Focus On Inherited Assets

In the recent case of J v J, summarised in our March 2010 family law newsletter, Mr Justice Charles considered the extent to which pre-acquired or gifted assets could justify a departure from equality of division of assets on divorce.

The spotlight remains on gifted/inherited assets in two more recent cases, D v D and N v N, both also decisions of Charles J.

D v D [2010] EWHC 138

This case concerned an 18-year marriage. The key asset in the case was a farming company, which the husband ('H') had inherited and in which he still worked. H's shareholding in the company was entirely gifted/inherited and had been increased by a company buy-back.

The Arguments and Principles of the Judgment

H claimed that as his interest in the company was inherited, it should be left wholly out of account and the wife's ('W') award should be calculated by reference to her needs only. Charles J disagreed. He held that the fact that the assets were inherited farms did not mean that the sharing principle was irrelevant to the question of what was a fair award. H argued that where there was good reason for departing from equality, the extent of the departure should be determined by W's needs, as this was the only principled route by which an award could be quantified. Charles J held that whilst needs inform the extent of the departure from equality and whilst there are difficulties in quantifying an award that contains a departure and is in excess of needs, a principled award must be based on sharing and needs. Charles J held that an award which compelled H to sell the farm would be unfair. He described the need for H to be permitted to continue farming through the company if reasonably possible as a magnetic factor in the case. In conclusion, Charles J accepted that it was very difficult to quantify the platform or springboard effect of the gifted assets and their contribution to the current value of the company. He held that a fair approach was to attribute 30% to the gifted nature of H's shares, leaving 70% to be shared. Charles J accepted that 'this percentage has a spurious accuracy and has to be considered as being within a range'. N v N [2010] EWHC 717

N v N involved a 29-year marriage. The inherited asset was H's shareholding in a company, REC, which had been incorporated by H's father. REC owned a property, S Hall, which had been in H's family for some time, as well as a portfolio of land and other buildings. H's shareholding in REC was gifted to him...