriage are generally considered matrimonial, while those earned post-separation may be considered non-matrimonial.

In Charman v Charman [2007], the Court of Appeal considered the treatment of bonuses earned by the husband. The court held that bonuses earned through efforts made during the marriage should be considered matrimonial, as they resulted from the joint efforts of the parties.

Conclusion

The classification and division of non-matrimonial or non-civil partnership assets in financial remedy cases involve complex legal principles and judicial discretion. The courts aim to achieve fairness by considering the contributions of both parties, the nature of the assets, and the circumstances of their acquisition and use. While matrimonial assets are generally subject to equitable distribution, non-matrimonial assets may be treated differently, depending on their origin, use, and the financial needs of the parties.

Judicial precedents provide valuable guidance in navigating these complexities, emphasising the importance of fairness, the contributions of both parties, and the specific circumstances of each case.

For further information and advice on this issue, and other family law issues, please contact us for a free initial consultation on 01992 306 616 or 0207 956 2740 or email us.