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By Christopher Butler, head of family law team at Speechly Bircham
On 24 May 2006 the House of Lords gave their decision in the case of Alan and Melissa Miller. Their decision confirms that a short marriage is no bar to the equal division of matrimonial assets, while giving clear support for the contention that pre-marital and inherited assets are to be considered separately and as a different class of asset. However, it is also clear that the passage of time may erode the distinction between these classes of assets, as may the manner in which the assets have been dealt with during the marriage.
The House of Lords decision:
the starting point of equal division of marital assets applies equally to short and long marriages;
marital assets are to be distinguished from pre-marriage assets and inherited or gifted assets;
there may be justification for differentiating between family marital assets such as the family home, holiday homes, cars, boats and savings and separate business or investment assets generated by one party alone during the marriage, particularly where the marriage is short;
conduct of parties to the marriage is only relevant in exceptional cases and Mr Miller's decision to end the marriage did not impact upon the size of the award made;
Mrs Miller's award of £5m represents a fair share of the additional wealth accumulated by Mr Miller during the marriage, estimated to be in the region of £15m. The short duration of the marriage, the fact that Mr Miller's business dealings had in part pre-dated the marriage and that he had funded his investments using pre-marriage wealth justified the departure from equality in this case.
What this will mean for future cases
the conduct of the parties continues to be irrelevant in all but the most extreme of cases;
marital assets (including, in most cases, the family home, whether or not that home pre-dates the marriage) will be vulnerable to equal division in all cases;
pre-marriage assets, inherited assets and gifts are to be considered separately as an additional contribution to the marriage (although the passage of time and the manner in which those assets have been dealt with can lessen the impact of this distinction).
On 24 May the House of Lords also announced their decision in the case of Kenneth and Julia McFarlane. Their decision offers guidance on how income should be treated on marriage breakdown.
The House of Lords decision
quantum of periodical payments should not be limited solely to amounts needed to maintain the receiving party;
a periodical payments order may also have the purpose of affording compensation for a party where that partys earning capacity has been reduced as a result of the marriage (typically where a wife has given up a career to support a husband and care for children);
while it is desirable to achieve a clean break between the parties, this should not be done if the result it leads to is unfair;
where periodical payments are designed to compensate for loss or reduction of an earning capacity, it will not be appropriate in all probability for these payments to be brought to an end after a set term.
What this will mean for future cases
where there is insufficient capital available to meet the parties requirements, in terms of both needs and compensation, one party's income may be applied to this purpose by way of periodical payments;
claims for periodical payments for a spouse will no longer, in big money cases, be limited by the discipline of the budget;
wives who have given up promising careers will be fortified in their financial claims, particularly with regard to periodical payments;
term orders in big money cases will inevitably become rarer;
more wealthypeople contemplating marriage may wish to consider entering into pre-nuptial agreements.
See July  Fam Law for the full news article.
The full judgment and headnote for Miller and McFarlane are now available in the fast reporting section of Family Law Reports online. Call 0117 918 1491 to subscribe to the Family Law Reports online.