Inherited shares excluded from matrimonial property after separation
Background
In this case, the wife had inherited a substantial portfolio of shares from her late father shortly before the parties married. The shares remained registered in her sole name, and no part of the capital was used during the marriage. However, the income from dividends was used to meet general household expenditure.
Upon divorce, the husband argued that the income use amounted to conversion of the shares into matrimonial property, or that fairness required their inclusion in the overall asset calculation.
Key legal issues
The question before the Sheriff was whether the inherited asset had become matrimonial by reason of its treatment during the marriage. This engaged the provisions of section 10(4) and the broader equitable principles of section 9.
The case also raised the issue of whether income derived from excluded property can result in the underlying capital becoming divisible on divorce.
Decision
The Sheriff rejected the husband’s claim. It was held that although the income from the shares had been used for joint purposes, this did not in itself alter the character of the asset. The shares had remained intact, had not been placed into joint names, and no part of the capital had been converted into another asset.
The court accepted that the wife had made voluntary contributions from her excluded asset and noted that the husband had not suffered any economic disadvantage requiring compensation. A modest capital sum was awarded to reflect the fair division of other jointly acquired assets.
Conclusion
The case reinforces the principle that inherited property remains excluded unless it is expressly or impliedly converted into matrimonial property. Practitioners should note the distinction between capital and income, and advise clients accordingly when considering the potential consequences of using excluded assets for family spending.