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A Theory of Everything – Special Contributions in Matrimonial Finance

Joshua Viney of 1 Hare Court considers the problem of identifying those cases where a contribution will be treated as “special” and analyses the relevant case law

Joshua Viney of 1 Hare Court

Oscar fever is still in the air. Two of the leading films of the past year have been the two biopics 'A Theory of Everything' and 'The Imitation Game'. Both films have brilliant portrayals of their respective subject matters – Stephen Hawking (played by Eddie Redmayne) and Alan Turing (played by Benedict Cumberbatch). The relevance of this is that both Hawking and Turing are/were geniuses. Everybody knows that they are geniuses, they know it, we (the audience) know it and the filmmakers know it. But how do we know it? You can point to their intellect (undoubtedly high) or their achievements (undoubtedly impressive) or their view of the world and their subject matter (arguably unique). But which of these stakes them out as 'geniuses', is it one particular aspect or is it a mixture of all three? Was Turing a genius before he broke the Enigma code or was his genius confirmed subsequent to its breaking? Ultimately, do we simply know geniuses when we see them?

The significance of the above discussion is that in matrimonial finance it is possible to depart from equality in the division of the matrimonial assets where one spouse has demonstrated that their contribution to the marriage has been a special contribution. The spouse may seek to demonstrate this through a number of ways. In seeking to clarify the legal test for a special contribution two issues have remained stubbornly unclear, perhaps for legitimate reasons, namely what level of skill/effort or genius is required and what degree of assets counts as 'exceptional'? To date judges have effectively adopted the approach of 'we know it when we see it' and have stayed away from providing anything more prescriptive.

The Law
Fresh from the case of White v White [2000] UKHL 54 a special contributions argument arose and was approved in the Court of Appeal in Cowan v Cowan [2001] EWCA Civ 679. Here the total net assets were approximately £11.5 million. This had been accumulated off the back of the husband's plastics business. Of note, was the husband's development of bin liners, which Thorpe LJ termed 'genius'. A relevant consideration for the purposes of this article was Mance LJ's warning at paragraph [161]:

'The exercise of special skill and effort raises yet further and different considerations. I start by recording my conviction that there is no sensible basis for restricting consideration to cases of "stellar contribution", as Miss Baron submitted. Ultimately, there is probably one continuous spectrum, extending from the entirely ordinary to the "stellar". For convenience, it is useful to speak of any acquisition of wealth that is achieved by more than ordinary skill and effort as "special", and I would certainly wish to discourage over-refined analysis of the precise extent to which skill and effort may have been "special". The underlying idea is that a spouse exercising special skill and care has gone beyond what would ordinarily be expected and beyond what the other spouse could ordinarily have hoped to do for himself or herself, had the parties arranged their family lives and activities differently. The first spouse's special skill and effort is special to him or her, and the individual's right to the fruits of an inherent quality of this nature survives as a material consideration despite the partnership or pooling aspect of marriage. For my part, I think that this consideration is a material one to which weight can and should be given in appropriate cases.' (emphasis added)

A more restrictive approach than Cowan was embraced by the Court of Appeal in Lambert v Lambert [2002] EWCA Civ 1685. Here the assets were approximately £20 million and were generated from the sale of the husband's company. Bodey J stated:

'[69] I agree that it is not possible to define once and for all, by way of some formulaic label, the precise characteristics of the fortune-maker (or fortune-making) required in the paradigm case such as this, in order that when the proposed distribution of the resources is checked against the "yardstick of equality", the fully contributing homemaker should receive a lesser share of the wealth than the fortune-maker.

[70] However, those characteristics or circumstances clearly have to be of a wholly exceptional nature, such that it would very obviously be inconsistent with the objective of achieving fairness (i.e. it would create an unfair outcome) for them to be ignored.' (emphasis added)

The test as espoused bears a comparison to the test in conduct cases. Bodey J's formulation was adopted by the House of Lords in Miller; McFarlane [2006] UKHL 24.

Following this, a special contribution argument raised its head once more in Charman v Charman (No 4) [2007] EWCA Civ 503. Here the total assets amounted to approximately £131 million. Coleridge J at first instance accepted the husband's special contribution argument, awarding the wife only 36.5% of the assets. The husband appealed this decision and the Court of Appeal noted that it would be unlikely that there would be a departure from equality greater than 66.6 % - 33.3%.

More recently special contributions has been considered in two cases - SK v TK [2013] EWHC 834 (Fam) and Cooper-Hohn v Cooper-Hohn [2014] EWHC 4122 (Fam).

