UK-WIDE: An Introduction to Family/Matrimonial Finance: Ultra High Net Worth

In the last year, several cases that may have far reaching consequences for high net worth families have concluded. In the much-discussed case of Standish v Standish,the UK Supreme Court made a rare foray into family law by delivering a highly anticipated judgment on the extent to which non-matrimonial assets can become matrimonial and therefore subject to sharing on divorce (otherwise known as “matrimonialisation”). In 2017, Mr Standish transferred GBP77.8 million of assets that originated from his pre-marital wealth to Mrs Standish as part of an inheritance tax mitigation strategy, intending for the funds to be settled in trusts for their children. The trusts were never established, however, and the wife retained the assets in her name at the end of the marriage. The first-instance judge considered those assets matrimonialised and therefore to be shared with the wife, albeit unequally. The Court of Appeal disagreed, saying that the source of an asset, not who holds it, is critical and that while the concept of matrimonialisation still applied, it should be applied narrowly. Mrs Standish’s overall award was reduced from GBP45 million to GBP25 million as a result. The Supreme Court upheld the Court of Appeal’s decision. They stated definitively that the sharing principle applied only to matrimonial property (which should normally be on an equal basis) and that the concept of matrimonialisation should not be applied narrowly. The court should, they said, look at whether an asset is treated by the parties over time as a shared asset. The Supreme Court also held that assets transferred between spouses to save tax should not be treated as being shared between them without compelling evidence to the contrary.

ST v AR (heard before the Supreme Court’s judgment in Standish) was an example of a big-money case (nearly GBP150 million) where the assets were inherited and held to have had remained non-matrimonial, such that the question for the court was how generously the wife’s needs would be assessed. The wife received just under GBP14 million.

As ever, another issue at the forefront of some big-money cases this year has been the court’s treatment of pre- and post-nuptial agreements. When very significant wealth is built up during a marriage, the temptation to dispute the terms of a nuptial agreement can be hard to resist. In PN v SA, the parties entered into a post-nuptial agreement in 2021, which provided for the equal division of assets, followed by a subsequent post-nuptial agreement in 2023, which was signed post-separation. The court had to grapple with whether the 2023 agreement should override the earlier agreement. The assets at the final hearing were valued between GBP460 and GBP540 million. The wife’s position was that the 2021 agreement should be upheld on the basis it was freely entered into and provided for an equal division, while the 2023 agreement was signed under undue pressure and was less fair. The husband’s position was that the parties should be bound by the 2023 agreement. The court found that the 2021 agreement was valid, fair and binding, while the 2023 agreement was not as the wife did not receive full legal advice when signing and faced undue emotional and financial pressure from the husband. The wife received GBP230 million, the third largest reported award in English legal history.

The case of BI v EN centred around whether a French marriage contract signed seven days before the parties’ wedding adopting the separation de biens marital regime (ie, with each spouse retaining ownership of their own assets and debts) should be upheld. The wife claimed she did not understand its implications. The husband had amassed estimated wealth of between GBP87 and GBP115 million. The wife argued that this was matrimonial and should be shared, while the husband relied on the agreement. The court gave the agreement decisive weight, and so the wife did not share in the husband’s assets. Instead, she received a needs-based settlement, which was generously assessed due to the length of the marriage and standard of living, amounting to circa GBP23 million. AH v BH was another high-value case with a pre-nuptial agreement and assets worth close to GBP50 million. In that case, the validity of the pre-nuptial agreement was not disputed, but the wife received additional provision to meet her and the children’s needs for housing and income.

In BR v BR, the husband founded a technology business worth circa GBP200 million during the marriage. Both parties accepted it was a sharing case. The wife disputed the expert accountant’s valuation of the business interests. The wife sought to continue to hold shares in the company alongside the husband, and the husband sought to buy out the wife’s interest. The court endorsed the expert’s valuation and noted that parties continuing to share assets should be avoided where possible. In this case, the court found that it would be unworkable: it risked conflict not only between the parties but also between the wife and other shareholders and management in the business, and the possibility of the destruction of value in the business. The husband was ordered to buy out the wife’s share, allowing for a clean break. The husband received 55% of the overall assets, and the wife 45%, taking into account that the husband retained risky and uncertain business assets in a volatile sector.

The case of KV v KV involved a jurisdictional dispute with assets worth many billions of pounds. In KV v KV (No 1), as well as ordering the husband to pay the legal costs of the wife, totalling nearly GBP750,000, the court ordered that the husband should pay interim expenses plus maintenance to the wife of almost GBP4 million per annum. In KV v KV (No 2), the court determined that the wife was habitually resident in England and that the English court was the appropriate forum. In SM v BA, the court ordered the husband to pay a similarly large legal services payment order (LSPO), some of which related to historic costs, and in the case of PM v RM, the wife received interim maintenance of circa GBP33,000 per month.

Finally, simply obtaining an award may not be enough if the spouse refuses to pay. In enforcement proceedings in the very long-running case of Collardeau v Fuchs, the court found that a purported lease over the husband’s property in the Cotswolds was a sham designed to defeat the wife’s claim for financial relief (she had been awarded a circa GBP19 million lump sum). The lease was set aside.