Applicable legal Principles for distribution/division of Matrimonial Assets
1. When approaching a low / medium / high net worth case, practitioners should advise clients that the courts ordinarily apply the following principles in order:
a. Needs
b. Sharing
c. Compensation
The proper approach is to apply each of these principles in order. In reality, most cases start and end with the application of the “needs” principle, most families are stretching the matrimonial pot to it’s maximum meet the needs of two households – rarely do “sharing” and “compensation” get a look-in.
Where do these principles originate from?
2. The “needs” principle has grown organically over the years through a series of cases. The “sharing” principle was established in two landmark cases, namely White [2000] UKHL 54 and Miller, McFarlane [2006] UKHL 24. The “compensation” principle was also enunciated in Miller, McFarlane [2006] UKHL 24 “for relationship generated disadvtanges”.
Needs:
3. So what does “needs” mean in practice, in short the court must take into account the reasonable needs of the parties. The most obvious and striking needs are housing and an income stream. On occasion it is possible to meet the needs of both parties by dividing the equity in the matrimonial pot equally, however, increasingly it is becoming necessary to depart from equality to meet the needs of minor children of the family.
4. In assessing needs, the court is entitled to consider the standard of living enjoyed during the marriage. The court seeks to achieve to retain that standard if at all possible.
5. The court’s first consideration is and always remains the needs of minor children of the marriage.
6. Clients ought to be warned that they should not overstate their needs – this is a common pitfall so often demonstrated in Form E’s, clients prepare a schedule specifying their needs – most of the requests are excessive or they seek to have new goods/services such as a weekly cleaner etc.
Sharing:
7. Established in White [2000] UKHL 54 and Miller, McFarlane [2006] UKHL 24 this principle is derived from the basic concept of equality: spouses are equal parties in a marriage and should share “the fruits of the matrimonial partnership”. This means in the simplest terms that matrimonial assets obtained through the matrimonial acquest should be divided equally between the parties – this does not include non-matrimonial assets that are ring-fenced or excluded from the matrimonial pot. This principle also rules out discrimination against the homemaker – who is often the woman. This principle ensures that the important work of managing the household and raising the children is given equivalent weight to pursuing a career and working outside the home.
Compensation:
8. The principle of “compensation” is to ensure a party is remunerated for “relationship generated disadvantage”. This principle applies once “needs” and “sharing” are fulfilled. It has been applied in cases where one party [usually the wife] has foregone her career or diminished her earning capacity for the greater good of the family unit. This principle is designed to stamp out discrimination levelled against homemakers or those who have made incredible sacrifices to their own detriment. The House of Lords in the McFarlane case determined that an equal division of the capital did not meet the wife’s reasonable needs, she was awarded a joint lives maintenance order to meet her future needs and to compensate her for her own loss of income.
9. Lastly, it is important to remember that every case turns on it’s own facts and no case will have the same outcome as another case. Clients need to be advised individually. This article contains a snapshot of the law and does not constitute legal advice and should not be relied upon as such.
Aysha Miah
33 Bedford Row
9th September 2024