11 JAN 2017

Non-matrimonial property and sharing: Scatliffe v Scatliffe [2016] UKPC 36

Kathryn Mason

Trainee solicitor

@Vardags

Non-matrimonial property and sharing: Scatliffe v Scatliffe [2016] UKPC 36
The Board dismissed a husband’s appeal from the Court of Appeal of the Eastern Caribbean Supreme Court (British Virgin Islands) but used the ‘ill-starred appeal’ to give guidance to the local courts on the treatment of non-matrimonial property in applications for ancillary relief.

Background facts


The husband (‘H’) and the wife (‘W’) were married in 1971. They lived in the British Virgin Islands. Together, they shared two children of adult age. H had two adult children, assumed by the court, to be from a previous relationship. H and W made full contributions to the family: H had managed a number of businesses throughout the marriage and had entered into successful property ventures; W had worked for 8 years in the early part of the marriage; thereafter she had assisted H in his businesses and had been a homemaker. The marriage encountered difficulty and in 2009 W was awarded a decree of divorce in spite of H’s defence of the petition.

The case was heard by the local courts at first instance. The case was appealed, and cross-appealed, to the Court of Appeal of the Eastern Caribbean Supreme Court (British Virgin Islands). H subsequently appealed to the Privy Council, where a Board comprising Lady Hale, Lord Wilson and Lord Carnwath considered the case.

The assets


The assets, as disclosed to the courts comprised:
  • ‘Parcel 38’: The former matrimonial home, in which W continued to live. The ground floor comprised two apartments which together generated rental income of $19,000 pa. The property was owned in H’s sole name and had been purchased 2 years prior to the marriage. The property was valued at $600,000.
  • ‘Parcel 195’: The property was purchased in H’s sole name during the course of the marriage. The property was undergoing development work to the ground floor. The property was valued at $350,000 in its incomplete state and $750,000 upon completion. At the time of the hearing, H resided in Parcel 195 and attempted to argue that the property was held in trust for his son, Derwin, and one of his other sons.
  • ‘Parcel 147’: the land was owned by the Crown but H had built on the land (using funds acquired during the marriage) and received rental income (some $40,000) from the properties. The building, excluding the land, was valued at $425,000. The land, owned by the Crown, was valued at $30,000. 
  • ‘Parcel 174’: owned in joint name by W and the parties’ son, Derwin.
  • A lump sum of $219,000 paid to the H by the government for work done (which H claimed had been spent at the time of proceedings).
  • Shares and cash worth $7,000 held by W. 

The award at first instance


At first instance, Hariprashad-Charles J (‘the judge‘) held that there were three properties which should be classified as the parties’ matrimonial property and which should be subject to the sharing principle, Parcel 38, Parcel 195, and Parcel 147.

It was ordered that H was to transfer Parcel 38 to W. W was also to retain the rental income from the ground floor apartments. H retained Parcel 147, and the rental income generated. H had argued that it was not possible for the land and the property contained on the land to be separated and therefore Parcel 147 remained the property of the Crown. This argument was not afforded any weight.

In addressing H’s claim that Parcel 195 was held on trust for his children, the judge held that the parties had intended the property to be for the benefit of the children and awarded H a lifetime benefit in the property, which would enable him to live in the property and receive the rental income once the works had been completed; following which Parcel 147 would become the property of the children of the marriage.

Parcel 174 did not amount to a ‘matrimonial asset’ as it was held on trust for Derwin, a son of the parties.

The judge also held that W should retain her $7,000 shares and cash and H should retain the $219,000 in spite of his claims that he had spent the monies.

The Court of Appeal 


The case was appealed to the Court of Appeal, where W cross-appealed, seeking payment of $50,000 from the $219,000 payment to her. W’s appeal was successful. The effect of the varied order was that the matrimonial assets were divided such that W retained assets totalling some $657,000 and H retained assets totalling $944,000.

H appealed to the Privy Council.

