K v L

[2011] EWCA Civ 550; [2011] All ER (D) 124 (May); Court of Appeal (BAILLI report)

This case concerned non-matrimonial property in the context of the principles of fairness and non-discrimination between husband and wife in ancillary relief proceedings Miller v Miller, McFarlane v MacFarlane [2006] 2 AC 618. The wife inherited shares at 15 years old and held them until the divorce more than 21 years later, when their value had substantially increased.  The court held that in this case, notwithstanding the length of the marriage, the shares, being non-matrimonial assets, would remain ring-fenced from inclusion as part of the wife's resources for the purposes of the Matrimonial Causes Act 2003.n This may be relevant in applications under the Inheritance (Provision for Family and Dependants) Act 1975 (see sub-sections 3(2) and (2A) of that Act).

Wilson LJ said:

"16. [Counsel's] second charge, made by reference to the 21 years of the marriage, is that the judge failed to recognise 'that the importance of the source of the assets will diminish over time'. Such is a quotation from the speech of Baroness Hale in Miller v. Miller, McFarlane v. McFarlane [2006] UKHL 24, [2006] 2 AC 618, at [148]. As authority for that proposition she referred to the passage in the speech of Lord Nicholls in White … at 611B, where he said:

'The initial cash contribution made by Mr White's father in the early days cannot carry much weight 33 years later.'

Lord Nicholls was there referring to an interest-free loan of £11,000, made to the parties in 1963 and later released, which had enabled them to purchase the farm upon which, until 1994, they had both worked and which, by the time of the trial in 1996, was worth £3.5m. Thus, on the facts in White, the importance of the source of the contribution of £11,000 diminished over time. The question is whether such justified the absolute terms of Baroness Hale's proposition.

17. The answer to the question, or at any rate Lord Nicholls' answer to the question, is made clear in his speech in Miller/McFarlane … at [25] as follows:

"Non-matrimonial property represents a contribution made to the marriage by one of the parties. Sometimes, as the years pass, the weight fairly to be attributed to this contribution will diminish, sometimes it will not. After many years of marriage the continuing weight to be attributed to modest savings introduced by one party at the outset of the marriage may well be different from the weight attributable to a valuable heirloom intended to be retained in specie." 

18. Thus, with respect to Baroness Hale, I believe that the true proposition is that the importance of the source of the assets may diminish over time. Three situations come to mind:

(a) Over time matrimonial property of such value has been acquired as to diminish the significance of the initial contribution by one spouse of non-matrimonial property.

(b) Over time the non-matrimonial property initially contributed has been mixed with matrimonial property in circumstances in which the contributor may be said to have accepted that it should be treated as matrimonial property or in which, at any rate, the task of identifying its current value is too difficult.

(c) The contributor of non-matrimonial property has chosen to invest it in the purchase of a matrimonial home which, although vested in his or her sole name, has – as in most cases one would expect – come over time to be treated by the parties as a central item of matrimonial property.

The situations described in (a) and (b) above were both present in White. By contrast, there is nothing in the facts of the present case which logically justifies a conclusion that, as the long marriage proceeded, there was a diminution in the importance of the source of the parties' entire wealth, at all times ring-fenced by share certificates in the wife's sole name which to a large extent were just kept safely and left to reproduce themselves and to grow in value."