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Overview

On 11 April 2017 the Court of Appeal handed down judgment in the case of Gray v Work.  It determined whether a spouse should receive more than 50% of the shared net marital assets on the basis that he or she has made a "special contribution" to the welfare of the family.  In England all assets acquired during the marriage are shared equally unless there is a good reason for a departure.  It is an important decision about when marital assets will be unequally shared.     

Background

In summary, the parties were both born in America in the late 1960's.  They met in 1992 in their mid-20's and soon began to live together.  They were engaged in 1993 and married in 1995.  In the early days both had what the court described as modest jobs and no appreciable capital.   

In 1997 the husband was offered a job with a private equity firm in Texas.  The wife gave up her job in California and moved to Texas with the husband.  Towards the end of 1997 the husband moved to Japan to work for the same employer and the wife followed a few months afterwards.   

In 2000 they signed a post-nuptial agreement in Texas which provided that their property (including future earnings) was kept separate and distinct and was the property of him or her alone.   

They had two children (born in 2000 and 2003 and 15 and 13 years old at the time of the final hearing) before moving to Hong Kong in 2005 where the husband remained with the same employer.  In 2008 the husband's employment came to an end and they moved to England.   

At the peak of the husband's success he had accumulated approximately $300,000,000 in personal wealth.   

They separated in March 2013 and the husband issued divorce proceedings in England in May 2013.   

In July 2013 the husband sent a quantity of documents to the wife in support of his calculation that his net worth was $216,000,000 or $176,00,000 after discounts for illiquidity.  He offered to pay her $71,000,000 over a period of five years.   

The wife did not accept the offer for three main reasons: (i) she did not accept the husband's calculations as to his net wealth (ii) the offer represented approximately 40% whereas the wife felt fairness dictated she should be entitled to 50% and (iii) she felt that no credit was given for the fact she would receive her settlement over a period of five years.  

The wife therefore issued financial proceedings in January 2014 and the husband's case became that the wife was not entitled to anything pursuant to what he said were the terms of the post-nuptial agreement.  

The High Court (First Instance)

The matter came before Holman J in the English High Court for final hearing in March 2015.  

The terms of the post-nuptial agreement were dealt with at length.  Holman J found that the agreement did not limit the wife's right to seek financial claims on divorce and, even if the agreement did have the effect of limiting the wife's claims, then no weight should be given to it because the wife was not aware of the implications and it would be unfair to hold her to the agreement.  (England has no statute law of binding marital agreements although will give substantial weight if there has been appropriate legal advice and it is fair and provides for needs.)    

Holman J then had to consider whether the husband should retain more than 50% of the net assets on the basis that he had made a "special contribution" to the welfare of the family.  He started by reminding himself that the English statute (The Matrimonial Causes Act 1973) specifically required him to take into account the contributions which both had made to the welfare of the family and any conduct (positive or negative) if it would be inequitable to disregard it.  He also noted that both the Court of Appeal in Charman and the House of Lords in Miller had confirmed that "special contribution" can impact on the outcome. 

In relation to the use of the word “genius” (which had been referred to in previous cases) Holman J said:

“I personally find that a difficult, and perhaps unhelpful, word in this context. To my mind, the word ‘genius’ tends to be over-used and is properly reserved for Leonardo Da Vinci, Mozart, Einstein, and others like them. 

The lawyers representing the parties in this case had only been able to identify three cases over the last 12 years in which a person was found to have made a contribution special enough to affect the final outcome, the most recent of which involved assets of $6 billion!  

Holman J took into account that the husband had been offered (rather than created himself) the job which lead to the creation of his wealth.  He also took into account the contribution the wife had made to the family throughout the marriage including following the husband to Asia for his job and raising their children.  In considering the merits it is believed the court was aware of decisions in other common law countries, including Australia.    

Holman J concluded that, whilst he had not found this aspect of the case easy, on reflection he was not satisfied that the husband had made an unmatched special contribution of the kind and to the extent required, and that the net assets should therefore be shared equally. He stated that whilst the sums the husband had generated were large, they were not wholly exceptional.

