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Privy Council clarifies treatment of non-matrimonial property in AR applications

Appeal dismissed in Scatliffe v Scatliffe

In Scatliffe v Scatliffe [2016] UKPC 36 the Privy Council has dismissed a former husband's appeal against an order for ancillary relief made by the High Court of the Eastern Caribbean Supreme Court (British Virgin Islands) and upheld in large part by the Court of Appeal of the Eastern Caribbean Supreme Court (British Virgin Islands).

In applying the relevant provisions of the Matrimonial Proceedings and Property Act 1995 (similar to sections 21 – 28 of the Matrimonial Causes Act 1973, in particular, in respect of the court's powers to order a lump sum and the transfer of property), Lord Wilson, who wrote the opinion of the Judicial Committee, said that it is "easy to conclude that… [the original order] was an entirely reasonable sharing of the matrimonial property". In short it gave each of the parties a home in which they could live for the rest of their lives and a rental income on which they might subsist and it appeared to represent a fair outcome having regard to all of the circumstances and the concluding words of section 26(1), MPPA 1995.

However, the Privy Council also noted that a failure of the two local courts to take account of other property, which it had deemed to be '"non-matrimonial", "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", at [24].

The Privy Council helpfully offered ten points of guidance on this point:

(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 a parcel beneficially owned by the son), 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 White v White [2000] UKHL 54, 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 Miller v Miller [2006] UKHL 24, 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.

For a fuller summary of the facts and judgment by Alex Laing of Coram Chambers, click here.