Work v Gray [2017] EWCA Civ 270

In categories:

Court of Appeal, 11 April 2017, Sir Terence Etherton, Master of the Rolls, King and Moylan LJJ

The husband and wife had both been born in the USA. Their relationship began in 1992 and lasted for about 20 years; they had two children together. When they met neither of them had any capital, and they had similar modest incomes. By the time of their marriage in 1995 the husband was studying for an MBA, while the wife continued to work. In 1997 the husband started work in Texas for private equity company Lone Star. He quickly moved to Japan, where he was joined by the wife in 1998. The husband thereafter ran the new Japan office of Lone Star, and the family lived in Japan until 2005. In 2008 the husband stopped working for Lone Star and the family moved to London. Over the course of the marriage the husband’s earnings exceeded $300 million. In 2013 the wife petitioned for divorce; between then and March 2015 the parties spent nearly £3 million on legal fees and associated costs. By the date of the hearing, the total family wealth was about $225 million.

There were two significant issues in the case: first, the meaning and impact of the post-nuptial agreements signed by both parties; and second, whether or not the husband had made a special contribution such that the amount now payable to the wife should be less than it otherwise might have been.

The High Court judge awarded the wife half the net assets, which was at least £72 million; the parties were to attempt to agree the extent of the net wealth as at 31 December 2014 by reviewing the relevant discounts claimed by the husband. The first $60 million was to be paid within 28 days, the balance by a set date. The interim maintenance was to continue to be paid until the husband had paid the balance.

The wife received a total of $108.861 million within 21 weeks of the order. That represented half of the wealth on the basis of the husband’s discounted figures. The first ($60 million) tranche was achieved without the husband liquidating any of his assets, using a combination of cash and a $16 million draw down facility. The remainder was provided by liquidating four investment funds at short notice – although during the hearing he had argued that the value of these funds should be discounted by 25% to allow for the need to liquidate at short notice, in fact he achieved full face value on liquidation. The wife was willing to accept assets in specie rather than cash, and offered a round table meeting to discuss how best to achieve this. The husband did not reply directly to this, but did offer an additional sum of just under £2 million as the final payment. Despite the husband’s initial assertions that actual investments could not be transferred because the investment managers concerned would not consent, it later emerged that 29 investments were transferable, with a combined gross value of just over $54.7 million, or a discounted value of just under $43.8 million. The wife calculated that without any discounts she would be entitled to just under $10.5 million extra, but said she was prepared to accept $8.2 million (as a time-limited 2 week offer).

The husband was granted permission to appeal the special contribution decision, In the meantime, the issues as to computation and extraction, which the parties had been unable to agree, came back to court to be heard by a different judge. The High Court judge awarded the wife a further $5.5 million.

The husband’s appeal against the original decision gave the Court of Appeal an opportunity to review the issue of special contribution.

The Court of Appeal dismissed the husband’s appeal.

The issues raised by this appeal were to be summarised as: 
(i) what was the proper approach to the determination of whether a party had made a special contribution which, in the application of the sharing principle, justified an unequal division of marital wealth; 
(ii) did the concept of special contribution remain valid or should it be discarded as being discriminatory; 
(iii) had the judge at first instance applied the proper approach; 
(iv) if his decision was wrong, what division of the matrimonial property should have been made? Although it was clear that the concept of special contribution, as currently applied, was potentially relevant in only a very small number of cases, when determining these issues the court should place significant weight on the public interest in the promotion of clarity and consistency. Provided the guidance was authoritative, it was to be applied whether or not the guidance was part of the reasoning behind the actual decision. To follow guidance only if it was part of the reasoning was too restrictive in the context of s 25 of the Matrimonial Causes Act 1973, which gave an unfettered discretion, especially when cases involving its application would only very occasionally reach the Supreme Court and, although more frequently, only occasionally reach the Court of Appeal.

Having regard to the very small number of reported cases in which special contribution had been raised as an issue, the outcomes in those cases made it difficult to sustain the submission that there was uncertainty in the manner in which it was to be determined. Subject to argument on the present appeal based on discrimination and the Convention and on developments in the corresponding Australian jurisprudence, nothing had in fact occurred in the years since Miller v Miller; McFarlane v McFarlane [2006] 2 AC 618 and Charman v Charman (No 4) [2007] 1 FLR 1246 showing that the principles in those cases were erroneous or had caused unfairness. There was no doubt that concepts of discrimination, equality and fairness changed with time, and this was reflected in the changing jurisprudence on the application of s 25 of the MCA 1973 over time. In the absence, however, of any significant change in perceptions of fairness since Miller and Charman, it was not open to the Court of Appeal to substitute any personal concepts of fairness for those reflected in the principles on special contribution laid down by the House of Lords.

