Posted by Kit O'Brien, Senior Associate
Has the ‘equal split principle’ on divorce changed?
This week a city trader won her appeal to cut her divorce payment to her ex after a short marriage. We look at how this may affect future divorce settlements and decisions about asset splitting.
For some years now, the principle when sorting out finances post-divorce has been that capital built up during a marriage should be shared equally, regardless of the length of the marriage. Following a Court of Appeal judgement released on 13 June 2017, we have an example of a radical change of approach to comparatively short, childless marriages, where both parties had maintained well paid careers and separate finances.
Julie and Robin Sharp were married for 4 years. They had no children and both had successful careers. Their salaries were similar (c. £100k), but Julie Sharp was paid significant bonuses over 5 years (£10.5m). During their marriage they kept their finances almost entirely separate.
The question for the court was whether all the assets Julie built up during the marriage should be divided equally, or whether the length of the marriage should be taken into account and the award to Robin based more on his reasonable needs. Of course, Julie argued for the latter and Robin the former.
In 2015 the payment to Robin totalled £2.725m, the judge concluding “no sufficient reason has been identified in this case for departing from equality of division”. However, Julie appealed against this and the Court of Appeal looked carefully at existing case law, in relation to both the sharing of assets built up during a marriage and the relevance of the length of the marriage.
The Court went to some lengths to emphasise that a small amount of cases “may lie outside the equal sharing principle… in order to achieve overall fairness”. They said that this was one of those cases because:
- Julie’s bonuses were not “family assets”, as they had not been generated by the joint efforts of the parties.
- both Julie and Robin had worked full time for most of the marriage, and
- there were no children.
In 2017 Robin’s award was reduced to £2m, saving Julie £725,000. However, a significant chunk of that will undoubtedly have been spent on legal costs!
So what does this mean for asset splitting in divorce?
It certainly won’t change how we approach all short marriages, because it’s clear that the factors of childlessness, dual incomes, and separate finances were of key importance here. But it certainly erodes, to some extent, the principle that capital accrued during a marriage should automatically be shared equally. In recent years we have certainly seen a move towards the meeting of needs as a principal factor, and this case certainly supports that concept and emphasises, as has long been the case, that needs take precedence.
Just as no two marriages are the same, no two divorce outcomes are identical. But judgements like this, refining guidance and emphasising the crucial importance of particular factors, show more than ever that it’s essential to take expert, specialist advice if you’re contemplating divorce. This will guide you as to the most likely outcome, so that you know where you stand.
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