UK Supreme Court Ruling Impacts Divorce Asset Sharing Cases

The UK Supreme Court’s landmark decision in financial remedy law in England and Wales could impact how a party with significant wealth will look to protect their assets from being shared in the event of divorce.

The dispute centered on the identification and treatment of matrimonial and non-matrimonial property; how assets are treated when transferred from one spouse to another during the course of the marriage; and particularly whether this would result in the assets being “matrimonialized.” This is where non-matrimonial property can become matrimonial property because of the way in which it was dealt with during the course of the marriage.

The unanimous decision confirms that non-matrimonial assets won’t be subject to the sharing principle. While the case involved ultra-high-net-worth assets, it’s anticipated that its implications will trickle down to lower courts.

The case concerns Clive Standish and Anna Standish, who married in 2005 and had two children together. Clive Standish retired in 2007.

Clive Standish had a successful career in the financial services industry and generated the majority of his wealth prior to his relationship with his wife. For the entire duration of the marriage, Anna Standish remained at home and cared for the children.

The majority of Clive Standish’s wealth was held in his sole name, but after receiving tax planning advice in 2017, he transferred approximately £77 million ($103.7 million) of assets to his wife on the understanding that she would then settle this into a trust for the benefit of their two children.

However, before the trust was set up, Anna Standish commenced divorce proceedings while the assets were still in her sole name.

In the first instance decision, the High Court found that the transfer of the 2017 assets resulted in those assets becoming matrimonialized.

However, the court departed from an equal division on the basis that the 2017 assets were pre-marital and only became matrimonialized toward the end of the marriage and therefore this justified a departure from equality.

Both Clive and Anna Standish appealed the decision to the Court of Appeal. Each party argued that the 2017 assets were non-matrimonial property but for different reasons.

The Court of Appeal considered whether the legal title to the 2017 assets was the most important factor, or whether the source of the original wealth was the critical factor in determining whether an asset should be regarded as matrimonial or non-matrimonial.

It favored the latter interpretation—the source of the asset is most important. This led to what is considered the largest reduction in an award ever made by an appeal court, reducing Anna Standish’s award by around £20 million. She appealed to the UK Supreme Court, which ruled that it was important to consider how the couple had dealt with the 2017 assets and whether this showed over time that the parties treated the assets as shared.

It upheld the Court of Appeal decision on the basis that the 2017 assets weren’t matrimonialized, as the purpose of transferring the assets from husband to wife was part of a tax planning exercise and it was never the parties’ intention that Anna Standish would retain those assets.

Anna Standish argued that the 2017 assets had been matrimonialized because they were transferred for the benefit of the family. The Supreme Court rejected that argument on the basis that there was a clear reason for the transfer—to mitigate the impact of inheritance tax, which was for the benefit of the children.

Some family law practitioners say the outcome of the Standish case will provide greater certainty within such cases and give the wealthier spouse greater protection where there are non-matrimonial assets. But the sharing principle will apply only in cases where there are more than sufficient assets to meet both parties’ needs. In cases where there are insufficient assets to meet needs, the court can invade non-matrimonial assets to meet those needs.

In circumstances where there is substantial pre-marital wealth, or the possibility of a large inheritance being received by either party during the marriage, the parties should seek to enter into a pre-nuptial or post-nuptial agreement and regularly review it to ensure their assets can be protected in the event of a divorce. Had the Standishes done that, it’s likely that there would have been no need for lengthy and costly proceedings

The court will attach significant weight to pre-nuptial agreements following the decision in the UK Supreme Court case of Radmacher v Granatino (2010) and subsequent case law that has followed.

In Radmacher, the court effectively set out the rules for entering into a pre-nuptial agreement. The court established that the parties should expect to be bound by its terms as long as they freely entered into it, have a full appreciation of its implications (including independent legal advice for both parties and full and frank financial disclosure), and acknowledge that the agreement isn’t manifestly unfair.

It’s likely we will see further calls for written legislation to be introduced to make pre- and post-nuptial agreements ultimately legally binding as professionals advocate for greater certainty in the family courts. The Law Commission published a report in 2014 that recommended clarifying the law of financial needs on divorce and introducing the concept of Qualifying Nuptial Agreements in England and Wales.

These would be enforceable contracts, which would enable couples to make binding arrangements to cover the financial consequences of divorce. While these recommendations haven’t been followed through, the Standish case may pressure the government into considering them again.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Anna Patsalides is associate solicitor at Taylor Walton Solicitors.

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