The decision in the House of Lords in the case of White in 2000 changed the way in which English family courts dealt with the separation of assets on divorce. The previous distinction between breadwinner and homemaker was replaced by a concept that the starting point after a long marriage should be equal sharing. That changed the way in which the legal profession and wider society viewed financial outcomes after marriage across the board. White however is a case involving a farming partnership between husband and wife and in the 21 years since the decision, case law has demonstrated that the application of the original principle to farming cases raises tricky issues. In fact, in farming cases it could be said that there may be more reasons to depart from equality than in non-farming cases.
White v White [2000]
Mr and Mrs White were married for 33 years and had three children. They both came from farming families and jointly owned a farm with a large farmhouse and 160 acres of land. They had a loan from the husband’s father. During the marriage they increased their land ownership to 337 acres. By 1996 when Mrs White started financial proceedings in divorce the entire farm was worth £3.5 million.
Mr White had inherited and owned a separate farm – as well as running the joint farm in partnership, Mrs White was active in running that as well as being the primary carer for the three children.
Based on previous precedents, the court at first instance determined that from a combined asset pot of around £4.6 million (the value of both farms and pensions) Mrs White’s settlement should be based on her ‘reasonable needs and requirements’. She was therefore awarded £980,000 which was slightly over 1/5 of the total assets. She retained her pension of £193,300 and was to receive a payment of £800,000 with all the joint assets then being transferred to Mr White.
Mrs White successfully appealed to the Court of Appeal. Her settlement was increased from £800,000 to £1.5 million – so around 2/5 of the assets – on the basis that she should be able to use her share of the partnership as she saw fit. She was entitled to a share that recognised her contributions to the family not just as part of the farming partnership, but also as a wife and mother.
There were cross appeals in the House of Lords – Mrs White sought an equal share of all the assets and Mr White wanted to go back to the first court’s decision.
The House of Lords upheld the decision of the Court of Appeal. The net effect was that Mrs White had 43 per cent of the assets and Mr White 57 per cent. The difference was explained by assistance that Mr White had had from his father (the loan on the family farm) and the basis upon which he had obtained the additional farm from his family during the marriage. Crucially, the House of Lords said that there should be no discrimination between a husband and wife in their respective roles and a division of assets should no longer favour the breadwinner. The concept of the ‘yardstick of equality’ was introduced and only to be departed from when there was a good reason for doing so. It is that principle upon which all financial cases are based today.
Farms and liquidity
Whilst a victory for equality the decision in White raises significant issues for farming cases. Judges have for many years found farming cases ‘difficult’. The farm is usually the family home, which means the division on divorce is difficult – it serves a dual purpose and may well need to be retained if the farming business is to continue successfully. There is generally extremely limited liquidity and a real risk that dividing or selling off land would cripple the business and or leave a financially weaker party with an illiquid asset that they might struggle to sell.
Whilst it is not a farming case, the issue of liquidity was addressed shortly after the decision in White in N v N [2001]. Mr Justice Coleridge was of the view that the equality principle in White might not result in the most beneficial outcome and that the nature of the assets had to be taken into account. He concluded that the House of Lords could not have intended that the court should strive to reach equality even if it meant crippling an entire family’s financial structure. He famously used the analogy of a goose that lays golden eggs – and that if the goose had to be taken to market for sale her egg laying ability should be damaged as little as possible in the process. The outcome in N v N was that the wife received 40 per cent of the total assets but over a number of years so that the husband’s business could continue to trade and retain its value to meet payments to her.
It’s a family affair
Almost all farming cases concern inherited assets – they are multi generational businesses. As well as being handed down through the generations there is often a strong desire for the farm to be retained intact to benefit the next generation. The case of P v P (inherited property) [2004] EWHC 1364 (Fam) concerned a 16 year marriage with 2 children. Both husband and wife worked on the farm that had been in the husband’s family for four generations. The wife sought an equal division of the assets worth approximately £2.5 million. £2.1 million of the assets were held solely by the husband and represented his inheritance. It was found that the wife contributed hard physical labour as well as administrative work on the farm and in addition she worked as a journalist to supplement the family income.
Despite this, her settlement was £575,000 which represented just over 25 per cent of the family assets. The court based this on the ‘overarching requirement of fairness’ on the basis that the bulk of the family wealth was represented by the inheritance from previous generations on the husband’s side and the fact that any higher award would require a sale of the farm. The court held that that would have devastating implications for the husband who told the court that he couldn’t envisage his life carrying on if he had to live and work anywhere else. The award was justified on the basis that it was deemed ‘enough’ to meet the wife’s needs.
P v P therefore appears to suggest that farming cases operate outside the principles established in White and that the focus will be needs rather than sharing if sharing means invading inherited capital, or the sale of a business.
More recently there are cases that demonstrate that this may not necessarily be a fixed principle. In D v D [2010] EWHC 138 (Fam) the husband owned the majority of a farming company established by his father in 1952. By 2009 the turnover was £6.84 million. The husband argued he should retain 100 per cent of the assets he had inherited. The court rejected the idea that the case should be treated differently simply because the business was a farm and held that there was no case law since White suggesting any automatic exception for farms existed. The outcome was that the husband retained control of the business but that the likely longer term success based on a recent £3 million investment should be taken into account – the wife was awarded the family home with a value of £950,000, a lump sum of £1.5 million, and maintenance of £44,000 a year.
In Y v Y [2012] EWHC 2063 (Fam) the court took a similar approach in a farming case. During a 26 year marriage the husband and wife had lived on an estate which had been part of the husband’s family assets since the 1940s and which the husband had inherited in 1983, before the couple were married. The wife was awarded £8.7 million in divorce proceedings. That equated to 33.5 per cent of the £22.9 million assets. The percentage took into account the origin of the assets but also what were described as the wife’s ‘sharing claims’ post White and the standard of living that the family had enjoyed. The court held that the sharing principle should apply to inherited assets where the facts dictated, and in contrast to the decision in P v P where the court decided that a sale would be a disaster for the husband, the award in this case was made knowing that it would in all likelihood result in the sale of some the husband’s inherited assets.
Farming cases and the future
Farms will always cause the family courts difficulty because of their very nature. The principles established in White 20 years ago are more difficult to apply where there are issues of inheritance and a lack of liquidity. The ‘yardstick’ of equality should perhaps be seen rather as a cross check against discrimination and creative ways need to be found to try to achieve a fair outcome for both parties in sometimes extremely difficult circumstances.