The “Genius” v the Homemaker: Special Contribution arguments in Divorce

In a High Court judgement conducted in private before Mr Justice Haddon-Cave, a husband’s argument against his former wife receiving half the marital assets to the tune of £453m has failed and, in doing so, has led to one of the biggest divorce settlements awarded in UK history.

 

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The husband, a 61 year old oil and gas trader from the Caucasus, moved to the UK with his former wife, 44 and hailing from Eastern Europe, in 1993. They were married in Moscow when the wife was pregnant with the eldest of their two sons. Setting up home in Surrey, the husband worked in London and travelled frequently. The wife was a housewife and hands-on mother throughout the marriage, caring for the two children without the assistance of a nanny and, for the most part, alone. The husband became extremely successful pursuing business interests in the Russian energy sector through his Russian company and, in 2012, sold his shares in the company for a staggering US$1.375billion.

Mr Justice Haddon-Cave upheld the wife’s submissions that that the couple had jointly acquired matrimonial assets – including, a yacht, a plane, sports cars, art collections and multi-million pound properties - to the tune of £1bn, and that these had been built up during the marriage and thus were therefore entirely matrimonial in character.  In doing so, Mr Haddon-Cave rejected argument by the husband of pre- and post-marital wealth and of making a “special contribution” to the generating of the assets by way of his Russian company ruling that, instead, the assets had been acquired by “equal contributions to the welfare of the family and should be subject to the sharing principle”.

 

What does this judgement mean?

The case is the latest in a recent line of cases attracting media attention for one spouse’s argument as to deviation from the general rule of equal division of assets in divorce by seeking to argue some “special contribution”; a relatively modern concept derived from the case of Cowan v Cowan [2001] 2 FLR 679 which provides for a husband or wife with some “special skill” or “genius” to argue that without such skill or genius there would be no subsequent accruing of wealth and thus entitling them to the lion’s share of the assets in recognition.

Cowan followed quickly in the aftermath of the landmark decision of White v White [2000] 2 FLR 981 which introduced a “yardstick of equality” into divorce settlement cases in the UK and laid down fundamental principles of there being no recognisable distinction between spouses performing different roles within a marital partnership. In other words, neither the homemaker nor the breadwinner has any greater entitlement to marital wealth than the other in divorce proceedings.

What Cowan did was recognise that there may be certain circumstances in which it may be inequitable to disregard some “special contribution” by one spouse over the other (in that case it was the husband’s development of plastic bin bags that Lord Justice Thorpe deemed as “genius”). The concept received definition by Lord Justice Wilson in K v L [2011] 2 FLR 980 as a term of art arising “in circumstances in which a spouse’s contribution, direct or indirect, to the creation of matrimonial property has been so extraordinary as to dictate a departure within the sharing principle from the ordinary consequence of its equal division”.

The courts have since developed their own criteria which, if satisfied, will lead to a spouse securing a departure from the yardstick of equality to at least 55% but with the potential to go up to 66.66% (per Sir Mark Potter in Charman v Charman (No 4) [2007] 1 FLR 1246). The criterion is as follows:
 

  • the existence of a large sum of money which is not a mere windfall
  • the existence of an exceptional individual quality which has created that fortune
  • in certain cases it will be the size of the fortune alone that will be enough to prove an exceptional individual quality
  • there must be a gross and obvious disparity between the parties’ contributions before a special contribution can be found
     

Dispute its recognition, special contribution has proven notoriously difficult to establish. This judgement goes to demonstrate the particularly high threshold for convincing the court to depart from equality in divorce settlements here in the UK, as if the widely reported dismay of Mr Work in the recent appeal case of Work v Gray [2017], concerning some $230m, was not already enough.

That is not to say, however, such an argument is impossible. There have been three cases reported of successful arguments of special contribution being approved in the last 12 years (Sorrell v Sorrell [2005], the aforementioned Charman v Charman [2007}, and Cooper-Hohn v Hohn [2014]).  Footballer Ryan Giggs is reported to be next in line to submit such an argument in his own multi-million pound divorce. It remains to be seen whether he will join the pool of recently reported on failed “special contributor” spouses and be forced to part with half of his estimate £40m fortune, or, if the courts will agree to the opinion of thousands of Manchester United fans as to him having some unique, genius, special skill warranting his retaining a lion’s share in the settlement. One thing is for certain, it will be an argument requiring fervent pursuit.