Sharp v Sharp is an important case on the principles to be applied when dividing assets between parties on divorce. In this blog, Family Law in Partnership associate Carla Ditz looks at the recent Court of Appeal judgment in the case of Sharp v Sharp [2017] EWCA Civ 408. The case concerned a departure by the Court from the principle of sharing and in which the wife was successful in reducing the capital sum awarded to the husband in a short marriage with no children.
Background
The husband and wife were described as coming from a modest financial background and had both worked hard to achieve a certain level of financial security brought about by their successful careers. When the parties met, the wife was employed as a trader, earning approximately £100,000 per annum and the husband was employed in IT, working for an international organisation. He too was earning approximately £100,000 per annum (although he took voluntary redundancy in October 2012). The main difference in earnings, however, was that the wife, during the marriage, earned bonuses in the region of £10.5m. The husband’s bonuses were said to be ‘comparatively trivial’. Their joint financial positions, therefore, afforded them a certain lifestyle and standard of living during the marriage. The parties cohabited from the end of 2007 and married in June 2009. The wife petitioned for divorce in December 2013. The duration of the marriage (ie. the marriage plus the period of cohabitation) was therefore 6 years which included the 18 months of pre-marriage cohabitation. There were no children of the marriage and at the time financial remedy proceedings were brought, the parties were in their early 40s. Total matrimonial assets in the case were assessed at £5.45m. Save for two jointly held properties (both of which were funded by the wife), the rest of the assets were owned individually – there were no joint bank accounts or joint investments. Further the parties shared the household outgoings and often split restaurant bills, for example. The wife, therefore, argued that the parties largely maintained separate finances and that, by consequence, there was no pooling of assets.
Financial remedy proceedings were brought by the wife and were heard in the High Court in May 2015 before Sir Peter Singer. At first instance a capital award of £2.725m was made in favour of the husband, representing 50% of the total matrimonial assets and designed to achieve a clean break. The wife appealed. On appeal, the award made to the husband was reduced to £2m.
Crucially, the award represents a departure from the longstanding principles of equality that apply to the division of assets on divorce and, in essence, the Court was being asked to determine to what extent a departure from equality (or ‘relaxation’ of the sharing principle) could be justified in a short marriage.
The significance of the judgment
Whilst the judge at first instance awarded the husband 50% of the total matrimonial assets, the Court of Appeal took a different approach and determined that a departure from equality in relation to short marriages may be justified in certain circumstances. The Court of Appeal’s award of £2m comprised:
- A sum of £1.3m representing 50% of the value of the two properties held in joint names; and
- A sum of £700,000 to reflect:
- the standard of living during the marriage;
- a modest capital sum to reflect an amount on which the husband needed to live; and
- a share in assets held in the wife’s name.
As the husband was to retain one of the properties owned by the parties (worth £1.1m) and a property transfer therefore was to be made to him, a balancing lump sum payment of £900,000 was therefore required to bring the total award to £2m.
The ruling in this case has the potential to be hugely significant for cases involving a short marriage, where there are no children and where the principle of sharing exceeds needs – where needs are easily met from the matrimonial pot. Whilst the sharing principle is still good law for the majority of cases, the decision in Sharp tells us that the principle of a 50/50 split will not automatically be applied in every case and that a ‘fringe of cases may lie outside the equal sharing principle‘
The immediate case is somewhat exceptional due to the total financial wealth of the parties which was held mainly by the wife as the higher earner. Nevertheless it represents the position that the Court of Appeal has taken as regards short, childless marriages where both parties have worked and have their own independent financial means and where, as was stated by Lord Justice MacFarlane in this case, there is a ‘marked degree of separation’ of the finances.
How might Sharp v Sharp affect couples who are divorcing after a ‘short’ marriage?
The judgment in Sharp was based on quite exceptional circumstances and led to a detailed consideration of whether a departure from a 50/50 split of assets could be applied. The judge at first instance considered the 6 year marriage in this case to be, ‘not so desperately short … as some, but still by no means lengthy‘. Whilst the principle of equality still lives on, the length of the marriage was a key consideration in this case. Even in a short marriage however, a number of factors could cause the division of assets to be a matter for debate. Factors include:
- Where one party to the marriage is dependent on the other for financial support (because of a low earning capacity for example) and the needs of the financially weaker party must be met
- Where the parties have a child who will require ongoing financial support – a primary consideration under Section 25 Matrimonial Causes Act 1975.
Whilst the court determined that a departure from the principle of equal sharing was justified in the case of Sharp) so as to achieve fairness, it is important to note that this will only apply in a relatively small number of cases and in particular, the parties needs must be met as a matter of course.
This case also highlights the importance of planning ahead and the need for parties to consider entering into a pre-nuptial or post nuptial agreement so as to try to avoid any unnecessary wrangling regarding the finances on divorce if at all possible.