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Equity vs equality – the sharing principle and fairness in short marriages

This week we thought we’d look at the application of the ‘sharing principle’ following an interesting development in the law in the reported decision of Mr and Mrs Sharp.

The case involves a couple in their mid-40s, worth around £6.9M. They did not have any children. The wealth was largely generated through substantial bonuses paid to the wife during the marriage. At the outset of their relationship the couple earned relatively similar amounts (c.£100k p.a.) and later, the wife received bonuses totalling c.£10.5M over the course of their 6 year marriage (including 18 months of pre-marital cohabitation).

As is commonly the case in big-money cases, how the assets should be shared often becomes the battleground where each ex-spouse gives reasons why they should have more of what’s available than the other – sometimes the arguments relate to what each party owned prior to the marriage (pre-marital assets), other times it is the source of assets acquired during the marriage such as inheritances (non-matrimonial property) or funds built up after the end of the marriage (post-separation accrual).

This case looks at whether it is always right and fair for the funds built up by a couple during their marriage to be divided equally, irrespective of the contributions made by each party. The wife argued that in a short, childless marriage, there should be a departure from equality to reflect the significant contributions she made. She pointed to how they conducted their financial arrangements – keeping their finances separate throughout, save for sharing household bills and expenses.  The husband argued that the bonuses received by the wife during the marriage were “matrimonial” as they were funds built up during the course of the marriage.

At first instance the Judge largely agreed with the husband’s approach and awarded a sum to the husband equivalent to 50% of the total matrimonial assets (£5.45M).  This figure was arrived at after taking the total resources of £6.9M and deducting the value of a property owned by the wife prior to the marriage (£1.1M) and a further £350k being the wife’s other pre-acquired funds. The net effect of this award was that the husband received £2.725M and the wife received £4.175M.

The wife appealed the decision.

The Court of Appeal considered the development of the ‘sharing principle’ and whether it is fair to strictly apply a 50/50 in a short, childless, dual-career marriage. The Judge concluded:

“Mr Freehan [Counsel for the wife] is therefore right that the combination of potentially relevant factors (short marriage, no children, dual incomes and separate finances) is sufficient to justify a departure from the equal sharing principle in order to achieve overall fairness between these parties.” [explanation added]

The award to the husband was reduced to £2M, notwithstanding previous authority which applied equal sharing to assets built up during the marriage irrespective of the length of the marriage.

This decision marks a sea change for wealth sharing after short marriages and will potentially lead to a greater number of disputes as lawyers and divorcing couples grapple with this new approach. Many questions remain – will this impact on how couples manage their finances during the relationship? What will be defined as a short marriage? Where is the cut off? If you would like to talk about any aspect of this decision, or family law, please give us a ring on 01223 443333 to speak to Adam, Simon, Tricia, Gail or Sue.