Posted: 16/06/2017
The Court of Appeal acknowledged that the appeal in Work v Gray [2017] EWCA Civ 270, [2017] All ER (D) 61 (Apr) on the doctrine of 'special contribution' provided 'an opportunity for this court to review the issue of special contribution and its proper scope, if any, when the court is determining a financial claim under the Matrimonial Causes Act 1973'. Unfortunately, however, the judgment provides little further guidance on how judicial discretion should be exercised when considering the issue of special contribution, beyond the principles which had already been set out in the previous cases of Miller v Miller; McFarlane v McFarlane [2006] UKHL 24, [2006] 3 All ER 1, and Charman v Charman (No 4) [2007] EWCA Civ 503, [2007] All ER (D) 425 (May).
The parties met in 1992 and began living together shortly afterwards. They were married in 1995 and had two children. When they met they had no significant financial resources but had 'good modest jobs'. In 1997 the husband began working for a private equity fund called Lone Star and he moved to Japan in 1997. The wife joined him in 1998, and the family remained living in Japan until 2005, before moving to Hong Kong. In 2008 the husband left Lone Star and the family returned to live in England. The marriage then came to an end in 2013.
The parties' marital wealth had all been accumulated during the husband's employment with Lone Star with his total earnings exceeding $300 million during the marriage. By the date of the final hearing before Holman J in March 2015 the parties' assets totalled approximately $225 million. At the hearing, one of the issues argued by the husband was that there should be a departure from equality on the basis that his 'special contribution' to the matrimonial assets would be inequitable to disregard.
In his judgment, Holman J gave very careful consideration to the issue of special contribution. He assessed the nature and quality of the husband's financial contribution and concluded: 'He was, undoubtedly, very successful and performed very well at the job he was employed to do.' However, he reached the decision that the husband had not made 'an unmatched special contribution of the kind and to the extent that the authorities require' and had not 'displayed the exceptional and individual quality that the authorities require'. Holman J also concluded that it would discriminate against the wife if he were to make an unequal award and therefore, taking all matters into consideration, ordered that there should be an equal division of the assets.
The husband's argument regarding special contribution was allowed to proceed to the Court of Appeal and was heard by Sir Terence Etherton MR, King LJ and Moylan LJ in February 2017.
The husband's case at the Court of Appeal was that he should be awarded a 61% share of the parties' matrimonial property on the basis that he had made an 'unmatched' exceptional contribution. Interestingly, he proposed that the focus should be on the contribution, and not on the contributor, and that it is the nature or quality of the contribution - 'what has been done or the impact or value of what has been done' - which bears on the welfare of the family and not the qualities of the person making the contribution. As a result, the husband suggested that when considering a financial contribution, the court should give primary weight to the quantum of the wealth generated during the marriage.
The husband argued that the approach which should be taken by a court when determining whether there should be a departure from an equal division of the marital wealth should be:
It was submitted by the husband that if Holman J had followed the above approach, and given proper weight to the quantum of wealth generated by the husband by first considering quantum alone, he would have decided that the husband had made a special contribution.
The husband also submitted that Holman J had been wrong when he said that special contribution 'requires some exceptional and individual quality in the spouse concerned' which, he said, was contrary to Miller in which reference had been made to 'exceptional earnings'. Furthermore, the husband suggested that when considering whether his contribution was 'unmatched' Homan J should have assessed whether the wife had made 'an equal (exceptional) contribution'. If he had considered this, he would have determined that the wife had made no more than a 'normal' contribution and not one sufficient to match the husband's exceptional contribution.
Finally, the husband submitted that special contribution is not discriminatory in the manner in which it is applied, and that there is a clear legal basis for differential treatment, namely a substantive difference in the contributions made by the parties.
The wife submitted that the new approach proposed by the husband was contrary to the authorities, which emphasise the need for there to be an exceptional and individual quality. She argued that to remove this element would broaden the concept unduly. Furthermore, the wife submitted that the scale of the wealth is relevant as part of the court's determination and, as set out in Charman, may 'make it easy for the party who generated it to claim an exceptional and individual quality which deserves special treatment'. However, to elevate this to a primary consideration as proposed by the husband would increase the prospect of discrimination against the home-maker.
