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Richard Castle, barrister at 1 King’s Bench Walk Chambers, discusses the court’s approach when determining the division of assets between a husband and wife on the basis of the husband’s post-separation bonus earnings and what the husband asserted to be non-matrimonial property.
What are the practical implications of this case?
In C v C, the court applied the test set out by the Court of Appeal in Hart v Hart [2017] EWCA Civ 1306, [2017] All ER (D) 14 (Sep) to post-separation earnings in the form of bonuses and share awards, in the context of the decision in Waggott v Waggott [2018] EWCA Civ 727, [2018] All ER (D) 44 (Apr). Key points are:
where the evidence establishes a clear dividing line between matrimonial and non-matrimonial property, the court should determine the sharing claim on that basis
while the court must still undertake a holistic assessment of fairness by deploying any and all relevant factors under section 25 of the Matrimonial Causes Act 1973 and the ‘cross-check’ of fairness, any adjustment must be principled on the basis of compensation or needs
Practical advice for cases concerning post-separation accrual are that:
parties seeking to ring-fence their post-separation earnings should consider placing them, upon receipt, into a separate bank account, to evidence the segregation of funds
insofar as remuneration is in the form of share awards vesting of a number of years, it will be important to calculate what element of the period is pre-separation and what is post-separation
What was the background?
After an eight-year marriage (ten-year relationship) the parties, in their mid-forties, separated in June 2016. The wife previously worked in banking, earning a substantial salary, but since 2010 had devoted her time to caring for the parties’ two children, aged six and nine. The husband worked as senior head of department for an investment bank.
The husband had a substantial remuneration package comprised of:
a basic fixed annual salary (£257,000 net) paid monthly
a supplemental compensation allowance (SCA) awarded retrospectively at the end of each year and paid in tranches throughout the next financial year (circa £1.2m net in 2017)
a discretionary bonus (US$1.8m in 2015 and US$600,000 in 2016) paid exclusively in restricted stock units (RSUs)
The husband’s income in 2016–17 was £4.3m net, with 2018 net receipts of £3.1m. This included RSUs vesting from previous awards which had a vesting period over four years having been awarded for the previous years’ service.
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