Standish v Standish
The Supreme Court is not often tasked with hearing financial remedy proceedings on divorce and, when it does, the implications of its judgements reverberate around the divorce world. A judgement has just been handed down which will have implications for many divorcing couples.
Who are the people involved?
Ex-banker, Clive Standish, and his Australian ex, Anna Standish, were the parties to the Supreme Court case. Their relationship began, for the purposes of the court, in 2004. They separated in 2020.
What is the case about?
The court applies a number of different principles when considering the division of couples’ finances on divorce. When couples are divorcing after a long marriage, one of the key principles applied by the court is the sharing principle – the starting point being that matrimonial property is divided equally. This begs the question of what counts as matrimonial property and, if property is not matrimonial, should the sharing principle apply to it? This case brought that question into the spotlight.
What happened?
The parties’ assets totalled in the region of £133m. The key area of dispute was whether £77.8m that was transferred from husband to wife in 2017 had become matrimonial and therefore whether it was subject to the sharing principle.
There was no dispute that the majority of the money in question was built up prior to the relationship. The court found the proportion to be about 75:25 weighted towards pre-relationship accrual. The key question was whether the transfer of the money from husband to wife changed the nature of the 75% built up outside of the marriage and made it matrimonial.
The transfer took place during the marriage and the court found that it was done as part of the husband’s tax-planning as he was concerned about the inheritance tax that would be incurred on his death. The intention was that the monies would be transferred to the wife (as she was domiciled outside of England and Wales) and then into a trust for the benefit of the parties’ children.
The wife’s case was that this transfer made the money matrimonial. The husband said that they money was not treated as a joint asset in the marriage and therefore was not matrimonial.
What did the lower courts say?
The first court to hear the case decided that the monies were all matrimonial but they did decide that the source of the funds should be reflected in the settlement and they divided the £77.8m 60:40 in favour of the husband. Both parties appealed – wife saying that it should have been shared equally and husband saying that the court was wrong to find that the money had become matrimonial.
The Court of Appeal agreed with the husband and said that the source of the money and not the legal title that was important. Their decision was that the wife’s total pot following the divorce should be reduced from £45m to £25m. The wife appealed this.
What did the Supreme Court decide?
The Supreme Court heard the wife’s appeal which was on the basis that the Court of Appeal was wrong in law and that the transfer made the monies matrimonial and therefore subject to being shared.
The Supreme Court took this as an opportunity to clarify a number of points about matrimonial vs non-matrimonial assets:
- The legal title of an asset is less important that where it came from;
- If an asset is not matrimonial then it is not available for division between the parties on the basis of the sharing principle (though it could still be ‘invaded’ on the basis of needs or compensation);
- If there has been a transfer or use of non-matrimonial assets during the relationship, the intention behind that use will be very important. If the intention was simply for tax-planning purposes, this is unlikely to count as the asset being matrimonialised.
Ultimately, the Supreme Court upheld the Court of Appeal’s decision. They said that there was no intention that the money should be treated as a joint asset when it was transferred as it was clearly to do with tax-planning. As such, it should not be considered matrimonial and therefore the sharing principle did not apply to it. The question now will be whether the wife’s needs can be met on the £25m she was awarded.
What does this case mean for divorcing couples?
This case clarified the law about the application of the sharing principle on divorce. This mainly comes into play in ‘big money’ cases as the court will be concerned with whether each person can meet their needs as a priority over the sharing and compensation principles. Needs, however, are a flexible concept and it is likely that there will be ripples into the lower courts from Standish v Standish.
Arguments about whether property is matrimonial or not will be important because, if an asset is found not to be matrimonial, then it is not subject to the sharing principle at all so the starting point of an equal division will not apply in respect of that asset. It’s likely that there will be evidential disputes as to people’s intentions.
What’s next?
The case in question had a lot of evidence of the intention of the transfer being part of tax-planning. We will need to see how the court will treat cases where the parties have competing evidence of their intentions. It is also notable that the tax-planning in this case solely benefitted the parties’ children (as it was designed to minimise inheritance tax which would not crystalise in the husband’s lifetime) and not the parties themselves. This allowed the court to draw an analogy to a trust for the benefit of children – it is obvious that money placed into a trust for the children is not for the benefit of the other person in the marriage. It is interesting to consider whether the outcome would have been any different if the parties benefited directly from the reduction in tax e.g. if it was to reduce CGT which would leave more money in the parties’ pockets.