The wife also challenged the third element of the proposed new approach, suggesting that the wife's contribution must have also been exceptional in order for the contributions to have been 'matched'. This again was clearly contrary to the authorities. Finally, the wife contended that the concept of special contribution should no longer be regarded as valid on the basis that it is discriminatory in favour of the money-maker.
The Court of Appeal referred back to the seminal case of White v White [2001] 1 AC 596, [2001] 1 All ER 1, in which reference was made to the concept of the 'yardstick of equality' which was introduced to ensure that there was no discrimination between the husband and the wife and their respective roles as money-earner and home-maker and child-carer.
The Court of Appeal also referred back to Lambert v Lambert [2002] EWCA Civ 1685, [2003] 4 All ER 342 in which, although the court made an unequal division based on special contribution, Bodey J stated that in order to justify a departure from equality 'the characteristics or circumstances clearly have to be of a wholly exceptional nature, such that it would be obviously be inconsistent with the objective of achieving fairness for them to be ignored'.
The Court of Appeal acknowledged that there have only been three reported cases since Lambert where there has been an unequal division of the assets on the basis of an argument of special contribution, namely: Sorrell v Sorrell [2005] EWHC 1717 (Fam), [2005] All ER (D) 104 (Oct); Charman v Charman [2007] EWCA Civ 503, [2007] All ER (D) 425 (May) and Cooper- Hohn v Hohn [2014] EWHC 4122 (Fam), [2014] All ER (D) 166 (Dec).
In the determination, the Court of Appeal reiterated that the authoritative jurisprudence on the principle of special contribution is clearly provided by the House of Lords in the cases of Miller and Charman and that it was not open to the Court of Appeal to substitute any personal concepts of fairness for those reflected in the principles already laid down by previous authorities. The Court of Appeal also did not consider it to be helpful to add to the guidance contained in the House of Lords' judgments in Miller and Charman which they said 'provide authoritative and clear guidance as to the circumstances and manner in which special contribution is to be applied'.
The Court of Appeal concluded that the husband's proposed three part test would simply serve to 'complicate the analysis required when considering whether a party has made a special contribution, and, at worst, would unfairly elevate a financial contribution above other forms of contribution'.
Furthermore, the Court of Appeal confirmed that the 'wife's submission that special contribution requires a combination of financial and other contributions and cannot be founded on financial contribution alone has no principled basis unless this can be shown to be discriminatory. Absent discrimination, it is artificial to seek to exclude one form of contribution save in combination with another'.
The Court of Appeal confirmed that Holman J had accurately summarised the guidance in Miller and Charman save that he had been incorrect when stating 'a special contribution requires a contribution by one unmatched by the other'. The Court of Appeal instead stated: 'The focus is on disparity of contribution and whether there is a sufficient disparity to make it unequitable to disregard. It is not whether a contribution is “unmatched”. The latter can lead, as reflected in the husband's submission in this case, to the contention that, if one party has made an exceptional contribution, the court must consider whether the other party has made an equal, matching contribution.'
Finally, the Court of Appeal agreed with Holman J that the use of the description 'genius' in Lambert, Charman and Cooper-Hohn is unhelpful. It is sufficient for the court to determine whether the contribution is wholly exceptional.
In conclusion, the Court of Appeal accepted that Holman J did not err in law or apply a wrong principle. They agreed that the judge had carefully considered the parties' contributions and the amount of wealth generated by the husband, and that he had concluded that there was not such a disparity that it would be inequitable to disregard the husband's contribution. Accordingly, the Court of Appeal dismissed the husband's appeal.
Since the Court of Appeal decision, we have been informed that Mr Justice Haddon-Cave has recently ordered a husband to pay the sum of £453 million to his ex-wife, equating to 41.5% of the total marital assets after ruling that the husband had not made a special contribution to the generation of marital assets, despite the assets allegedly totalling approximately £1 billion (see AAZ v BBZ, C Ltd and P Ltd [2016] EWHC 3234 (Fam), [2017] All ER (D) 91 (May)). It therefore remains to be seen whether the doctrine of special contribution will ever be successfully argued again in the future.
This article was published in New Law Journal in June 2017.
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