Most, if not all, financial remedy judgments contain a review of the guidelines in section 25 of the Matrimonial Causes Act 1973, together with an analysis of relevant case law. Few judgments, however, provide a detailed checklist with a clear overview of how section 25 is presently being interpreted.
Peel J provided such helpful guidance in his judgment in WC v HC [2022] EWFC 22. The checklist provided by Peel J can be summarised as follows:
- In accordance with Charman v Charman [2007] EWCA Civ 503, the court will usually undertake a two-stage exercise: the first stage is the computation of the assets; the second stage is the distribution of the assets. Also in accordance with Charman, where the result suggested by the application of the needs principle is an award greater than the result suggested by the sharing principle, then the former shall prevail. Needs are however an elastic concept, and they cannot be looked at in isolation.
- In accordance with Lord Nicholls in White v White [2000] 2 FLR 981, the objective of the court is to achieve an outcome which is as fair as possible in all the circumstances of the case. Also, in accordance with the case of White, there is no place for discrimination between a husband and a wife and their respective roles.
- In evaluating fairness, the court must have regard to the section 25 criteria, with first consideration being given to any child of the family in accordance with section 25(1) of the Matrimonial Causes Act 1973.
- As emphasised by Baroness Hale in Miller; McFarlane [2006] 1 FLR 1186, section 25A is a powerful encouragement towards a clean break. Also in accordance with Miller; McFarlane, the three essential principles at play are needs, compensation and sharing.
- In most cases, the enquiry will not extend beyond an assessment of the parties’ needs. It is only in those cases where there is a surplus of assets over the parties’ needs that the sharing principle is applied.
- In applying the sharing principle, the parties are, ordinarily, only entitled to an equal division of the matrimonial assets. Non-marital assets will ordinarily be retained by the party to whom they belong, unless there is a good reason to the contrary. Usually, needs will be the only justification for a spouse pursuing a claim against non-marital assets. Wilson LJ had previously commented in K v L [2011] 2 FLR 980, that at that time there was no reported case where a party had secured an award of non-matrimonial assets in excess of their needs. Peel J believed that still held true.
- Drawing a line between marital and non-marital assets is not always easy. As per the case of Hart v Hart [2018] 1 FLR 1283, it must be assessed with a degree of particularity or generality, appropriate in each case. Usually, non-marital assets have one of the following origins: they comprise pre-acquired assets; they represent assets acquired post-separation; or they are inherited or gifted assets. Such non-marital or non-matrimonial assets can, however, acquire a marital character, depending upon how they have been treated or mingled during the marriage. Peel J summarised that it all depended upon the circumstances of each individual case, including when an asset was acquired, how it had been used, whether it had been mingled with marital assets and what the parties intended.
- Reference is also made to the Family Justice Council’s Guidance on Financial Need in which they state that in an appropriate case, typically a long marriage, the standard of living should be reflected, as far as possible, in the sort of level of income and housing each should have as a single person thereafter. Peel J also refers to Baroness Hale in Miller; McFarlane in which she said that needs should be met at a level as close as possible to the standard of living enjoyed during the marriage.
- The standard of living is not however an immovable guide and, as Mostyn J said in FF v KF, it cannot be allowed to dominate the section 25 exercise.
- The source of the wealth can be relevant to needs. If the wealth is substantially non-matrimonial, it would be unfair not to take that factor into the balance. Mostyn J had made a similar observation in N v F [2011] 2 FLR 533.