Financial provision - Application

S v AG (financial remedy: lottery prize): Family Division (Mr Justice Mostyn): 14 October 2011

The husband and wife married in Columbia in 1984. There were two children of the marriage, born in 1986 and 1988. The marriage had been troubled and unhappy from an early stage. In 1999, the wife and her friend entered into a lottery syndicate. The ticket won £1m. In January 2000, £500,000 was paid into an account in the wife's name. In May 2000, the wife purchased a property (the house) in her sole name for £275,000. She expended £25,000 on purchase costs and £90,000 on a complete renovation of the property.

In January 2004, H was removed from the house by the police as a result of an episode of serious domestic violence and the parties were fully separated from that date. In October 2005, the husband registered a notice of matrimonial home rights against the house. In August 2006, the wife mortgaged the property for £300,000. In May and June 2007, a total of £300,000 was paid to MR, the second respondent. The husband issued divorce proceedings and in May 2007, a Degree Nisi was pronounced.

However, divorce proceedings had also been issued by the wife in Columbia. In August, a divorce was decreed in Columbia. The effect of that divorce, provided that it was entitled to recognition in the UK was to overreach the Decree Nisi and to nullify the husband's English divorce proceedings. The English divorce proceedings were subsequently dismissed and the husband was granted leave to apply for financial relief following an overseas divorce. The wife subsequently re-married.

The principal issue that fell to be determined was the treatment to be accorded to the lottery prize. It was agreed that the husband had been wholly ignorant of the wife's participation in the lottery. It was also agree that her contribution to the winning ticket came from her earnings.

The court ruled: Whether a lottery prize was to be regarded as matrimonial or non-matrimonial property was highly fact specific and did not depend centrally on the origin of the amount used to purchase the lottery ticket. If the parties were in effect operating a syndicate, whether formal or informal, where both were aware that tickets were being bought and where both had agreed tacitly or expressly to their purchase, then it was easy to see that prize as a joint venture and therefore as matrimonial property.

On the other hand if one party was unilaterally buying tickets, from his or her owned income, without the knowledge of the other party, then it was equally easy to see the prize as a receipt by that party alone akin to an external donation, and therefore as non-matrimonial property. That case would be fortified if the party in question was buying the tickets as part of a syndicate with others, and more so if the marriage had become troubled and unhappy with the parties drifting into separate lives socially and economically (the second scenario) (see [15] of the judgment).

It was established law that, in the application of the sharing principle, as opposed to the needs principle, matrimonial property would normally be divided equally. By contrast, it would be a rare case where the sharing principle would lead to any distribution to the claimant of non-matrimonial property. However, while matrimonial property would normally be divided equally, that was not an invariable rule. The reason for that was sometimes the matrimonial property in question would not be the product of the endeavours of the parties within the social-economic partnership that was marriage.

In Miller v Miller; McFarlane v McFarlane [2006] 3 All ER 1 it was specified that the matrimonial home should always be designated matrimonial property, whatever its source. But even the matrimonial home was not necessarily divided equally under the sharing principle; an unequal division might be justified if unequal contributions to its acquisition could be demonstrated (see [7]-[9] of the judgment).

In the instant case the first port of call was to apply the needs principle. The marriage was a long one and both parties had needs, particularly to provide for themselves in old age. H had a need for a lump sum to be paid now of £82,000. On that basis the wife would be left with a capital base of just over £350,000. By downsizing her home at the point of retirement the wife and her new husband would have ample funds to provide for their old age. Turning to the application of the sharing principle, the initial receipt of the lottery was non-matrimonial property. The case clearly fell into the second scenario.

However, when the wife purchased the house she converted that part of her non-matrimonial assets into matrimonial property. Given that the source of that matrimonial property was not joint endeavour but rather non-matrimonial property of the wife, and given the relatively short period that the husband actually lived in the house, the husband was not entitled to an equal sharing of it, or anything approaching that. A sharing of 15 to 20% would be fair.

The value of the property after costs of sale, but ignoring the mortgage was £480,150. The assessment of the application of the sharing principle gave a range of award to the husband of £72,000-£96,000. Standing back and weighing together the application of both the sharing and needs principles, a lump sum award of £85,000 was warranted in the circumstances. The compensation principle was not applicable in the instant case (see [36]-[39] of the judgment).

Miller v Miller; McFarlane v McFarlane [2006] 3 All ER 1 considered; Vaughan v Vaughan [2007] All ER (D) 43 (Nov) considered; N v F (Financial Orders: Pre-Acquired Wealth) [2011] All ER (D) 96 (Apr) considered; K v L (Non-matrimonial Property) [2011] 3 All ER 733 considered.

The husband appeared by his representative: the wife appeared by her representative.