Interestingly, between his judgment in this case and the Court of Appeal’s decision, Holman J presided over a final financial hearing in another big money case (Robertson) with an asset base of £220m and, whilst holding that the husband in that case had also failed to demonstrate a special contribution, indicated that he thought he had come markedly closer to doing so than the husband in Gray v Work.   

The Court of Appeal

On 20 January 2016 King LJ gave Mr Work permission to appeal on the basis that the judge may have erred by not sufficiently considering whether the sheer quantum of the wealth generated by the husband was sufficient to amount to special contribution.  King LJ specifically asked the husband's barrister whether this issue was occurring in many cases and was told that it routinely arises in “big money” cases.  At iFLG we are of the view from our experience of “big money” cases that it is only argued in “really big money” (our phrase) cases of at least hundreds of millions. 

On appeal Mr Work asked the Court of Appeal to consider what was the proper approach to determining whether a party had made a special contribution, whether Holman J had applied the right approach and, if not, what division of the marital property should have been made.  His wife also asked the Court of Appeal to consider whether the concept of special contribution should be discarded as being gender discriminatory.  

The Court of Appeal reiterated the guidance which had previously been given by the House of Lords in Miller and the Court of Appeal in Charman and endorsed the following summary provided by Holman J (save that they would have deleted sub paragraph (v)):

(i) The characteristics or circumstances which would result in a departure from equality have to be of a wholly exceptional nature such that it would very obviously be inconsistent with the objective of achieving fairness for them to be ignored;

(ii) Exceptional earnings are to be regarded as a factor pointing away from equality of division when, but only when, it would be inequitable to proceed otherwise;

(iii) Only if there is such a disparity in their respective contributions to the welfare of the family that it would be inequitable to disregard it should this be taken into account in determining their shares;

(iv) It is extremely important to avoid discrimination against the home-maker;

(v) A special contribution requires a contribution by one unmatched by the other;

(vi) The amount of the wealth alone may be so extraordinary as to make it easy for the party who generated it to claim an exceptional and individual quality which deserves special treatment although often he or she will need independently to establish such a quality; and

(vii) There is no identified threshold for such a claim to succeed.

The Court of Appeal went on to find that Holman J had applied the correct approach and was entitled to find that the husband had not made a special contribution so as to justify a departure from equality.  The Court of Appeal also held that the current law is not applied in such a way as to be discriminatory, as suggested by the wife.   

Other Cases

A few days before the Court of Appeal delivered their judgment in Work v Gray, Bodey J was asked to consider the issue of special contribution at final hearing in the case of Chai v Peng in which the assets were between £66m (as per the husband) and £153m (as per the wife).  The judge said that he was aware of the pending judgment of the Court of Appeal in Work v Gray but that the parties had asked him not to delay in handing down the judgment.  When weighing the husband’s success as a businessman (he had been a director and non-executive chairman at Laura Ashley) against the wife’s contribution in the home, he concluded that there was no room for a reduction from equality based on special contribution.      

It has also been reported in the media recently that former Manchester United and Wales footballer Ryan Giggs is intending to ask the court to allow him to retain more than 50% of the assets in his divorce settlement on the basis of his special contribution towards the family, a scenario which Holman J specifically anticipated the court may one day be asked to consider in Gray v Work.  In light of the recent decisions in relation to special contribution Giggs might have a better chance of retaining more than 50% of the assets by seeking to exclude his pre-marital wealth (it has been reported that the parties commenced their relationship in 2002, by which time Giggs was already an established part of the Manchester United and Wales team and had famously won the Treble in 1999).       

If any lawyer abroad would like more details or to discuss how these decisions may impact on a case with English connections, please contact us.    

Michael Allum is a Solicitor at iFLG. He works in the divorce and finance team at and has a wide breath of knowledge in respect of all issues following the breakdown of a relationship. Much of his work involves complex international issues and he has a particular interest in jurisdiction and forum disputes. 

 

Michael Allum

 The International Family Law Group LLP

michael.allum@iflg.uk.com

www.iflg.uk.com

© 28 April 2017