S v S

In ancillary relief proceedings, the court must ordinarily assess the parties’ financial circumstances and available assets at the hearing date. That does not require equal or proportionate sharing of every asset. Post-separation accruals produced by one party’s unmatched industry may be treated as non-matrimonial property, although they remain within the court’s dispositive powers.

Where business assets are illiquid, speculative and substantially developed after separation, the court may decline to award the other spouse a proportionate interest in their eventual realisation. It may instead secure the spouse’s needs and matrimonial contributions through housing, pensions, lump sums and maintenance, while leaving the business risk and future reward with the spouse who undertakes the continuing endeavour.

The wife applied for ancillary relief following the dissolution of a long marriage. The parties had separated in 1996, but financial proceedings were not commenced until 2003. The principal dispute concerned the extent to which the wife should share in the husband’s ordinary shares in T Ltd, a business developed substantially after separation and having no presently ascertainable or readily realisable value.

Both parties sought to secure the wife’s continued ownership and occupation of the former matrimonial home. The wife sought a share of any future realisation of the T Ltd shares, together with substantial maintenance. The husband proposed provision based on the house, pension sharing, lump sums and maintenance, without a proportionate share in the business. The central issue was what distribution was fair under the principles governing ancillary relief, including the treatment of post-separation growth and illiquid business assets.

1. Outcome. The court ordered the husband to transfer a pension share, pay an initial lump sum of £200,000, discharge the mortgage on the former matrimonial home, pay a further lump sum of £900,000, and pay periodical payments of £75,000 per annum while servicing the mortgage. The wife was not awarded a proportionate share of the future value of the husband’s T Ltd shares.
2. Date of assessment and post-separation accrual. The court accepted that the hearing date is ordinarily the appropriate date for assessing the parties’ finances and valuing assets. The court also adopted the analysis in Rossi v Rossi and Rossi, [2006] EWHC 1482 (Fam), that assets created after separation through personal industry, without more than incidental use of matrimonial assets, may qualify as non-matrimonial property. Such property is not outside the court’s powers, but the court must decide whether and to what extent it should be shared.
3. Relevant considerations. In deciding whether post-separation accrual should be shared, and in what proportions, relevant matters include the applicant’s diligence in pursuing the claim, whether the benefiting party treated the other fairly during separation, and whether the money-making party has prospects of further gains and whether the other party will share in them.
4. Application to T Ltd. The shares had a historical connection with the pre-separation business, but the nature and scale of T Ltd had changed dramatically after separation. Their value was highly uncertain, their realisation depended on future growth, flotation or sale, and the husband would bear substantial continuing business risk. The wife would receive the former matrimonial home free of mortgage, an equalised pension provision and capital exceeding the presently identifiable hard assets. In those circumstances, a proportionate future share in the T Ltd shares would be unfair.
5. Equality and statutory factors. Equality remained a useful yardstick, not an inflexible rule. The court applied the statutory factors in section 25(2) of the Matrimonial Causes Act 1973, including the parties’ needs, resources, contributions, the effect of separation and the risks attached to the business. The award met the wife’s accommodation and income needs and went beyond them, while fairly recognising the husband’s unmatched post-separation endeavour and debt burden.
6. Compensation. The circumstances did not engage the compensation rationale identified in Miller v Miller; McFarlane v McFarlane, [2006] UKHL 24. The arrangements achieved a fair balance and a deferred clean break, secured by agreed arrangements over the husband’s preference shares. The wife was ordered to contribute £275,000 towards the husband’s costs, set off against the second lump-sum instalment.