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Case note: Work v Gray [2017] EWCA Civ 270

Posted: 3 July 2017

Summary:

The husband’s ('H') appeal against Mr Justice Holman’s order (see Gray v Work [2015] EWHC 834 (Fam)) where Holman J had rejected H’s argument that he had made a special contribution justifying the unequal division of wealth in his favour and had instead divided the family’s wealth equally between H and the wife ('W'). The appeal provided an opportunity for the Court of Appeal to review the scope of 'special contribution'.

The facts should be familiar but to recap, by the time of the final hearing, H was 47 and W 45. Both had been born and brought up in the USA. They had begun cohabiting in 1992, married in 1995 and had had two children. The marriage had ended in 2013.

Although both working when they first met, neither had had any significant financial resources. In 1997, and after completing his MBA, H began working for the Lone Star private equity fund, initially in Texas. He later moved to Japan where W and the children joined him. The family lived in Japan until 2005, and then in Hong Kong until 2008. H had had a very successful career and by March 2015 the pot of assets totalled c. $225 million. The marital wealth had all been accumulated through H’s employment with Lone Star.

Between 2013 and 2015, the couple had spent £3 million on legal fees and associated costs, a sum described by Holman J as 'profligate and unnecessary'.

H argued that, at first instance, he should have been awarded 61 per cent of the matrimonial property (note that the very precise figure of 61 per cent is in the middle of the bracket proposed by Charman (No 4) ). Relying upon Lord Nicholls’ comments about 'exceptional earnings' in Miller v Miller; McFarlane v McFarlane [2006] UKHL 24, H’s case was that the focus of the special contribution 'exercise' should be on the nature or quality of the contribution - what has been done or the impact or value of what has been done - and not the qualities of the person making the contribution. Accordingly, when considering financial contribution, the court should give primary weight to the quantum of wealth generated during the marriage. Only if the quantum alone was insufficient to be regarded as exceptional should the court then consider whether there was some other quality 'either:

  • in the manner or duration of the production of the wealth; or
  • in the skill or individual quality of the contributor which 'renders it sufficiently exceptional to make it inequitable to disregard'.

Having undertaken that exercise, H said the court should then assess whether any such special contribution was 'unmatched', by considering whether the other party had made an equal contribution so significant that it would also be inequitable to disregard it.

Adopting this approach, quantum alone, H contended, demonstrated that he had made a special contribution. Had Holman J then asked himself whether W had made an equal (i.e. exceptional) contribution, he would have determined that she had made no more than a 'normal' contribution, insufficient to match H’s.

Resisting the application, W argued that H could point to no error in either the factual determinations nor any error of principle. The elevation of the scale of wealth to a primary consideration, as proposed by H, she said would 'increase the prospect of discrimination against the home-maker'. Furthermore, the suggestion by H that the court must assess whether the other party had 'matched' the exceptional contribution was simply wrong.

W did a raise a new argument before the Court of Appeal, one which was based on discrimination. She sought to assert that the 'special contribution' was an inherently discriminatory concept as 'more home-makers are women and more money-makers are men'. Lip-service she said was paid to the 'theoretical possibility of a special domestic contribution because, in reality, it is 'impossible' that such ever will be found'.

The issues before the Court of Appeal were:

  • what is the proper approach to the determination of whether a party has made a special contribution which, justifies an unequal sharing or division of the marital wealth?;
  • does the concept of special contribution remain valid or should it be discarded as being discriminatory?;
  • had Holman J applied the proper approach?; and
  • if his decision was wrong, what division of the matrimonial property should have been made?

Held:

After reviewing the authorities on both contribution and special contribution, the Court of Appeal concluded that Holman J had accurately summarised the guidance from both Miller and Charman. The focus is on the disparity of contribution and whether there is a sufficient disparity to make it inequitable to disregard. The focus is not on whether a contribution is 'unmatched'. The latter approach can lead, as was actually reflected in H’s submissions, to the conclusion that, if one party has made an exceptional contribution, the court must consider whether the other party has made an equal, matching, contribution.

Also agreeing with Holman J that the use of the word 'genius' is unhelpful, the Court of Appeal found that it is sufficient for the court to determine whether the contribution is wholly exceptional. This requires the court to look both at the nature of the contribution and to determine whether it derives from an exceptional and individual quality.

Here, Holman J was found to have both correctly identified the approach to special contribution and correctly applied it. H tried to argue that the judge had failed to accord sufficient weight to his contribution and given excess weight to W’s contribution. The Court of Appeal found that the judge had neither erred in law nor applied a wrong principle meaning H had failed to demonstrate that the decision was wrong. The decision the judge had come to - that there was not such a disparity that it would be inequitable to disregard H’s contribution - was a decision he had been entitled to come to and which he had fully explained.

Noting that the outcomes in the 'very small number of reported cases in which special contribution ha[d] been raised as an issue' made it difficult to sustain H’s submission that there was uncertainty in the manner in which special contribution was being determined, the Court of Appeal unhesitatingly concluded that nothing since Miller or Charman had shown that the principles were uncertain, erroneous or had caused unfairness. Neither had there been demonstrated such a change in perceptions of fairness since Miller and Charman to warrant a different approach to special contribution, although different people, judges included, might hold different views as to fairness. Although concepts of discrimination, equality and fairness change with time, this, the Court of Appeal said, was 'reflected in the changing jurisprudence on the application of section 25 over time'.

The developments both parties suggested to the approach to special contribution were also rejected. W’s submission that special contribution requires a combination of financial and other contributions had no principled basis unless special contribution as a concept could be shown to be discriminatory. Absent discrimination, the Court of Appeal said, it was artificial to seek to exclude one form of contribution save in combination with another. It would also be likely to raise other issues such as whether the other form of contribution would also have to be exceptional or whether it is the combination which would have to be. This would significantly broaden the evidential inquiry undertaken by the court and be likely to take us back to the undesirable consequences referred to by Coleridge J in G v G. This would be inconsistent with the overriding objective and was not required for a fair outcome to be achieved.

Meanwhile, H’s approach would serve, at best, to complicate the analysis and, at worst, would unfairly elevate a financial contribution above other forms of contribution. It was also artificial to seek to separate the contribution from the contributor. The word 'contribution' the Court of Appeal concluded clearly incorporated all aspects including the nature of the contribution, its consequences and the individual’s role in making the contribution. The contribution had to derive from something the contributor had done. It went without saying that if the contribution did not derive from the 'exceptional and individual quality' of the contributor, it could not be a special contribution.

So, is the current approach to special contribution discriminatory? The Court of Appeal said not. Only one special contribution case since Charman had resulted in an unequal division of matrimonial property making it difficult to substantiate a discrimination angle. The fact that special contribution was confined so that it reflected a significant, substantive difference, which did not require extensive evidential investigation went towards preventing discrimination. Moreover, such a significant, substantive difference gave rise to a special contribution irrespective of whether the contribution has been made by the husband or the wife.

H’s appeal was accordingly dismissed and the original award upheld.

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