When will a company be regarded as a non-matrimonial asset?

Written by admin

December 9, 2011

In the case of Stefanou and Gordon the parties were married for 20 years before separating.  There was a further 10 year separation before the financial matters came before the courts relating to the parties divorce.

Three years after separation the husband had established a company.  The main issue in the ancillary relief proceedings was the valuation of the husband’s shares in the company and the fact that the company appeared impossible to value.  Before judgment was given there was considerable commercial activity in the company unbeknown to the Court.  During this commercial activity which involved the refinancing of the company, it was established and agreed that the Company had a value of £30 million.  The Court ordered that £1.1 million be transferred to the wife in two tranches.  When the husband paid his liability early the wife became suspicious and discovered that the company may have been sold for an enormous sum.  Her suspicions were found to be substantiated and the wife applied to set aside the financial order.

The Court considered her application but refused her appeal on the grounds that the company was a non-matrimonial asset in relation to which she had made no contribution.  She obtained limited permission to appeal, however on the basis that the husband had been in breach of his continuing duty of financial disclosure and that if the judge had been made aware of the true value of the company her award would have been higher.

The Court of Appeal dismissed the wife’s appeal finding that:

1. If the Court had been seized of all the information regarding the company the result would not have been materially different.

2. It was highly relevant that 10 years had elapsed since separation and the husband’s commercial activity within that period had been entirely his own with no involvement from the wife.

This is, however, an unusual case in that 10 years had elapsed since separation and the business had been built up post separation without any support or contribution from the wife.  Although the Court in 2009 carried out a thorough investigation it found that even if the company’s true value had been known, due to the period of separation, the business should be regarded as a non-matrimonial asset.

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