(House of Lords; Lord Nicholls of Birkenhead, Lord Hoffmann, Lord Hope of Craighead, Baroness Hale of Richmond, Lord Mance; 24 May 2006)  1 FLR 1186
Basic Principles: the House of Lords, having considered the cases of Miller and McFarlane, identified three important principles which justified the redistribution of resources from one party to another following divorce: (1) the needs (generously interpreted) generated by the relationship between the parties; (2) compensation for relationship-generated disadvantage; and (3) the sharing of the fruits of the matrimonial partnership. These three principles could guide the court in making an award under Matrimonial Causes Act 1973 (the 1973 Act), although the court must be careful to avoid double counting. Which of the three would be considered first would depend upon the circumstances of the case. The ultimate objective was to give each party an equal start on the road to independent living.
Conduct: where there was no conduct which it would be inequitable to disregard under s 25(2)(g) of the 1973 Act, the court should not seek to weigh the parties respective conduct or attitudes in an attempt to assess responsibility for the breakdown of the marriage, or to attribute legitimacy or reasonableness to the wish of one party to continue the marriage against the wishes of the other.
Contribution: the question of contribution should be approached in much the same way as conduct. Only if there was such a disparity in the parties respective contributions to the welfare of the family that it would be inequitable to disregard it, should this be taken into account in determining their shares.
Periodical Payments: a periodical payments order could be made to afford compensation to a party as well as to meet their financial needs. A clean break was not to be achieved at the expense of a fair result; if a claimant was owed compensation and capital assets were not available the social desirability of a clean break was not sufficient reason for depriving the claimant of that compensation;. There was no reason to limit periodical payments to a fixed term in the interests solely of achieving a clean break. Given the high threshold which now applied to extending the term of a periodical payments order, it was not appropriate to make an order whose continuation the wife would have to justify, it should be for the husband to justify a reduction, at which stage the court could consider whether a clean break had become a realistic option.
Legitimate Expectation: while the standard of living enjoyed by the parties was to be taken into account as one of the matters included on the statutory checklist, hopes and expectations were not an appropriate basis on which to assess financial needs. Claims for expectation losses did not fit comfortably with the notion that either party was free to end the marriage.
Assets: the Lords disagreed concerning the treatment of certain assets in certain circumstances. Baroness Hale, with whom Lord Hoffman agreed, considered that in a matrimonial property regime which started, as the English system did, with the premise of separate property, there remained some scope for one party to acquire and retain separate property which was not automatically to be shared equally between them. She identified the concept of family assets, ie assets generated by the joint efforts of the parties, which would exclude not merely property brought with the individual into the marriage or acquired by inheritance during the marriage, but also business or investment assets generated solely or mainly by the efforts of one party during the marriage. The duration of the marriage might justify a departure from the yardstick of equality of division in relation to non-family assets, in terms of a reduction to reflect the period of time over which the domestic contribution had or would continue rather thanin terms of accrual over time. The nature and source of the property and also the way the couple had run their lives might be taken into account in deciding how it should be shared. However, these arguments would be irrelevant in the great majority of cases and should not be taken too far. Lord Nicholls preferred to identify matrimonial property, ie the matrimonial home and property acquired during the marriage otherwise than by inheritance or gift, as against non-matrimonial property ie property which the parties brought with them into the marriage or acquired by inheritance or gift during the marriage. In his view, the equal sharing principle applied to matrimonial property regardless of the length of the marriage, whereas following a short marriage fairness might well require that the claimant would not be entitled to an equal share of the non-matrimonial property. In a longer marriage, non-matrimonial property represented a contribution made to the marriage by one of the parties whose weight would, in some circumstances, diminish, in others not. Exceptional earnings were a contribution to marriage which could justify departure from equality of division only when it would be inequitable to do otherwise. Lord Hope expressed no view on this point; Lord Mance identified some concerns about the concept of family assets, but identified himself with Baroness Hale's views on the possible relevance of the duration of the marriage and on the possible relevance of the principles by which the parties had chosen to live their lives while married.
Miller: in this case the needs generated by the relationship were comparatively small, as was the need for compensation, but the wife was entitled to some share in the assets, including the considerable increase in the husband's wealth during the marriage. Had the yardstick of equality been applied to all the assets which accrued during the marriage, the wife would have got more; there were however reasons to depart from the yardstick of equality, either on the basis that the substantial growth in the assets was attributable to contacts and capacities the husband brought to the marriage, or on the basis that the assets were business assets generated solely by the husband during a short marriage.
McFarlane: this was a paradigm case for an award of compensation in respect of the significant future economic disparity sustained by the wife, arising from the way the parties conducted their marriage. Equal division of the capital was not enough to provide for needs or compensate for disadvantage but unusually the husband's very substantial earning power was far in excess of the family's financial needs after separation. The wife, having given up her own highly-paid career for the family, was not only entitled to generous income provision, including sums which would enable her to provide for her own old age and insure the husband's life, she was also entitled to a share in the very large surplus, on the principles both of sharing and of compensation. The Court of Appeal should not have set a 5-year time limit on the order, which should be on a life basis.