In SK v TK the husband was a technology entrepreneur. The net assets were approximately £18 million. Whilst the husband had created some technology early on in his career the majority of his work had been in the management of his business. One aspect of the husband's case was a special contributions argument. Moor J dismissed this stating:

'[44] Nevertheless, I am quite satisfied that, applying the authorities, this does not amount to a "special contribution" such as to amount to a good reason for departure from equality.  It would not be accurate to describe him as a "genius".  Equally, whilst the extent of his business success is rare and something to be applauded, it cannot be said to be "exceptional".  I did not in any way get the impression that it was something that it would be inequitable for me to disregard.

[45] I realise that the quantum of the fortune amassed by a businessman is only one feature.  I am certainly not intending to lay down a rule that it is impossible to make a "special contribution" if the assets are below £20 million.  It is however a factor that the Husband's business success has not been so great as to generate truly vast wealth.   He has been very successful.  Whilst he is to be applauded for that, it is quite impossible to say that his contribution in this regard gets close to justifying a greater share of the wealth than that of the wife who contributed herself in an equally valuable way to the best of her ability.' (emphasis added)

In Cooper-Hohn v Cooper-Hohn the husband was a financial investor and had been incredibly successful generating assets of between $1.35 - $1.6 billion and a charitable foundation of $4.5 billion. The husband sought a departure from equality partly on the ground of special contribution. Roberts J considered the case in exceptional detail and found that a departure from equality was justified. At paragraph [282] she asked herself the following questions:

i. Can it properly be said that he is the generating force behind the fortune rather than the product itself?

ii. Does the scale of the wealth depend upon his innovative vision as well as on his ability to develop those visions?

iii. Has he generated truly vast wealth such that his business success can properly be viewed as exceptional?

iv. Does he have a special skill and effort which is special to him and which survives as a material consideration despite the partnership or pooling aspect of the marriage?

v. Would it, in all the circumstances, be inequitable for me to disregard that contribution?

She answered each of these with a 'yes'. She then went on to ask at paragraph [283] whether:

'Is it necessary for the purposes of 'special contribution' for me to find that the husband possessed the quality of 'genius'?'

Roberts J did not state whether it was necessary but went on to consider the question in any event stating:

'There are various definitions of the word 'genius' but all seem to suggest that, in order to qualify for this sobriquet, a person must have some exceptional natural capacity or intellectual or creative power or other natural ability which finds reflection in the exercise of an exceptional skill in a particular area of activity.  Applying that definition to this husband, I take the view that he qualifies as a financial genius in his particular field of financial investment. If he does not, who could?'

Whilst the tests Roberts J gave herself above would be helpful in a similar case one cannot help but conclude that a similar case will be rare. Roberts J asked herself when considering whether Mr Cooper-Hohn qualified as a genius 'if he does not, who could?'. Quite. This was a truly exceptional case; the assets were larger than all of the reported previous special contribution cases combined. This was, with respect to Roberts J, a situation where she could feel more than comfortable in the 'I know one when I see one' approach.  

The difficulty lies in cases where judges and practitioners are less clear; cases closer to the facts of SK v TK, for example. For such cases, in attempting to apply Roberts J's rhetorical questions, the following remain undeveloped in relation to question (iii) and (iv):

- What is exceptional wealth?
- What is a special skill and/or genius?

Perhaps unsurprisingly, the courts have expressed great discomfort at providing an analysis of these two areas. Highlighted above were the comments of Mance LJ and Bodey J, repeated here respectively for ease of reference:

'I would certainly wish to discourage over-refined analysis of the precise extent to which skill and effort may have been "special".'

'I agree that it is not possible to define once and for all, by way of some formulaic label, the precise characteristics of the fortune-maker (or fortune-making) required in the paradigm case such as this'

Taking each issue individually:

Exceptional Wealth
Moor J in SK v TK made it clear that he was not 'laying down a rule' that assets below £20 million could not be a special contribution. This will be addressed further below. However, what was clear from his judgment was that:

'the Husband's business success has not been so great as to generate truly vast wealth'.

What then is 'truly vast wealth'? Clearly, in the mind of Moor J, it is more than £20 million. One might highlight at this point that the man on the Clapham omnibus might raise an eyebrow at that conclusion. Nevertheless, this is an area where more certainty and an 'anchoring figure' could be helpful for both practitioners and judges. The possibility of an anchoring figure, £50 million for example, would be arbitrary, but no less arbitrary than the unpredictable process of 'I know it when I see it'.

Returning to Moor J stating that assets below £20 million may still evoke a special contribution argument, this no doubt must link to the question of 'genius' and the manner in which the £20 million was created. For example, were the £20 million to be generated over a markedly short period off the back of a parties' genius that may be a special contribution. Imagine for a moment if Mark Zuckerberg, the subject of another 'genius' biopic and Oscar Winner 'The Social Network' were to have been married and divorced in the early days of Facebook; he may have had a strong argument for special contribution (although his fictitious wife in this scenario may have sought the help of the Winklevoss twins).

