What’s More Important: Business Or Home?

This article was first featured in the April 2015 Edition of Jersey Life Magazine.

 

When a marriage breaks down and one party issues divorce proceedings it can be a difficult time for everybody involved.  Once the issue of the financial settlement is reached things usually become more fraught.  A thorny issue which some believe is raising its head again is whether the contribution made by the “breadwinner” (usually the husband) is more important than that made by the homemaker in cases where the assets are large and capable of meeting the needs of both husband and wife.

 

When the Family Court makes an order it does so bearing in mind what lawyers call the “section 25 factors” these are factors set out in English Law and the practice of the Jersey Court is to take these into account when looking at how assets should be dealt with upon divorce.  The Courts look at all of these factors and give greater or lesser weight to each, depending on the factors of the case.  Many moons ago in high asset cases the Courts looked at the non-breadwinner’s needs (usually this was the wife) and made an order on that basis with the breadwinner retaining the remaining assets namely the bulk of the matrimonial property.

In 2001 the well-known English case of White v White dealt with the issue of how assets should be divided although the Judgment is often misunderstood.  White v White was a case where the matrimonial assets were substantial and both parties needs could be met, the question arose of how to deal with the surplus monies.   The marriage was a long one of 33 years, the wife had initially been heavily involved with the family farming business but had reduced her involvement and looked after the house and children but still worked hard within the business.

The court said there should be “..no bias in favour of the money-earner and against the home-maker and the child-carer…” where there had been equal contribution to the family.  The Court also stated that there was nothing in the law stating that where assets exceed needs, the surplus should belong to only one party.  The settlement should be fair not equal.  On the facts of each case different factors would carry different weight when considering how the assets should be split.  It could not be that just because the needs of one party are met the other should retain all the remaining assets.

The Court specifically stated that the starting point of each case was not an equal division of the assets but that as a general guide, equality should be departed from if the factors of the case required it, with a check against equal division to ensure that no discrimination had occurred.  This has become known as the “yardstick of equality” which has been misunderstood by many.  In White v White, the wife received approximately 40% of the matrimonial assets rather than half.  The Court had given weight to the fact that the assets were tied up in the family farm and that it would be wrong to force sale to give her more in the circumstances.

One of the section 25 factors is the extent to which the parties have each contributed to the welfare of the family during the marriage and the extent to which each will contribute in the future.  This has led the Courts to consider whether one party’s contribution in creating the wealth of the family should be taken account of over and above the other’s role.  In the case of Lambert v Lambert (2002) the Court said that an attempt to reduce the award to a wife due to the husband’s special contribution was only available in exceptional cases and would often be difficult to establish in practice.

The impact of “special contribution” by one party as a factor in determining an award was set out in the English case of Charman v Charman (2007) which gave guidance that the minimum an award could be varied from equality is 5% up or down from 50% otherwise the variation was so slight that it would be a token variation rather than a genuine one.  The Court considered the most generous split to be a 66.6% – 33.3% split of assets.

Since this case there have been many well publicised English decisions involving wealthy couples and the awards made.  In the majority of cases the main “breadwinner” has been the husband.  The English Courts have built up a reputation for being a generous jurisdiction in which to divorce.  However, what the majority of these cases have in common is that the settlements have not been an equal division of assets.  There has been a degree of media frenzy which is largely down to a new breed of super-wealthy divorcing couples where the Courts have given large awards to the “non-breadwinner”.

The reason why awards to the wives have been lower than 50% of the assets has depended on a number of case-specific factors.  However, the Courts have frequently been influenced by the argument that the husband has made a special contribution and that should be reflected in any award given.  In the case of Charman the wife received 36.5% of the assets on the basis of this argument.

The most recent case in England is Cooper-Hohn v Hohn (2014) where the wife received 36% of the matrimonial assets in the sum of $530 million.  On the facts the Court decided that the husband had made a special contribution to the wealth accrued during the marriage and in addition the exponential growth of the husband’s business after the couple separated was solely due to the husband and his abilities.  He was referred to as a financial “genius”.  This decision may yet be appealed.

The Court was persuaded that the husband had contributed over and above in relation to the business, they also accepted that he was in effect the business and therefore the business did not have a value of its own.  He was the reason that people chose him to invest their monies given his exceptional talent at making money.  It was he who had the value not the company.  The Court was persuaded that the wife should not have the benefit of the growth of the husband’s business post-separation.  This was considered to be due to the husband’s skills alone and therefore had to be dealt with differently from wealth attained during the course of the marriage.

The Court did not apply a strict formulaic approach to the assets when calculating what the wife would receive.  It looked at the case as a whole and made an order it considered fair taking into account the relevant factors cross-checking this against the yardstick of equality and the movement away from an equal division.

In Jersey the Family Court has consistently referred to the need for fairness and through case law has adopted the same approach as in White v White and the subsequent cases.  It remains to be seen whether the division of assets in Cooper-Hohn v Hohn will change how the Court are looking at financial cases and whether this is the end of equality between business and home.  I would argue not.  Cooper-Hohn confirms the long standing position that fairness is what is sought when dealing with financial settlement upon divorce and that each case will depend on its facts and its facts alone.  Sometimes fairness will involve assets being split on a 50% – 50% basis and other times not.

 

Kirsty Thomas
Senior Associate
kirstythomas@bakerandpartners.com
 
April 2015

 

If you would like to discuss any of the issues raised above with Kirsty Thomas, please call 01534 766254 for a confidential discussion.

 

The Family & Matrimonial team at Baker & Partners has recently been joined by Advocate Simon Thomas, who practiced for many years at the English Bar and who was recently awarded the Jersey Law Society’s prize for Family Law.


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