Should a business asset be considered as matrimonial property?

Harry Clayton, a caseworker in the family team considers this recent Court of Appeal case.

The parties had been married for 7 years from 2008 until the marriage broke down in 2015. They had one child who had a rare life-threatening condition, the vast majority of the child’s care was carried out by the wife, however, the husband did play an important role.

The husband was a CEO of a company which had been set up before the marriage, however, during the marriage, the company became hugely successful and was sold in 2015 / 2016, with assets totalling £490 million.

The wife argued that she should be awarded half the matrimonial property, the husband’s position was that the wife should be awarded a needs-based award at best. The combined capital resources of the parties totalled £530 million, the trial judge awarded the wife £152 million which amounted to 29% of the combined capital.

The trial judge ordered that there should be a significant departure from equal sharing of the matrimonial property due to the following four factors;

• The parties had kept their financial affairs largely separate during their marriage;

• The assets that had grown so substantially in value during the latter years of the marriage were the husbands business assets;

• Latent potential in the company at the date of the marriage and this was not reflected in the expert’s valuation of the company;

• Special Contribution- the husband’s contribution to the growth in value of the business assets fell within the concept of special contribution. A special contribution is where an individual’s contribution to the marriage is truly exceptional and is based on the individual quality of the contributor.

The Court of Appeal allowed the wife’s appeal, they decided that the fact the parties kept their financial affairs separate was not a distinct factor. The trial judge was incorrect to state that the business assets were purely the husband’s assets. With regards to the ‘latent potential,’ the judge had not determined the extent of marital property, and the judge failed to undertake the required assessment for the ‘special contribution’ test.

The court went on to substitute the previous decision, the ultimate success of the company was attributable to a certain extent to its pre-marriage foundations and these remained a significant factor. The court, therefore, treated 60% of the wealth derived from the shares as matrimonial property totalling £293 million and 40% as non-matrimonial.

The total marital wealth of £296.7 million led to the wife receiving a lump sum of £145 million and the jointly owned property worth £3.7 million. The effect meant that the wife was awarded approximately 34.5% (£182 million) of the parties’ combined wealth.

If you have a financial case you need assistance with please contact Mavis on 020 8885 7986 to make an appointment with a family solicitor.