In a recent decision in the High Court (reported in the press 12.8.11; judgment not yet available) Mr Justice Moylan has given encouragement to spouses who seek to preserve inherited or pre-acquired wealth.
The case concerned a couple in late middle age with assets of between £21 and £24 million. The source of their wealth was a manufacturing business set up by the husband’s father shortly after WWII. It was floated as a company in the 1950s and sold in the 1980s. As a result, the husband had inherited shares in the company, other investments, and a substantial country estate where the couple had enjoyed a very comfortable lifestyle.
The wife had £1 million of assets in her sole name. She sought a further £6 million, including £1.5 million for a suitable home and a fund to give her an income of £130,000 per annum.
The husband offered £1.4 million including £850,000 for rehousing.
According to press reports, the wife argued that the sharing principle should be applied, giving her a stake in the husband’s inherited wealth. The husband said that this would be an “invasion” of a fortune derived from his father and not built up during the marriage.
Mr Justice Moylan awarded the wife £3.3 million: it appears that he accepted that the husband’s wealth was not a matrimonial asset and that the wife’s award should be based on an assessment of her needs, albeit approached on a more generous basis than that suggested by the husband.
Sarah Greenan comments:
Although this decision has excited some attention in the news media, it does not really appear to break new ground. The approach taken by Moylan J is in line with that approved by the Court of Appeal in K v L  EWCA Civ 550. In that case the inherited wealth (£57 million) was the wife’s and the husband was awarded, after a twenty-one year marriage, £5 million. All the wife’s wealth had been acquired from an inheritance which occurred before the marriage and had been ring-fenced and remained in her sole name. Two points from K v L are particularly likely to have influenced Moylan J’s approach:
- In K v L Wilson LJ observed that although there are certain circumstances in which the source of family wealth may diminish over time, in that case they did not. Circumstances in which the importance of the source would diminish were:
(a) Where over time matrimonial property of such value has been acquired as to diminish the significance of the initial contribution by one spouse of non-matrimonial property.
(b) Over time the non-matrimonial property initially contributed has been mixed with matrimonial property in circumstances in which the contributor may be said to have accepted that it should be treated as matrimonial property or in which, at any rate, the task of identifying its current value is too difficult.
(c) The contributor of non-matrimonial property has chosen to invest it in the purchase of a matrimonial home which, although vested in his or her sole name, has – as in most cases one would expect – come over time to be treated by the parties as a central item of matrimonial property.
- Wilson LJ indicated that the “sharing” principle does apply to non-matrimonial property of this kind: the distinction is that when the sharing principle is applied to matrimonial property, the starting point is equal division; when it is applied to non-matrimonial property such as pre-acquired inherited wealth, the consequence is an extensive departure from equal division.
However Moylan J’s decision could perhaps be contrasted with that of Charles J in Robson v Robson  EWCA Civ 1171. In that case there was inherited wealth on the husband’s side of £22 million, including a farm estate in the Cotswolds and a shooting estate in the Highlands. The wife was awarded £8 million at first instance, reduced to £7 million on appeal. In that case however the parties had substantially drawn on capital in order to finance their lifestyle during the marriage and the Court of Appeal accepted that rendered the capital less inviolate than would ordinarily be the case with inherited capital. K v L should be regarded as setting out the correct approach in a case where there is substantial inherited capital which has been ring-fenced and protected, and Moylan J’s decision seems to have been to apply that approach.
For the article published in The Telegraph please click here