Should there be a cut-off for pre-acquired assets?
By:0 commentsSeptember 5, 2017
The Court of Appeal’s decision last week in the case Hart v Hart has led to something of a division between family lawyers, on the subject of how to treat assets that one of the parties acquired before the marriage. In the case the wife was appealing against a decision that she should only receive £3.5 million out of total assets of £9.4 million, on the basis that the husband had brought considerable assets into the twenty-odd year marriage. The Court of Appeal dismissed her appeal. Some family lawyers felt that the decision was unfair and discriminatory towards the wife, and others felt that it was simply a reasonable application of existing law.
At the time of writing this post the judgment in Hart v Hart has not been reported, so I’m not going to comment specifically on that case. Instead, I wanted to discuss generally the issue of how pre-acquired assets should be treated by the courts.
Before I proceed I should just very briefly summarise the relevant law, for the benefit of readers who do not know it.
When deciding a financial settlement on divorce the court distinguishes between ‘matrimonial’ and ‘non-matrimonial’ property. Matrimonial property is property that was acquired by the parties through their own efforts during the course of the marriage, and non-matrimonial property is other property, in particular property that one of the parties inherited or was given, and property that was acquired before the marriage. Accordingly, the pot of ‘total assets of both parties’ can comprise matrimonial assets and non-matrimonial assets. In very general terms, matrimonial assets will be divided (usually equally) between the parties, and the party who acquired them will keep any non-matrimonial assets.
The primary exception to this rule that non-matrimonial assets are kept out of the ‘pot’ for division is where the needs of the party who did not acquire the non-matrimonial assets cannot be met from the matrimonial assets. In such a case the court may use the non-matrimonial assets to meet those needs.
OK, all of that may seem fairly clear. However, in practice it is often not nearly as clear at that. Working out what assets were acquired by each of the parties prior to the marriage may not be at all easy. But the grey area that has led to debate amongst lawyers is this: for how long should pre-acquired assets still be relevant? As mentioned above, in the Hart case the parties had been married for some twenty years, during which time the wife was said to have made a full contribution. She clearly considered that in such circumstances the husband should not receive credit for the assets he brought into the marriage, but the court decided otherwise.
Now, I think most people would agree that after a short childless marriage into which one party brought substantially more assets than the other it is only fair that that party should keep those assets. However, if you extend the duration of the marriage then things become less clear.
Let us take an extreme example. Suppose a marriage breaks down after fifty years. Suppose that when the parties were married fifty years ago the husband had assets worth £60,000 (then a large sum, equivalent to over £1 million now) and the wife had nothing. During the next fifty years both parties made a full contribution to the marriage. The parties then divorce. Should the husband still receive credit for the assets he brought into the marriage? I think most people would say that he should not. The effect of those assets upon the family wealth has long since been lost, consumed by the far greater contributions made by both parties over the ensuing years.
So where does the cut-off occur? At what point should the assets acquired prior to the marriage no longer be treated as non-matrimonial?
Clearly, the amount of the pre-marital assets may be relevant. A larger sum may mean that the cut-off should occur later. Perhaps a sufficiently large sum may even mean that there should never be any cut-off, no matter how long the marriage.
I don’t know the answer to these questions, but it does seem to me that it would be extremely difficult to come up with any formula to calculate a cut-off that would be fair in all cases. That, of course, leaves us with the current system, which leaves it to the discretion of the judge to decide each case on its merits. In a given case, perhaps in Hart v Hart itself, different judges may have different ideas of what is fair, and may come up with different outcomes.
Of course, that is not the end of the matter. The higher courts can provide guidance for those judges. It may be thought that that is what the Court of Appeal did in Hart, but I’m not sure that it is – the Court of Appeal was merely saying that the judge was entitled to come to the decision that he did – i.e. it was within his discretion. It could equally have been within his discretion to find that Mrs Hart should have received half of everything. Hart v Hart may actually provide little or no guidance at all.
Maybe it is time for a little clearer guidance?
Photo by Alejandro Mallea via Flickr under a Creative Commons licence.
September 5, 2017
Categories: Family Law