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  1. Wealth
May 11, 2017

The great ‘genius’ debate in divorce

By Spear's

High earners can learn a lot about ‘special contribution’ in divorce from the Court of Appeal decision in Work v Gray, writes Suzanne Todd

It’s all go in the world of matrimonial law, with the Family Division and the Court of Appeal having delivered a number of high octane decisions in recent months. One of the standout cases is Work v Gray, judgment for which has recently been delivered by the Court of Appeal. It seeks to give guidance on how the concept of ‘special contribution’ can affect cutting up the cake following a divorce.

But first, the facts. At the date of the judgment, Mr and Mrs Work were 48 and 46 respectively; born and brought up in the USA, they had been married for over 20 years. It was a tale of modest beginnings transformed. Work was employed by private equity fund Lone Star in Texas; he moved to Japan in 1997 and subsequently Hong Kong. The family moved with him.

But here’s the key point: the marital wealth was wholly accumulated as a result of Work’s Lone Star employment. When the parties divorced in England, Holman J found that their postnuptial agreement had no impact and that, contrary to Mr Work’s assertions, his contribution was not so exceptional or individual that it justified a departure from equality. His contribution had been matched by that of his wife as a homemaker.

Mr Work appealed this decision, but the Court of Appeal upheld it. What was the judges’ reasoning? They held that there is scope for an unequal division of marital assets but, here’s the rub, only if there is good reason why such an approach is needed to achieve a fair outcome. The parties’ contributions are just one factor which the court is required to consider when deciding how to divide the pot, and one spouse’s financial contribution could, theoretically, still justify that. However, it would only be justified if that contribution derived from a unique, exceptional and individual quality. Mr Work did not fit that description.

So, is the bar for qualifying for ‘special contribution’ somewhat higher than previously thought? Certainly the ‘threshold criteria’ which many had hoped for were not forthcoming in this judgment. The appeal judges also highlighted the fact that in the last twelve years there have only been three cases in which the court has made an unequal division based on special contribution, namely Sorrell, Charman and Cooper-Hohn v Hohn. What made their contribution special and why wasn’t Mr Work’s contribution special enough?

In Sorrell the court held that the husband had shown remarkable business acumen which was exceptional; his ‘genius’ accounted for the vast majority of the family assets and this was recognised in a 60/40 split. In Charman the Court of Appeal confirmed that the notion of special contribution could take a number of forms, non-financial as well as financial. In recognition of his individual and exceptional qualities, Mr Charman retained 65.5 per cent of the £131m fortune. In Hohn the court held that the husband had made a special contribution in generating wealth of $6bn through exceptional and innovative vision and unique skills and was entitled to 64 per cent of the assets.

Pulling these threads together, it would appear that a divorcing spouse who has amassed a fortune and wishes to claim more than a half share in the assets will need to show remarkable acumen as well as exceptional individual, unique and innovative qualities and vision in generating the wealth. But, in this fast-moving hi-tech world, perhaps the opportunities for innovation and exceptionality are now greater than ever? A high bar indeed, but not an insurmountable one for an extraordinary few.

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Suzanne Todd is Head of Withers’ Family Law Team (Withers LLP acted for the husband in Sorrell, Charman and Cooper-Hohn v Hohn).

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