As has been widely reported in the press over the last few weeks, Bill Gates, the founder of Microsoft and his wife Melanie Gates announced they were getting a divorce. Mr. & Mrs. Gates are American, but had they been English, how would the Family Court of England and Wales deal with their financial separation?
Bill and Melanie Gates were married for 27 years and have 3 children. Bill Gates has, according to Google, an estimated net worth, prior to any financial separation with his wife, of $137 billion.
Needs or sharing?
In any divorce where a financial division cannot be agreed by the parties and the Court is required to consider the evidence and pass down a judgement, the starting point is to consider whether it is a ‘needs’ case or a ‘sharing’ case. In a ‘needs’ case there is likely to be limited assets, with just enough or even not enough to go round.
The court will always consider whether an equal split of the matrimonial assets is appropriate, but there are frequently reasons to depart from the principle of equality in such cases.
If there is more than enough capital to meet both parties’ capital needs, the starting point is that each party should share equally in the fruits of the matrimonial partnership. The ‘sharing’ principal applies to capital assets and pensions, not income.
Given the quantum of the assets owned by Bill and Melanie Gates, their case would certainly be a sharing case. The starting point would be to divide the capital and any pensions equally. As stated above, the sharing principle does not apply to income and a Maintenance Order in this case would be unlikely given the size of the assets. The court would expect both parties to utilise their capital to generate an income.
When considering the division of any divorcing couple’s assets, the court must consider Section 25 of the Matrimonial Causes Act 1973 which sets out the factors which a court needs to consider when dividing a family’s finances.
One of these considerations is the contributions which each of the parties has made or is likely in the foreseeable future to make of the welfare of the family (including any contribution by looking after the home or caring for family).
There is a presumption that the parties contributed equally to the marriage and there is no distinction between the ‘bread winner’ or the ‘home maker’. Where both parties work, the Court will not reward the spouse with the higher income because of his or her greater financial contribution.
Notwithstanding this, it can be argued in certain circumstances that one party has made ‘special contributions’ which would justify a departure from the principle of equality.
The issue of ‘special contribution’ was considered by the Court of Appeal in the case of Work -v- Gray in 2017.At the time of the Final Hearing the husband was 48 and the wife nearly 46. Both were born and brought up in America and began cohabiting in 1992, married in 1995 and having two children. The marriage ended in 2013. By the day of the financial remedy hearing, the husband had accumulated assets totaling in the region of £144 million.
The husband argued that he should be awarded 61% of the matrimonial assets relying on the court’s comments about ‘exceptional earnings’ in the previous cases of Miller -v- Miller and McFarlane -v- McFarlane, cases where two appeals on the same /similar basis were heard together in the Supreme Court. In those cases, Lord Nicholls considered that it would be a factor pointing away from equality of division of the assets of the family only where it was inequitable to proceed otherwise. Baroness Hale believed that only a special contribution to the welfare, not wealth, of the family should be considered.
The husband in Work v Grey argued that the court should consider the contribution of the party and not the qualities of the person making the contribution and consider whether such a special contribution was ‘matched’ by the other spouse. He further argued that his contribution had been so significant it would be inequitable and for the court to disregard it.
The wife opposed these arguments, arguing, amongst other things, that the concept of ‘special contribution’ was discriminatory as ‘more homemakers are women, and more moneymakers are men’. The wife also argued that the court should not take consideration as to whether the other party had ‘matched’ the claimed ‘special contribution’.
The Judge rejected the husband’s arguments that his ‘special contribution’ should apply and observed that whilst the concept of a special contribution remained valid, it was ‘confined to very narrow bounds’ but it was not discriminatory in practice. The courts must be satisfied that the ‘special contribution’ claimed reflects a “significant, substantive difference” in contribution by either party, which does not require extensive evidential investigation to prove.
The Judge also commented that the amount of wealth itself would not give rise to a special contribution and that the party raising the exception must demonstrate that it would be inequitable for the court to disregard disparity in contributions.
If Bill and Melanie Gates were divorcing in the English courts, it would certainly be open for Bill Gates to raise a ‘special contributions’ argument. After all, he founded the company which has dominated the computer operating systems market for decades.
Melinda Gates joined Microsoft in Product Development in 1987 and rose to become General Manager of Information Products. She married Bill Gates in 1994 but left the company in 1996 to concentrate on her family and the couple’s charitable work.
The court would need to hear evidence from both parties as to their contributions to the success of Microsoft to make a determine as to whether his contribution was of a ‘highly exceptional nature’.
The court may also have to consider whether Melinda should be compensated for giving up her employment to concentrate on her family and charitable work. Compensation is rarely a factor that the court will consider but it may be of some relevance in a case such as this.
We will of course never know what might have happened had the Gates’ been English, but one could speculate that there may be some departure from equality in Bill Gates favour if it was found that Bill Gates was primarily responsible for Microsoft’s global success.
This article was written by Michael Sheville, Partner in the Family Law Team. The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. Specific legal advice should be taken on each individual matter. This article is based on the law as of May 2021.