The Australian cases, relied upon by the wife, did not assist. The Australian legislation was differently phrased to the MCA 1973, and the Australian jurisprudence did not throw up any arguments which had not been deployed or potentially available in Miller or Charman.

The parties’ respective contributions could be given unequal weight leading to an unequal division of matrimonial property; applying Charman the statutory requirement to have regard to the parties’ contributions in every case “would be inconsistent with a blanket rule that their past contributions to its welfare must be afforded equal weight”). This left scope for an unequal division if there was good reason why such was required to achieve a fair outcome; the good reason must be sufficiently substantial if it was not to undermine the principles set out in Miller.

In this context, the wife’s submission that special contribution required a combination of financial and other contributions and could not be founded on financial contribution alone had no principled basis unless the alternative could be shown to be discriminatory. Absent discrimination, 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 was the combination that needed to be exceptional. This would significantly broaden the evidential inquiry undertaken by the court and be likely to take the courts back to the undesirable consequences referred to in G v G (Financial Provision: Equal Division) [2002] 2 FLR 1143. This would be inconsistent with the overriding objective and was not required for a fair outcome to be achieved.

The husband’s proposed test or approach would serve, at best, to complicate the analysis required when the court was considering whether a party had made a special contribution and, at worst, would unfairly elevate a financial contribution above other forms of contribution. The word “contribution” clearly incorporated all aspects including the nature of the contribution, its consequences and the party’s role in making the contribution. The contribution must derive from something the contributor had done. Accordingly, if the contribution did not derive from the “exceptional and individual quality” of the contributor, it could not be a special contribution.

The fact that there had only been one reported case since Charman in which special contribution had resulted in an unequal division of matrimonial property made it difficult to sustain the submission that the manner in which it was being applied was discriminatory. If the concept were being applied more broadly, there would clearly be a risk that it would be discriminatory. Equally, applying K v L 
”the law does not abjure all discrimination. On the contrary it is of the essence of the judicial function to discriminate between different sets of facts and thus between different claims.” 
The mere fact that one party had made a financial contribution and the other had not was of no significance in the s. 25 exercise. However, the court was still mandated to consider the parties’ respective contributions. In order to ensure fairness, for the reasons articulated, in particular, in White and in Miller, the courts had confined the concept of special contribution so that it reflected a significant, substantive difference, which did not require extensive evidential investigation. Moreover, such a significant, substantive difference gave rise to a special contribution irrespective of whether the contribution had been made by the husband or the wife.

This was the short answer to the wife’s argument based on Article 14 of the European Human Rights Convention, even if, which was by no means clear, the wife was able to show that a right to financial relief on divorce fell within Article 1 of the First Protocol to the Convention.

The court did not consider that, save for the observations below, it would be helpful to add to the guidance contained in Miller and Charman, which provided authoritative and clear guidance as to the circumstances and manner in which special contribution was to be applied.

The judge below had accurately summarised the guidance from Miller and Charman in paragraph 140 of his judgment, provided sub-paragraph (v) was deleted. The focus was on disparity of contribution and whether there was a sufficient disparity so that it would be inequitable to disregard it. It was not on whether a contribution was “unmatched”. The latter could lead, as reflected in the husband’s submissions in this case, to the contention that, if one party had made an exceptional contribution, the court must consider whether the other party had made an equal, matching, contribution.

The court agreed with the judge that the use of the word “genius” was unhelpful. It was sufficient for the court to determine whether the contribution was wholly exceptional. This required the court to look both at the nature of the contribution and to determine whether it derived from an exceptional and individual quality.

There was some debate during the hearing about the extent to which the judge making a decision about special contribution was making findings of fact or engaging in an evaluative exercise or exercising a discretion. It was not altogether easy to draw a sharp line between the three elements when the court was addressing special contribution. Clearly, the last stage, when the judge decided the actual division of the marital property, was discretionary. Special contribution itself comprised in part findings of fact, as to what contributions each party had made, and in part a value judgment, namely whether one party had made such an exceptional contribution that the disparity in the parties’ respective contributions made it inequitable to disregard the former when determining how to exercise the distributive powers under the MCA 1973. It could also be said that the latter was in part discretionary because the weight that a trial judge decided to place on the parties’ respective contributions was part of the discretionary process.

In essence, the husband had contended that the judge had failed to accord sufficient weight to the husband’s contribution, namely the amount of money generated by him over the course of 10 years, and had given excess weight to the wife’s contribution. Assessing contributions and the weight to be given to them were matters in respect of which the trial judge has significant advantages over an appellate court: applying Piglowska v Piglowski [1999] 1 WLR 1360

The husband had failed to demonstrate that the judge’s decision was wrong. It was clear from the judgment that he had given this issue the most detailed consideration; he had explained that he had not found it easy to determine. He had carefully considered the parties’ respective contributions, including the amount of the wealth generated by the husband. This was a decision to which he had been entitled to come and which he had fully explained.