Special contributions and departure from equality
The starting point in division of assets in a divorce case is 50/50. The home maker looking after the child(ren) and home is seen as equal to the breadwinner, however much the breadwinner may earn and however much capital he may have generated.
There is however an exception to this doctrine if one party can show they made a special contribution to the marriage, usually financial to justify a move away from equality.
A recent work case (Work v Gray) came before the Court of Appeal earlier this year which examined this area of law, there the husband was a very high earner having generated £144 million pounded from his employment as a private equity fund manager. There were 2 children of the marriage and the parties has lived together as cohabitees and then spouses for 20 years.
The parties had signed 2 pre-nuptial agreements under Texan law which kept the earning and property of each spouse separate, the marriage broke down in 2013 and in financial remedy proceedings the husband offered the wife $5 million dollars of her own separate property relying on the pre-nuptial agreement and his own special contribution.
The High court judge who dealt with the case said that the case was one where sharing the principle should apply and he rejected the husband’s special contribution argument. In his judgement he laid down the main principles in relation to this area of law. They are as follows: –
- The special contribution must be of a “wholly exceptional nature” to justify a departure of equality.
- Exceptional earnings are a factor.
- It must be inequitable to disregard the disparity in their respective contributions.
- It is extremely important to avoid discrimination against the home maker.
- The amount of wealth alone doesn’t mean the case will amount to a special contributions case, the party raising this exception must also demonstrate genius in business or other field.
The husband appealed the ruling and the Court of Appeal dismissed his appeal stating that the judge in the high court has decided the case correctly.
The court also pointed out that since the leading case of Charman v Charman in 2007 there has only been one reported case when the submission of special contribution has been successful, emphasising how difficult it is to establish. From the point of view of the wife / husband and homemaker it is reassuring that the courts require such a high burden of proof for this to be established. For very high earning husbands / wives facing separation can divorce it will be very concerning. The best advice to such high earnings individuals is to take pre-emptive action by the way of either prenuptial agreement prior to marriage or post nuptial agreement after marriage. This agreement must meet the less wealthy party’s reasonable needs. There were in fact 2 post nuptial agreements in the case referred to above, but the husband only offered the wife $5 million comprising of her own separate property. Bearing in mind the wealth of the husband i.e. £144 million and the standard of living the parties must have enjoyed during their marriage his offer was insulting and would be insufficient to meet her and the children’s reasonable needs. He has offered he substantially more albeit less than half his wealth she may well have accepted this.
Neil Grunfeld can prepare a pre or post-nuptial agreement tailored to your situation and needs.
Neil Grunfeld is specialist family solicitor and specialises in high net worth divorces and children matters. Please contact him on 0161 872 9999 or Neil.Grunfeld@howardssolicitors.com for a 30-minute free consultation.