The court’s enquiry in every financial order application is in two stages: computation and distribution.1 The court needs to establish, as at the date of the trial, what assets are held [2] and what their current values are.[3]

Increasingly, a distinction is drawn between ‘matrimonial’ and ‘non-matrimonial’ assets. The sharing principle has been said to apply to both matrimonial and non-matrimonial property, ‘but, to the extent that the property is non-matrimonial, there is likely to be better reason for departure from equality’.[4] The current state of the law is that, where considerations of need do not arise, the court is likely to start from the position that matrimonial assets will be subject to the sharing principle and divided equally between the parties and non-matrimonial assets will not be so subject and will remain in the hands of the party who contributed them.[5]

Differentiating between matrimonial assets and non-matrimonial assets is, however, not always a black and white exercise. Assets which fall into the grey area in between can cause difficulties of characterisation.

Until recently, the authorities suggested that there were ‘two schools of thought’[6] as to how the existence of non-matrimonial property should be considered/reflected:

(1) The first was to simply adjust the percentage division of the assets between the parties from 50%.[7]

(2) The second was to identify and exclude the non-matrimonial property (allowing it to be retained by the contributor) and to identify and divide equally the matrimonial property.[8]

However, in Hart v Hart [2017] EWCA Civ 1306, the Court of Appeal suggested that, in fact, these were not two different schools of thought, but rather ‘examples of the same principle [namely ‘that the sharing principle applies with force to matrimonial property and with limited or no force to non-matrimonial property’] being applied, but applied in a different manner depending on the circumstances of the case … The outcome will be the same, namely, when justified, an unequal division of the parties’ property.’ Either technique can therefore be adopted.[9] This was reiterated by the Court of Appeal in Versteegh v Versteegh [2018] EWCA Civ 1050.

In Hart v Hart, the Court of Appeal also gave guidance (a three-stage process) as to how cases involving non-matrimonial property should be approached in practice:

(1) The court will need to make a case management decision as to whether, and if so what, proportionate factual investigation of the asserted non-matrimonial property is required.

(2) The court will need to make such factual determinations about the asserted non-matrimonial property as the evidence permits, including drawing inferences where appropriate. The court does not need to make specific demarcations between the matrimonial and non-matrimonial property.

(3) The court will need to undertake the section 25 exercise, factoring its factual determinations as to the extent of the parties’ matrimonial/non-matrimonial property into the exercise of its discretion, having regard to all of the relevant factors in the case.

In XW v XH [2019] EWCA Civ 2262, Moylan J acknowledged that Hart may have created some confusion by providing that the court did not have to ‘apply any particular mathematical or other specific methodology’. He emphasised that ‘as I said in the next sentence, I was talking about a broad assessment as being a permissible route to the division of the wealth which would be fair and not that the ultimate effect of this determination need not be identified’. Whilst the degree of specificity will vary from case to case, ‘when applying the sharing principle, I would suggest that in most cases the court will be able to, and should, make clear at some stage what part of the value of the asset or assets the court has determined is non-marital property’.[10 A useful summary of the law is set out by Peel J in ND v GD [2021] EWFC 53.

The matrimonial home

In most cases, the matrimonial home (and its contents) will be treated as matrimonial property. This will almost certainly be so where both parties have contributed to its purchase and/or it has been placed in their joint names; and will probably also be the case (but not invariably so) even if only one party has contributed or if the property remains in the name of one party, particularly in a long marriage case. The rationale for this is that the matrimonial home has a unique place within the parties’ relationship.11 It has been asserted that the matrimonial home is ‘matrimonial property whatever [its] source’,[12] but this may be too inflexible a proposition.[13] However, in any event, even if it is always treated as matrimonial property, which should ordinarily be shared, it does not follow that the sharing should be equal, particularly where one party has made substantial, unmatched contributions.[14]

Characteristics of matrimonial property

It is likely to be a feature of matrimonial property that it has been accrued during the marriage as a result of the parties’ joint efforts, albeit that the efforts may have been made in different ways (e.g. as money-maker and home-maker/child-carer).[15] Matrimonial property has been variously described as property which is ‘the financial product of the parties’ common endeavour’; ‘the fruit of the matrimonial partnership’;[16] ‘the property which the parties have built up by their joint (but inevitably different) efforts during the span of their partnership’;[17] and ‘the property of the parties generated during the marriage otherwise than by external donation’.[18] Assets easily identifiable as falling into this category (in addition to the matrimonial home) are savings, policies and pensions, for which the contributions have been made during the marriage, and family businesses, which have been established and built up during the marriage. In Waggott v Waggott [2018] EWCA Civ 727, the Court of Appeal confirmed that one party’s earning capacity itself is not a matrimonial asset in which the other party is entitled to share. In CB v KB [2019] EWFC 78, Mostyn J considered the position of a musician who goes on tour after the parties’ marriage, but plays songs created during the parties’ marriage. He stated:

‘Mr Kingscote QC has sought to argue that … the ticketing and merchandising income generated on tour, is in some way a matrimonial asset susceptible to being shared. I completely disagree with this approach. If the husband goes on tour in 2021 and 2022 and plays songs which were created during the marriage … then the income which he derives from that endeavour are to be characterised as earnings made after the marriage. The fans are coming to see the band performing, not to listen to songs being played by a machine and pumped out of loudspeakers.’

In CG v SG [2023] EWHC 942 (Fam), HHJ Hess (sitting as a Deputy High Court Judge) found that investments deriving from success fees received by a husband relating to work which was completed post-separation were not ‘matrimonial assets’ by virtue of the fact that the business relationships which led to the work were formed during the marriage.

Characteristics of non-matrimonial property

Non-matrimonial property has been described as ‘property received or created outside the span of the partnership, or gratuitously received within the partnership from an external source [which] has little to do with the endeavour of the partnership’[19] and ‘assets … which are not the financial product of or generated by the parties’ endeavours during the marriage’.[20] It will usually have arisen from the unmatched contribution of one of the parties.

Pre-acquired assets: Non-matrimonial property may be in the form of property which one party held prior to the marriage and brought into the marriage at the outset.[21] Whether, and if so how, the existence of pre-acquired assets will be reflected in the court’s overall determination will depend on the duration of the marriage and the extent to which the pre-acquired assets have been mingled with the matrimonial assets[22] – the shorter the duration of the marriage and the more the pre-acquired assets have been kept separate, the more likely they will be reflected in the court’s overall determination.[23] However, it should be noted that if the income generated by a non-matrimonial asset has been used towards the parties’ domestic economy, this does not necessarily change the non-matrimonial asset into a matrimonial one.[24]

Where the asset started off as non-matrimonial property, but has increased in value over the course of the marriage, the court draws a distinction between ‘passive’ growth and ‘active’ growth. Where the increase is as a result of passive growth, this ‘growth’ is likely to be treated as non-matrimonial too. Where the increase is as a result of active growth – i.e. as a result of efforts or contributions made during the marriage – this may be treated as matrimonial (even where the growth is achieved with the assistance of a ‘springboard’ already in place).[25] The court may need to hear detailed evidence, possibly expert valuation or accountancy evidence, to distinguish between the effects of the two.[26] If the asset is real property, then the exercise may be relatively straightforward. If the asset is a business, the exercise may be more difficult.[27]

Continued...