The question of genius is patently more difficult to analyse. As Bodey J recognised there can be no formulaic label to sort the genius from the talented. However, if we are to rely on the 'I know it when I see it' approach this will inevitably be influenced by the scale and history of the party's achievements. This was the underlying factor in both of the recent decisions of SK v TK and Cooper-Hohn v Cooper-Hohn.

It is therefore likely that the future of special contributions will be fought on what constitutes exceptional wealth.

A Final Point
This article has assessed the current approach to special contributions but a background feature whenever one considers special contributions is whether it should exist at all. In truth, an assessment of whether special contributions should justify a departure from equality is beyond the remit of this article. However, to simply ignore the protestations of several members of the judiciary is blinkered. Wilson LJ memorably stated in Charman:

'[80] The notion of a special contribution to the welfare of the family will not successfully have been purged of inherent gender discrimination unless it is accepted that such a contribution can, in principle, take a number of forms; that it can be non-financial as well as financial; and that it can thus be made by a party whose role has been exclusively that of a home-maker. Nevertheless in practice, and for a self-evident reason, the claim to have made a special contribution seems so far to have arisen only in cases of substantial wealth generated by a party's success in business during the marriage.'

One of the wife's arguments in Cooper-Hohn, who not only raised the parties' children but also significantly contributed to the parties philanthropic activities, was 'what more could I do'? This was neatly considered in paragraph [273] of Roberts J's judgment:

'It is really the third point which goes to the heart of the case which is being advanced on behalf of the wife.  Given the extent of her involvement with the Foundation (which I have already described earlier in this judgment); her obvious devotion to and prioritisation of the family's needs – a family of four children which included triplets; her role as homemaker and co-ordinator of all the children's social and other needs; what more, asks Mr Pointer, could she have done?  What more should she be expected to have done in order to qualify for equal treatment with the husband in terms of financial outcome?  As he rightly reminds me, she was not simply a 'working' wife; she was a wife who was fully engaged in fulfilling her role in the joint objective which had underpinned the marriage from its very inception.  Her role in the Foundation demanded of her the skills and qualities which would have been needed in any CEO at the top of an organisation.  Until the time came when the 'job' grew too big for any one individual, she performed that role without remuneration and entirely for the benefit of the beneficiaries of its grants and programmes.  I thought it slightly churlish on the husband's part to say, as he did, that he did not seek to control the amount of time which she spent at work and she more or less devised her own working programme around the needs of the home and the children.  I am quite satisfied that there was not a spare moment of this wife's waking day when she was not actively engaged either in discharging her role in the home or working for the Foundation.  I heard, and accept, her evidence that her day would often start in the early hours to coincide with calls which needed to be made in different time zones.  She was frequently still working in her study at home after midnight when the children no longer needed her attention.'

Despite the above, as already discussed Roberts J did depart from equality on the basis of the husband's special contribution. Nevertheless, when reading paragraph [273] one is left with the sense that perhaps this could have been the case where the wife's quite clearly stellar non-financial contribution to this family and her endeavours in the families' philanthropic ventures could have been reflected.

The law is left in a difficult position, practitioners and their clients more so. The Court of Appeal in Charman considered that it would be 'dangerous' for them to identify any figure as a guideline threshold for a special contribution, Sir Mark Potter stating at paragraph [88]:

'However laden with qualification, the guideline might discourage a court from discerning special contribution in the generation of wealth below the threshold in circumstances, however rare, in which it should properly do so. The greater concern, however, is the obverse risk that it might encourage a court to discern special contribution in the generation of wealth above the threshold in circumstances in which it should not properly do so. While the law recognises the concept of a special contribution in the generation of wealth, there is no doubt that, following the decision of this court in Lambert, approved and developed in Miller, it keeps the concept in very narrow bounds. We would not wish a party's claim to have made a special contribution to succeed by reference to something interpreted as effectively a presumption deriving from our identification of a threshold figure.'

Whilst there clearly are dangers in providing a guideline figure it is self evident that the scale of the wealth is the key (but not sole) consideration in special contribution cases. This was acknowledged in the subsequent paragraph [89] in Charman:

'the greater the wealth, the greater is the extent to which it is unmatched and to which it calls for an unmatched, or unequal, division under the sharing principle.'

Practitioners are therefore left in a position where there is very little guidance about the most important factor in a special contributions case. The law is crying out for an overhaul. Sir Mark Potter's warnings in Charman relate to the situation where the manner in which a set figure of wealth has been generated is overlooked. However, recent precedents shows that judges are considering how the parties' wealth is accumulated, not just the size of the wealth.

Surely the problems in relation to special contributions are surmountable. One possible route may be to have an anchoring figure in place which can then be a centre point for the arguments about how a certain figure in any case was reached. If it is below or above the anchoring figure then the arguments will centre on that.