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Applicable law


The relevant statute in this case was the Matrimonial Proceedings and Property Act 1995 (‘the 1995 Act’), an act largely akin to the Matrimonial Causes Act 1973 (‘the 1973 Act’).

Like s 25(2) of the 1973 Act, s 26(1) of the 1995 Act specifies matters which the court must have regard when deciding whether, and how, to exercise its powers when awarding a fair division of the assets. In particular, limb (a) of s 26(1), which requires the court to have regard to ‘the income, earning capacity, property and other financial resources which each of the parties … has’.

Although limb (f) of the 1995 Act and the 1973 Act were broadly similar in that they required the court to have regard to ‘contributions made by each of the parties to the welfare of the family, including any contribution made by looking after the home’, it was noted that there was one substantial difference between the 1995 Act subsection and that contained within the 1973 subsection: the 1995 Act required that the court was also obliged to exercise its powers ‘as to place the parties, so far as it is practicable and, having regard to their conduct, just to do so, in the financial position in which they would have been if the marriage had not broken down and each had properly discharged or her financial obligations and responsibilities towards the other.’

It was established in local case law that principles identified in the UK Supreme Court and the House of Lords, are persuasive authority in relation to the exercise of powers under ss 23 and 25 of the 1995 Act (Wheatley v Wheatley, Court of Appeal of the Eastern Caribbean Supreme Court (British Virgin Islands), 13 October 2008, HCVAP 2007/006, para 92).

The sharing principle, as established in White v White [2001] 1 AC 596, [2000] 2 FLR 981 and developed in Miller v Miller; McFarlane v McFarlane [2006] UKHL 24, [2006] 1 FLR 1186 applied and thus the judge at first instance and at Court of Appeal were obliged to use their discretion in a manner which divided the assets against the yardstick of equality, unless there was reason to depart from it.

It is worth briefly noting that the Board addressed the suggestion (made in written submissions only) that the judge at first instance had wrongly failed to allude to s 19 of the Married Women’s Property Act 1887, which enabled the court in a summary way to determine issues between husband and wife as to the ownership of property. The written submissions on behalf of H argued that the judge had been mistaken in applying s 26(1) of the 1995 Act and that the judge did not have the power to make an order in relation to the matrimonial home. The Board stressed that the arguments made in written submissions were misconceived and that proceedings under the Married Women’s Property Act 1887 had, in fact, become obsolete now that the courts had wide redistributive powers under the 1995 Act.

Privy Council: guidance from the Board


The Board advised that the judge’s order, as varied by the Court of Appeal, was an entirely reasonable sharing of the matrimonial property. Both H and W had been given a home in which they could live and a rental income, from which they could meet their expenditure.

However, the Board raised additional problems with H’s appeal.

Appeals and findings of non-disclosure against an appellant


The judge at first instance had made a finding of non-disclosure against H, as he had failed to disclose his bank statements during the course of proceedings. The Board noted that in circumstances where an appellant has had a finding of non-disclosure made against him and, in circumstances where an appellant is unable to dislodge the trial judge’s finding of non-disclosure, then the prospects of his successful appeal are remote.

The need for an appeal court to give reasons for their decision


H complained that the Court of Appeal gave limited reasons for dismissing his appeal and allowing W’s cross-appeal. H complained that he was not aware of the reasons his appeal had been dismissed. The Board referred to Mummery J’s decision in Re Portsmouth City Football Club Ltd, Newmans LLP (a firm) v Andronikos [2013] EWCA Civ 916, citing:

‘If the judgment in the court below is correct, [an appellate] court can legitimately adopt and affirm it without any obligation to say the same things over again in different words. The losing party will be told exactly why the appeal was dismissed: there was nothing wrong with the decision appealed or the reasons for it.’

Having consulted the transcripts from the appeal, the Board rejected H’s complaint.

The treatment of matrimonial property


For inexplicable reasons to the Board, the judge at first instance had not taken account of all H’s disclosed assets. The Board referred to the agreed schedule of assets, which made reference to a two-storey guest house, which H had inherited from his parents. No valuation was obtained for this property and it was agreed that W had not made a claim against the property.

