Family Court Analyzes Post-Separation Accrual in GA v EL (No 2) Case

Citation: [2023] EWFC 206
Judgment on

Introduction

In the case of GA v EL (No 2) (Post Separation Accrual) [2023] EWFC 206, the Family Court was called upon to consider the division of proceeds following the sale of a business post-separation, with a key focus on distinguishing between matrimonial and non-matrimonial property. The court faced the complex task of discerning the extent to which post-separation accrual should influence the division of assets. This article delves into the legal principles utilized by the court and the rationale underpinning the eventual outcome.

Key Facts

The marriage between GA and EL resulted in significant gains from the sale of a business, X Ltd. The business, incorporated during the marriage, had been valued between £28.1m and £39.2m at the time of separation, later selling for a headline figure of £70m. The issue at hand was to determine the proportion of this post-separation business growth that could be considered matrimonial property to be shared equally, and what portion represented non-matrimonial property attributable to one party’s post-separation labour. Both parties had different views regarding the division: the Wife sought an equal division, while the Husband proposed that the Wife should receive a lesser percentage.

The court’s analysis was guided by several established legal principles concerning financial remedies and asset division following marital dissolution:

Matrimonial vs. Non-Matrimonial Property

The court referred to seminal cases, including White v White [2000] and Miller & McFarlane [2006], asserting the fairness requirement and applying three principles guiding division: sharing of matrimonial property, compensation for relationship generated disadvantage, and the consideration of needs against the ability to pay. The focus was predominantly on the sharing principle, with the court having to determine whether the increase in the company’s value was attributable to matrimonial property or the result of post-separation endeavour.

Post-Separation Accrual

The court discussed the concept of post-separation accrual extensively, acknowledging that in certain circumstances, assets accumulated post-separation can be considered non-matrimonial. The court was influenced by case law that emphasized the difference between passive and active growth, insisted on considering the spouse’s domestic contributions during separation, and highlighted the importance of not overlooking that one party’s post-separation industry could generate non-matrimonial assets. Key precedents included Cooper-Hohn v Hohn [2015], where the court elucidated that fairness required accounting for significant post-separation accruals and post-separation contributions.

Calculation Approach

The judgement rejected a purely formulaic approach, underpinning the decision-making process with reasoning from Hart v Hart [2017], suggesting that determining matrimonial versus non-matrimonial assets is not to be approached with rigorous formulae but assessed with the requisite generality or specificity appropriate to the case.

Outcomes

Upon reviewing the evidence and arguments, the Deputy High Court Judge decided that:

  • The Wife’s share of post-separation accrued assets from X Ltd should be 42.5%, with the Husband’s share being 57.5%. This decision took into account the Husband’s post-separation labour contributing to the business’s increased value.
  • The approximate growth in company value attributable to post-separation efforts was evaluated to be about 50%. Various factors were considered, including the unreliability of the valuation, passive growth, market condition changes, and domestic contributions made by the Wife.
  • A ‘by and large’ approach was preferred over a purely formulaic or linear time apportionment method, with the resultant division deemed fair given the complexities and uncertainties involved in the asset valuation and future growth projections.

Conclusion

In GA v EL (No 2), the court conducted a meticulous examination of both passive and active contributions to the post-separation increase in business value. The judgement highlights the nuanced and tailored approach the court must take when dealing with post-separation asset growth. Importantly, it emphasizes the necessity of the overarching principle of fairness, the consideration of each party’s contributions, and the acknowledgment that sharing principles can warrant adjustment in response to post-separation efforts. The case serves as a significant reference for cases concerning complex asset divisions post-separation and demonstrates that while past case law provides a framework, each case’s unique facts are paramount in guiding a court’s decision-making.