Divorce – what amounts to a ‘special contribution’?
Posted on 23rd May 2017
Many people will be aware that when couples divorce, the legal starting point is that there will be a 50/50 division of assets. However, the court has the power to depart from equality where there is good reason to do so and in deciding this, will have regard to the factors set out in section 25 (2) of the Matrimonial Causes Act 1973. One of the factors relates to the contribution that each party has made and case law has established that a “special contribution” made by one party can allow the court to award that party a larger share of the assets. However, following the recent Court of Appeal case Work v Gray, the real question is, what amounts to a “special contribution”?
In the case of Work v Gray, the husband (somewhat ironically named Mr Work) worked for a private equity fund and by the time the matter reached court, the parties’ wealth totalled £180 million. The husband ran the Japan office of the private equity fund for a number of years and went so far as to use the word ‘genius’ in describing how he had made £7 billion for the firm. Consequently, the husband argued that he should be awarded 61% of the assets and his wife 39% due to his special contribution.
Division of assets
This argument was rejected in March 2015 by Mr Justice Holman who ruled that the assets should be divided equally. He claimed that the use of the word ‘genius’ was unhelpful and overused, and should be reserved for the likes of Leonardo Da Vinci, Mozart and Einstein. His overall conclusion was as follows:
“Although the figures are large, I do not consider that the contributions of the husband in this case can be described as of a wholly exceptional nature, nor that it would be “very obviously” inconsistent with fairness for them to be ignored. Indeed, it would, in my view, be unjustifiably gender discriminatory to make an unequal award. This was a marriage of two strong and equal partners over 20 years. They each contributed in a range of differing, but all of them important, ways to a marriage and relationship which enriched them both, both financially and emotionally, as parents of their children and partners to each other.”
The husband appealed the decision and the matter went to the Court of Appeal. The husband’s primary argument at this stage was that special contribution should focus on the contribution, not the contributor. In essence, he was arguing that the court should focus on the quantum of the wealth that he generated and he seemed to largely concede that the way in which he had done so was genius. However, the Court of Appeal found that it was wrong for the husband to try to separate the contribution from the contributor and if the contribution did not derive from the “exceptional and individual quality” of the contributor, then it could not be a special contribution.
The Court of Appeal went on to dismiss the husband’s appeal and held that Mr Justice Holman was entitled to reach the decision that he did.
Special contribution requires exceptional circumstances
The case, therefore, does not change the current position in that it really is only possible to run a special contribution argument in really exceptional circumstances. The difficulty that remains is identifying quite what this would include, especially where the family court does not discriminate against the role of the homemaker who may have, for example, made a significant contribution in raising the parties’ children.
Special contribution is, in fact, an argument so rarely used (and even more rarely successful), that at the date of the hearing before Mr Justice Holman, the parties’ legal representatives had only identified three cases in the last twelve years in which the court had awarded an unequal division of assets based on special contribution. One of those cases involved generated wealth of $6 billion ($4.5 billion of which had been donated to a charitable foundation).
The judgment in Work v Gray referred back to Miller v Miller; McFarlane v McFarlane and Charman v Charman to continue providing the appropriate guidance as to the circumstances in which special contribution should be applied and confirmed that there is scope for an unequal division if there is good reason why this is required to achieve a fair outcome. The guidance from those cases includes the following:
- The characteristics or circumstances would 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.
- 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.
- It is extremely important to avoid discrimination against the home-maker.
- A special contribution requires a contribution by one unmatched by the other.
- 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. Often, however, he or she will need independently to establish such a quality, whether by genius in business or some other field. A windfall is not enough.
With the above in mind, it was surprising to read the recent reports of Ryan Giggs trying to run a special contribution argument following the breakdown of his ten year marriage. It seems unlikely that he will be successful based on this recent decision, however, each case is of course considered on its own merits and I am sure the judgment will provide an interesting read.