Pre-marital Wealth In Divorce Cases: What Is A 'fair' Result?

What happens in divorce cases where one half of the couple is already wealthy before the marriage? Jonathan Flower takes a look at the issue.

A recent ruling by the Court of Appeal has brought into question what makes for a fair settlement when it comes to the division of assets following divorce and why pre-nuptial agreements are more important than ever. In the case of Hart v Hart, the husband – now aged 82 – and the wife now aged 61 – were married for 23 years and had two adult children. At the start of the marriage, the husband had already acquired substantial wealth, having built up his own businesses as a property developer and, in the wife’s own words, was a “man of substance” at the time of marriage. On divorce, their total resources were £9.4 million, comprising assets of £3.9 million and a trust worth £5.5 million. The judge in the original High Court case found that a precisely equal division of the assets would be unfair because of husband’s pre-marital wealth. However, there was no reliable evidence of the value of this wealth, partly because of the husband’s deficient disclosure of what assets he possessed. Despite the husband’s disclosure deficiencies, the Judge had to use the evidence available to him to make findings on the scale of resources. The judge found that a needs-based award (the lowest award he considered) was the most scientific and principled. The wife was awarded £3.56 million. She appealed the High Court’s decision, but her appeal was dismissed in the Appeal Court.

This case reiterated that in divorce proceedings, it is important to establish the origins of pre-marital wealth and whether the pre-marital wealth has become matrimonial in character. In the Court of Appeal, Lord Justice Moylan agreed with the judge in the original High Court hearing that the fact that at the beginning of the couple’s relationship, the husband had been a wealthy man whereas the wife had no significant capital assets was a matter which “must be reflected in the outcome”. Lord Justice Moylan ruled that an equal division would be unfair to the husband and, equally, that an unequal division would be fair to the wife. This case highlights the court applying a more broad and flexible approach when considering the sharing principle. The court should undertake a broad evidential assessment considering what is fair in the circumstances of the case when considering whether to ring-fence part or all of pre-marital assets. In many cases, particularly where resources do not run to millions of pounds, then there will not be the luxury of separating out pre-acquired assets. However, this case does emphasise that pre-nuptial agreements could become even more important in order to establish and prove what assets are invested into the relationship prior to marriage and how they would be dealt with on divorce.