K v L

The sharing principle applies to non-matrimonial property, but equal division is not its ordinary consequence. The property’s source may retain decisive importance after a long marriage where it remains identifiable, separate and unmingled. In such circumstances, fairness may permit the contributing spouse to retain all property exceeding the other spouse’s generously assessed needs.

Recognising an additional contribution of inherited capital does not discriminate between earning and domestic roles. A special contribution to the creation of matrimonial property is a distinct concept and does not determine the division of inherited property.

The husband appealed from an order of Bodey J requiring the wife to pay him a clean-break lump sum of £5m: [2010] EWHC 1234 (Fam), reported at [2010] 2 FLR 1467. The award generously met his needs, but he sought £18m under the sharing principle.

Almost all the parties’ £57m wealth derived from shares inherited by the wife before their 21-year relationship. The shares remained in her sole name and were neither mixed with matrimonial property nor invested in the matrimonial home. Both spouses had contributed equally to family life, and neither had earned income.

The central issue was whether the judge erred in limiting the husband’s award to a generous assessment of need rather than granting a larger share of the wife’s non-matrimonial property.

1. The appeal was dismissed unanimously. Bodey J had not erred by limiting the husband’s substantive entitlement to a generous assessment of his needs. The sharing principle applied, but it did not require an award of £18m from property inherited entirely by the wife.

2. Equal treatment of financial and domestic contributions prevents discrimination based on the spouses’ chosen division of labour. It does not require the court to disregard a substantive difference between those contributions and a spouse’s separate introduction of valuable inherited capital. The judge correctly treated the parties’ work within the home as equal while recognising the wife’s contribution of the shares as an additional fact of great importance.

3. The importance of an asset’s non-matrimonial source may, rather than invariably will, diminish over time. Diminution may occur where substantial matrimonial property reduces the initial contribution’s relative significance; where separate and matrimonial property become mixed; or where separate property is invested in a matrimonial home that the parties come to treat as central matrimonial property. None applied here. The inherited shares remained identifiable, ring-fenced in the wife’s sole name and largely passively retained.

4. A special contribution is distinct from the contribution of non-matrimonial property. It concerns an extraordinary contribution to the creation of matrimonial property and may justify departure from equal sharing of that property. The guidance in Charman concerning a likely outer division of 66.6% to 33.3% therefore did not govern the division of inherited property.

5. Although non-matrimonial property falls within the sharing principle, equal division is not its ordinary consequence. Extensive departure from equality, potentially to 100%–0%, may be appropriate. The reported percentage awards relied upon by the husband did not establish disproportionality because the comparator cases either contained substantial matrimonial property or awarded no more than the applicant’s needs.

6. The court did not determine the challenge concerning the £2m allowance for latent capital gains tax because the outcome was unaffected whether the assets were valued at £57m or £59m. It also maintained reporting restrictions to protect the children’s rights under Article 8 of the ECHR, which outweighed the general interest in publication identifying them.

1. Court of Appeal (Civil Division): The husband’s appeal was dismissed unanimously: [2011] EWCA Civ 550.
2. High Court, Family Division: Bodey J ordered the wife to pay the husband a clean-break lump sum of £5m: [2010] EWHC 1234 (Fam), reported at [2010] 2 FLR 1467.