The Board questioned why both local courts (the judge at first instance and the Court of Appeal) had ignored the husband’s interest in the guest house, and considered that the ‘answer may betray a serious misunderstanding about the treatment of “non-matrimonial property”, indeed possibly about the very meaning of the phrase, in the determination of applications for ancillary relief under the 1995 Act’.

The Board therefore took the opportunity of H’s ‘ill-starred appeal’ to offer guidance in respect of this point.

Non-matrimonial property: guidance of the Board


‘(i) Section 26(1)(a) of the 1995 Act obliges the court to have regard to the “property and other financial resources which each of the parties … has or is likely to have in the foreseeable future”.
(ii) Thus, when a court finds that an asset is not one in which either party has any interest (such as, in the present case, Parcel 174, beneficially owned by the son Derwin: see para 17 [of the judgment] above), no account should be taken of it.
(iii) It is, however, confusing for such an asset to be described as “non-matrimonial property”.
(iv) It was when introducing the “yardstick of equality of division” in the White case, cited above, at p 605, that Lord Nicholls proceeded, at p 610, to refer to “matrimonial property” and to distinguish it from “property owned by one spouse before the marriage, and inherited property, whenever acquired”. In the Miller case, cited above, at paras 22 and 23, he described the latter as “non-matrimonial property”; and he explained his earlier reference to “matrimonial property” as meaning “property acquired during the marriage otherwise than by inheritance or gift”.
(v) So the phrase “non-matrimonial property” refers to property owned by one or other of the parties, just as the phrase “matrimonial property” refers to property owned by one or other or both of the parties.
(vi) Accordingly it is contrary to section 26(1)(a) of the 1995 Act for a court to fail to have regard to “non-matrimonial property”. This raises the question: in what way should regard be had to it?
(vii) As was recognised in Charman v Charman (No 4) [2007] EWCA Civ 503, [2007] 1 FLR 1246, at paras 65 and 66, it was decided in the White and Miller cases that not only matrimonial property but also non-matrimonial property was subject to the sharing principle. In the Miller case, Lord Nicholls, however, suggested at para 24 that, following a short marriage, a sharing of non-matrimonial property might well not be fair and Lady Hale observed analogously at para 152 that the significance of its non-matrimonial character would diminish over time. Lord Nicholls had also stressed in the White case at p 610 that, irrespective of whether it fell to be shared, a spouse’s non-matrimonial property might certainly be transferred in order to meet the other’s needs.
(viii) In K v L [2011] EWCA Civ 550, [2012] 1 WLR 306, it was noted at para 22 that, notwithstanding the inclusion of non-matrimonial property within the sharing principle, there had not by then been a reported decision in which a party's non-matrimonial property had been transferred to the other party otherwise than by reference to the latter's need.
(ix) Indeed, four years later, in JL v SL (No 2) (Appeal: Non-Matrimonial Property) [2015] EWHC 360 (Fam), [2015] 2 FLR 1202, Mostyn J suggested at para 22 that the application to non-matrimonial property of the sharing principle (as opposed to the needs principle) remained as rare as a white leopard.
(x) So in an ordinary case the proper approach is to apply the sharing principle to the matrimonial property and then to ask whether, in the light of all the matters specified in section 26(1) and of its concluding words, the result of so doing represents an appropriate overall disposal. In particular it should ask whether the principles of need and/or of compensation, best explained in the speech of Lady Hale in the Miller case at paras 137 to 144, require additional adjustment in the form of transfer to one party of further property, even of non-matrimonial property, held by the other.’

Conclusion


The guidance provided by the Board serves as a useful reminder that the courts will have an eye to both matrimonial assets and non-matrimonial assets, particularly in circumstances where the application of the sharing principle does not meet the parties’ needs.

An in-depth article by Juliet Chapman, who represented the respondent wife, is due to be published in a forthcoming issue of Family Law.
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