Source: https://raydensolicitors.co.uk/blog/exceptional-qualities-and-special-contributions/
Timestamp: 2020-02-26 01:44:15
Document Index: 758534220

Matched Legal Cases: ['EWCA ', 'EWCA ', 'EWCA ', 'UKHL ', 'EWCA ', 'EWCA ']

Exceptional qualities and special contributions | Rayden Solicitors
Exceptional qualities and special contributions
Lehna Hewitt reviews cases where a special contribution argument has been successful, and the outcome in Work v Grey
It is possible to depart from equality in the division of the matrimonial assets on divorce where one party can demonstrate that they have made a special contribution to the marriage. Section 25(2)(f), Matrimonial Causes Act 1973 requires the court to have regard to the contribution that each party has made, or is likely to make in the foreseeable future, to the welfare of the family. A special contribution is usually argued where one party has earned and amassed exceptional wealth by their acumen and drive, which they say is unmatched by the contributions made to the welfare of the family by the other party. If successfully argued, this will impact on the division of the assets and result in a departure from equality in that party’s favour. In practice, these cases are extremely rare. There are just a handful of reported cases where a special contribution has been successfully argued. Further, the courts have shied away from any prescriptive rules and, as is so often the case in family law, this area of law has been subject to a huge amount of judicial discretion. There is no definition of a special contribution in statute, and arguably no clear definition in case law.
This article aims to provide a brief overview of how the courts deal with the issue of special contributions in financial remedy proceedings, and maps the development of the case law in this area.
Work v Gray
The most recent decision in this area is the Court of Appeal’s judgment in Work v Gray [2017], which involved a long marriage of almost 20 years. When the parties met, they had no significant financial resources. During the marriage, the husband went on to generate wealth of around $300m in less than ten years, establishing from scratch a large and successful Japanese office for the private equity firm he worked for. At the time of the final hearing, the marital wealth totalled $225m. The husband sought an unequal division of the matrimonial assets in his favour (61%) on the basis of his special contribution. The wife sought an equal division of the marital wealth.
The judge at first instance, Holman J, did not deem the husband’s financial contribution, on its own, to be ‘wholly exceptional in nature’. He did not consider that there was any demonstrable ‘genius’, or other exceptional individual quality that would meet the threshold for a special contribution. The judge acknowledged that while the husband had been very successful in his job, there was no evidence that his job could not have been performed by another employee.
This decision was upheld on appeal in the Court of Appeal. It was found that the trial judge had given the matter thorough consideration and had applied the proper approach. There was no justification for an unequal division of wealth in the husband’s favour on the facts of the case. There wasn’t a disparity between the parties’ respective contributions such that it would be inequitable to disregard the husband’s contribution.
The Court of Appeal reviewed the key authorities, but determined it would not be useful to add to the guidance contained in previous cases. It decided that the existing guidance was clear about the circumstances in which the special contribution principle should be applied. The Court of Appeal reiterated in Work v Grey that the correct approach is to determine whether a contribution is ‘wholly exceptional’ and did not endorse the use of the word ‘genius’.
Pre-Work cases
So, what are the key authorities that the Court of Appeal in Work reviewed, but declined to provide further guidance on?
Cowan v Cowan [2001]
The first case in which a court decided that contributions could justify a department from equality was Cowan. Here it was argued that a businessman who ran a plastics business developing bin liners should be allowed to keep more of the assets, as he had made a special and exceptional contribution to the couple’s assets during the marriage. The substantial assets of around £11.5m had been built up entirely during the marriage. The wife sought an equal division of the assets on the basis that she had made equal contributions as a wife and mother and had also made a material contribution to the success of the companies. The wife was awarded £3.2m at first instance after the judge found that her contributions were not as important as the husband’s entrepreneurial flair and success. The wife appealed and argued for an equal division. The husband submitted that the overall objective required fairness and not equality, and his ‘stellar’ contributions should be given due recognition. The appeal was allowed and the wife’s award was increased to around 38% of the assets. The court recognised the husband’s business genius but balanced this against the need to avoid discriminatory bias against the homemaker. Mance LJ stated that the ‘underlying idea’ in special contribution cases is that a spouse exercising ‘special skill and care has gone beyond what would ordinarily be expected and beyond what the other spouse could ordinarily have hoped to do for himself or herself’.
Lambert v Lambert [2002]
This concept was soon heavily qualified by the Court of Appeal in Lambert, where the court stated that an argument of special contribution should only succeed in exceptional circumstances. The court made it clear that there was a real need to guard against gender discrimination. Bodey J stated that successful special contributions have to be of a ‘wholly exceptional nature, such that it would very obviously be inconsistent with the objective of achieving fairness (ie it would create an unfair outcome) for them to be ignored’.
