Financial provision - Application - Husband and wife divorcing after 25-year relationship

AR v AR (ancillary relief: inheritance): Fam Div (Mr Justice Moylan): 11 August 2011

The husband was aged 66 and the wife aged 54. They had one child who was aged 18. The husband also had three children from a previous marriage.

The husband and wife met in 1981 and commenced living together in about 1984. They married in 1990. Throughout their relationship, the husband and wife lived in a house at T Farm, a property built by the husband in the late 1970s. In late 2009, the husband and wife separated and the wife commenced divorce proceedings.

The wife left the former matrimonial home and moved into a property purchased for her by the husband. In October 2010, decree nisi was pronounced. The husband’s current resources consisted of: (a) T Farm, a property transferred to the husband by his father in 1976 and added to by the husband with the purchase of additional land on various dates since then; (b) land at K purchased by the husband in about 1969; (c) P Farm purchased by the husband in 1993/94 using the proceeds of shares inherited from or given to the husband by his father; (d) a 25% interest in a family property company inherited by the husband on the death of his father in 1992; (e) a share portfolio purchased with inherited gifted assets, originally shares in the company created by the husband’s father; (f) some other more modest investments. The total wealth was in the region £21m to £24m, of which all but approximately £1m was in the husband’s name. The wife’s current resources all originated from the husband. The court heard the wife’s application for ancillary relief.

The case raised the issue of the manner in which the court ought to exercise its discretionary jurisdiction when determining an application by a wife when most of the wealth consisted of or reflected resources received by the husband by way of gift and inheritance.

The specific issues that fell to be determined were: (i) what constituted a fair and just assessment of the wife’s long-term needs, in respect of both housing and income, for the purposes of determining the award; (ii) whether the sharing principle had any application in the circumstances of the case; and (iii) the manner in which the principle of need ought to be applied in the instant case to achieve a fair and just award which gave proper weight to all the factors under section 25 of the Matrimonial Causes Act 1973.

The husband contended that the wife should be provided with resources equal to her housing and income needs, the latter calculated by application of the Duxbury tables. In determining the issues, consideration was given to Dharamshi v Dharamshi [2000] All ER (D) 2121.

The court held: (1) In assessing a spouse’s income needs, in particular for the purposes of determining what income fund would be awarded, the analysis was a broad one. The court’s task when addressing that factor was not to arrive at a mathematically exact calculation of what constituted an applicant’s future income needs. It was to determine the notional annual income which, in the circumstances of the case, it would be fair for the spouse to receive (see [70] of the judgment). On the evidence, a reasonable annual income need for the wife was £115,000.

That would meet her regular annual income needs, but did not encompass discretionary expenditure, being individual items not included as part of her regular expenditure. In the circumstances, the wife was entitled to be provided with housing of an equivalent standard to that provided by the former matrimonial home. The average of the valuations of the former matrimonial home, provided a good guide to the likely cost of housing of an equivalent standard to the former matrimonial home in a similar area. To that had to be added the costs of purchase and the costs of furnishing such a property, giving a total capital need of £1.1m (see [66], [69] of the judgment).

(2) In the instant case, it was clear that the bulk of the wealth was accurately described as non-matrimonial, in other words it was not the product of the parties’ endeavours during the marriage. The form of the wealth had in some respects changed, in particular following the realisation by the husband of his interests in the family company. The former matrimonial home had been lived in and the family had clearly, in part, used the invested income generated from the husband’s inherited wealth. Nothing had happened to the bulk of the wealth which had changed it into matrimonial property or diminished the weight to be attached to it as a factor in the instant case.

The principle that best guided the court in its exercise of discretion under section 25 was that of need. The sharing principle did not justify any additional or enhanced award. The bulk of the wealth was easily identifiable as non-matrimonial and there were no factors present which substantially undermined the weight to be attributed to that factor, or which merited the wife receiving a greater share of the wealth than that which she would receive by application of the principle of need.

The principal matters relied upon by the wife, namely, the length of the marriage, the wife’s contributions and the standard of living, were all factors which could be given appropriate and sufficient weight within the principle of need (see [81] of the judgment).

(3) When justified by the circumstances of the case, a flexible application of Duxbury in the manner, for example, identified in Dharamshi, would better achieve justice with sufficient predictability than the narrow approach which the husband appeared to be advocating (see [96] of the judgment).

In the instant case, an award based on the application of the principle of need was fair if the award sufficiently reflected the fact that Duxbury was a guide and also, importantly, that the wife was entitled to be able to incur additional expenditure. In order to give proper weight to all of the section 25 factors, the wife ought to have a measure of financial security above that which would be offered by a simple Duxbury calculation in respect of her income needs. An award of £3.3m represented a fair award under section 25 and one which represented a just application of the principle of need (see [98], [100]-[101] of the judgment).

The wife would be awarded £3.3m (see [101] of the judgment).

Deborah Bangay QC and Nicola Saxton for the wife; Lucy Stone QC and Mr Isaacs for the husband.