18 St John Street Family Department member Stephen J Murray asks “How is the court to approach a case where there are both matrimonial and non-matrimonial assets?”
1. There are 2 competing judicial views
• the Mostyn J “formulaic” approach; and
• the Moylan LJ “impressionistic” approach
2. The formulaic approach is exemplified in Jones v Jones  1 FLR 1723 (Court of Appeal), N v F  2 FLR 533 (Mostyn J) and WM v HM  EWFC 25 (Mostyn J) where the courts favoured an approach in cases where (a) there were both matrimonial and non-matrimonial assets and (b) the assets were liquid as follows:
(i) Firstly, divide the assets into matrimonial and non-matrimonial
(ii) Consider whether the existence of non-matrimonial property should be reflected at all.
This depends on questions of duration and mingling.
(iii) If it does decide that reflection is fair and just, the court should then decide how much
of the pre-marital property should be excluded. Should it be the actual historic sum? Or less, if there has been much mingling? Or more, to reflect a springboard and passive growth? It may be that this property should be shared 100% to the contributor and 0% to the other spouse?
(iv) The remaining matrimonial property should then normally be divided equally.
3. The impressionistic approach is exemplified in Hart v Hart  EWCA 1306 (Court of Appeal) and XW v XH  EWFC 76 Baker J (as he then was). Essentially this approach is based on the premise that the strict mathematical basis inherent in the formulaic approach is neither necessary nor in some cases desirable. Fairness can be achieved by a simple departure from equality based on the judge’s overall assessment of the case. As Moylan LJ put it in Hart
83. I have referred to the cases above to assist with answering the question I posed in paragraph 61 above, namely whether the court’s approach to the impact of non-matrimonial property should be formulaic or can be broader. I now propose to address my conclusions.
84. In my view, the court is not required to adopt a formulaic approach either when determining whether the parties’ wealth comprises both matrimonial and non-matrimonial property or when the court is deciding what award to make. This is not necessary in order to achieve “an acceptable degree of consistency”, Lord Nicholls in Miller (paragraph 6), or to achieve a fair outcome. Indeed, I consider that the present case demonstrates the difficulties which can arise if a court strives to adopt a formulaic approach in circumstances where that is not likely to be easily achieved because of the nature of the financial history.
85. It is, perhaps, worth reflecting that the concept of property being either matrimonial or non-matrimonial property is a legal construct. Moreover, it is a construct which is not always capable of clear identification. An asset can, of course, be entirely the former, as in many cases, or entirely the latter, as in K v L. However, it is also worth repeating that an asset can be comprised both, in the sense that it can be partly the product, or reflective, of marital endeavour and partly the product, or reflective, of a source external to the marriage. I have added the word “reflective” because “reflect” was used by Lord Nicholls in Miller (paragraph 73) and “reflective” was used by Wilson LJ in Jones (paragraph 33). When property is a combination, it can be artificial even to seek to identify a sharp division because the weight to be given to each type of contribution will not be susceptible of clear reflection in the asset’s value. The exercise is more of an art than a science.
86. Secondly, the court will need to make such factual decisions as the evidence enables it to make. In this context, I do not agree with Mostyn’s comment in N v F that a party would need to prove the existence of pre-marital assets “by clear documentary evidence” (paragraph 24). There is no reason to limit the form or scope of the evidence by which the existence of such property can be established. The normal evidential rules apply. These include the court’s ability to draw inferences if such are warranted.
96. If the court has not been able to make a specific factual demarcation but has come to the conclusion that the parties’ wealth includes an element of non-matrimonial property, the court will also have to fit this determination into the section 25 discretionary exercise. The court will have to decide, adopting Wilson LJ’s formulation of the broad approach in Jones, what award of such lesser percentage than 50% makes fair allowance for the parties’ wealth in part comprising or reflecting the product of non-marital endeavour. In arriving at this determination, the court does not have to apply any particular mathematical or other specific methodology. The court has a discretion as to how to arrive at a fair division and can simply apply a broad assessment of the division which would affect “overall fairness”. This accords with what Lord Nicholls said in Miller and, in my view, with the decision in Jones.
4. Which approach is correct?
It is worthy of note that in Jones v Jones (cited above) the Court of Appeal adopted both approaches – in that, having assessed the wife’s award by reference to the formulaic approach, they then performed as a cross check, an assessment of the fairness of the award by reference to the overall percentage technique.
5. The answer, at least for now and at least as far as King LJ is concerned in Versteegh v Versteegh  3 FCR 895 (Court of Appeal), is that both are correct and the trial judge can choose which approach best achieves the overall objective of fairness in each individual case. King LJ, having reviewed the competing approaches, concludes:-
. In my judgment it is however the observation of Lord Nicholls in Miller and McFarlane;  1FLR 1186 which continues to carry the day:
“ This difference in treatment of matrimonial property and non-matrimonial property might suggest that in every case a clear and precise boundary should be drawn between these two categories of property. This is not so. Fairness has a broad horizon. Sometimes, in the case of a business, it can be artificial to attempt to draw a sharp dividing line as at the parties’ wedding day. Similarly the ‘equal sharing’ principle might suggest that each of the party’s assets should be separately and exactly valued. But valuations are often a matter of opinion on which experts differ. A thorough investigation into these differences can be extremely expensive and of doubtful utility. The costs involved can quickly become disproportionate. The case of Mr and Mrs Miller illustrates this only too well.
 Accordingly, where it becomes necessary to distinguish matrimonial property from non-matrimonial property the court may do so with the degree of particularity or generality appropriate in the case. The judge will then give to the contribution made by one party’s non-matrimonial property the weight he considers just. He will do so with such generality or particularity as he considers appropriate in the circumstances of the case.
She goes on at para 100 to say
. As Moylan LJ said in Hart:
“The judge will then give to the contribution made by one party’s non-matrimonial property the weight he considers just. He will do so with such generality or particularity as he considers appropriate in the circumstances of the case.”
5. Which approach is to be adopted in a case where:-
• One spouse (usually the husband) has brought (great) wealth to the marriage unmatched by a similar contribution from the other – such that all (or nearly all) the assets can be traced back to that contribution
• it has been a medium/long marriage and/or
• one spouse (usually the wife) is to be left with primary child rearing responsibilities for many years to come at some cost to their earning capacity
6. I venture to suggest that:-
(a) If the court were to adopt a strict formulaic approach, it would have to exclude from the assets to be shared all the non-matrimonial assets brought into the marriage by the husband – which may well result in the wife being left with next to nothing: that clearly cannot be right.
(Having said that, even under some of the less pure applications of the formulaic approach, these factors find some acknowledgement in the discretionary exercise (see para 2(ii) above)
(b) Neither can it be right that Husband’s greater contribution finds no reflection in the division of property.
The solution is to adopt the impressionistic approach