Sorrell v Sorrell [2005]
In Sorrell the concept of special contribution reared its head again, successfully. Here, the marital assets totalled £73.4m, and had been generated by the husband’s exceptional talent in business. A special contribution by the husband succeeded and a clean break was awarded on the basis of a 60:40 split in the husband’s favour.
Later, in Miller v Miller; McFarlane v McFarlane [2006], Lord Nicholls said that special contributions should not be promoted unless the contribution is so marked that to disregard it would be inequitable. He went on to echo the words of Bodey J in Lambert, stating that ‘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’.
Charman v Charman (No.4) [2007]
In Charman further guidance was given. In this case, the wife was awarded 37% of the assets due to the husband’s special contribution. The Court of Appeal confirmed that the application of the sharing principle will always lead to an equal division of the assets, unless there is good reason (such as special contribution) to depart from equality. The court said it would be unwise to identify any figure as a threshold for the amount of a special contribution. The then President of the Family Division, Sir Mark Potter, clarified that the sharing principle would be ‘most unlikely to give rise to percentages of division of matrimonial property further from equality than 66.6% – 33.3%’. The court reiterated that the ultimate aim of the application of the three fundamental principles of need, compensation and sharing, is to achieve a fair outcome.
Cooper-Hohn v Hohn [2014]
A special contribution was successfully argued in a reported case in Cooper-Hohn for the first time since Charman. Here, the scale of the assets was exceptional. The sum of $6 billion was built up during the marriage. The husband was a hedge fund manager and the wife was a director and chief executive officer of the parties’ charitable foundation and primary carer of the children. Roberts J emphasised the husband’s ‘financial genius” and the truly vast wealth he had generated. The judge did not seek to define what could be classified as a special contribution, but identified the following questions to be answered in this particular case:
Whether it could properly be said that the husband was the generating force behind the fortune rather than the product itself?
Whether the scale of the wealth depended on the husband’s innovative vision as well as on his ability to develop those visions?
Had the husband generated truly vast wealth such that his business success could properly be viewed as exceptional?
Did the husband have a special skill and effort special to him that survived as a material consideration despite the partnership or pooling aspect of the marriage?
Would it, in all the circumstances, be inequitable for the court to disregard that contribution?
The judge answered each of the above questions in the affirmative and awarded the wife $530m (36% of the parties’ overall personal assets). The judge found that the wife had made a full contribution and could not have done any more, but that the husband had made an even greater contribution, over and above the wife’s contribution. The case underlined the fact that the threshold for a special contribution to influence the division of the assets is very high indeed and exceptionality, beyond the ordinary accrual of significant wealth, is required.
There is a continuing argument that the concept of special contribution discriminates against the non-wealth creating spouse. Does it not fly in the face of the sharing principle and the foundations laid down in White v White [2001] for the breadwinner’s contributions to be given greater recognition than the homemaker’s? Is there not a fundamental tension in awarding one spouse more of the assets on the basis of a great contribution when White tells us that the roles of breadwinner and homemaker are equal? As it stands, to date only financial contributions made by a male party have been successfully found to be a special contribution. There are no reported cases where a non-financial contribution (or indeed any kind of contribution made by a female) has been given greater weight or recognised as a special contribution. Is there any reason why such a contribution cannot be recognised as special? The writer submits not, although the prospects of such a case being reported in the near future seem slim, not least because it would be impossible to quantify a non-financial contribution.
In conclusion, while the concept of special contribution is still very much alive and current, such an argument will continue to succeed only in the most rare and exceptional of cases. Very few cases will have the factual matrix to successfully run a special contribution argument. It is clear that a party to a case claiming special contribution must demonstrate exceptional and individual qualities, unmatched by the contributions made by the other party. One of the next multi-millionaires to try his luck running this argument will be the footballer Ryan Giggs, who will argue in the High Court that he is a genius and contributed far more to his ten-year marriage than his wife. Family lawyers up and down the country are already surmising that Mr Giggs is likely to fail – but the writer is not so sure. Mr Giggs is lauded as a genius amongst his peers and has, without doubt, exceptional physical and mental sporting abilities. Whether or not this will push him across the high threshold for special contribution remains to be seen – nothing will be decided until the final whistle.
Work v Gray [2017] EWCA Civ 270
Cowan v Cowan [2001] EWCA Civ 679
Lambert v Lambert [2002] EWCA Civ 1685
Sorrell v Sorrell [2005] EWHC 17 (Fam)
Miller v Miller; McFarlane v McFarlane [2006] UKHL 24
Charman v Charman (No.4) [2007] EWCA (Civ) 503
Cooper-Hohn v Hohn [2014] EWCA Civ 896
White v White [2001] 1 AC 596
This article was first published in the July/August 2017 issue of Family Law Journal (Legalease) http://lawjournals.co.uk/
NEW on the Rayden Solicitors' blog: Jennifer Moore discusses the #childwelfare themes that emerged from this years… https://t.co/5XhTqlnnpc