Standish v Standish – Supreme Court develops law for divorcing couples whilst upholding largest ever reduction in divorce award
The Supreme Court of the United Kingdom handed down the highly anticipated judgment in the case of Standish v Standish earlier this month. This was a divorce case involving issues surrounding the correct treatment of assets transferred between spouses for tax planning purposes. The main issue for the court was whether on divorce Mr Standish, the former Chair and CEO of UBS Asia Pacific, would have to share a payment he made to his wife of c.£80m in 2017 as part of his inheritance tax planning strategies connected to issues of domicile. The capital in question had largely been generated by the husband before the marriage. He transferred the capital to the wife who was non-UK domiciled in to prevent a potential future inheritance tax liability from arising in respect of his estate if he died while deemed domiciled in the UK. The wife was expected to settle the assets upon discretionary trusts for the benefit of the children of the marriage but had not done so by the time of the divorce and sought to retain the assets. The key issues for the Supreme Court were the distinction between matrimonial versus non matrimonial assets and the correct approach to take in relation to the sharing of non-matrimonial assets.
At first instance the court held that (a) that “most of” the investment funds involved in the 2017 transfer of assets were the husband’s pre-marital wealth and were, therefore, non-matrimonial property; (b) that, by virtue of the transfer of the 2017 Assets, the part of the 2017 Assets which was non-matrimonial property became matrimonial property so that all of the £80 million was subject to the sharing principle; (c) that the total matrimonial property, including the £80 million, amounted to £112,631,062; (d) the source of the funds remained a significant feature so that the appropriate division of the matrimonial property was not 50% to each spouse, but rather 40% to the wife and 60% to the husband. He rounded the wife’s share down to £45 million (34% of the total assets), with the husband to receive £87,648,326; and (e) there was no need to undertake a needs assessment as it was quite clear that the wife could live very well on the sum of £45 million. On appeal the Court of Appeal reduced Mrs Standish’s financial award from £45 million to £25 million. The Supreme Court unanimously dismissed Mrs Standish’s application to overturn the Court of Appeal’s decision.
In only the third case in the last 25 years to reach the country’s highest court on these issues, the Supreme Court ruled:
- that assets generated during a marriage by either party are subject to the principle of equal sharing. The decision confirmed a starting presumption of equality of division between spouses (“the equal sharing principle”);
- that property acquired before the marriage (“non matrimonial property”) should be treated differently from assets generated during the marriage. For the first time, the Supreme Court has explicitly stated that non-matrimonial property should not be subject to the equal sharing principle. This provides a clear legal foundation for protecting pre-marital and inherited wealth, especially in cases where one party enters the marriage with significantly greater assets than the other.
- that non-matrimonial assets may become matrimonial despite having their origins outside the marriage if they are used or shared in a way that integrates them into the marital partnership. The judgment formulated a new test, turning on the source of the assets and how the assets have been dealt with by the parties, to determine whether or not assets which were originally non-matrimonial have become matrimonial.
- There remains a distinction between those cases in which there is a surplus of assets over the needs of the parties and those where there is not. Following Standish, the court will still routinely “invade” non matrimonial property when it is necessary to do so in order to meet the needs of the parties. Put simply, the court’s baseline approach of ensuring the needs of the parties are met fairly, the first concern being the needs of any children, will still trump all other considerations including issues of matrimonial versus non matrimonial property.
Importantly, the decision prevents the argument that a joint asset should be treated as non-matrimonial purely because of its source, despite the clear intentions and actions of the parties towards the asset in question. Going forward, the ruling strengthens the legal framework for distinguishing between different classes of property and offers a more robust foundation for advising clients on asset protection strategies both before and during marriage. The importance of pre-nuptial and post- nuptial agreements and their ability to cut through the issues in Standish is abundantly clear from the judgment. The decision provides helpful guidance for family lawyers, tax planners and wealth managers and may result in fewer disputes where pre-marriage assets are kept entirely separate from the joint resources of the parties. Care must also be taken given the risk that non matrimonial assets may be “matrimonialised” and therefore vulnerable to sharing claims. Early advice, clear records, and joined-up thinking are more important than ever.
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