Topic: Family Law – divorce financial remedy

Q7 Claudia and Malcolm met in June 2014. Claudia currently works as a successful architect and has won awards for her pioneering designs. Until recently, Malcolm was an investment banker and whilst he was a high-earner Claudia has always earned more money. The parties married in February 2015.

Prior to marriage, there was discussion of signing a prenuptial agreement, but Claudia refused believing such contracts to be unromantic. In March 2015 they purchased a house in London worth £2.2 million pounds and enjoyed an extravagant lifestyle. In June 2015, Claudia received an inheritance of £750,000 from a distant relative and. owing to smart business moves. acquired shares in a tobacco company worth £1.2 million pounds.

In May 2016, Claudia gave birth to Zac. She returned to work shortly after the birth. The marriage started to experience difficulties throughout 2017 when Malcolm started gambling and living beyond his means. In January 2020, Malcolm was made redundant following a crash in the stock market.

In April 2020, the parties decided to divorce after Malcolm committed adultery with Bethan. However, neither Malcolm nor Claudia can settle on the division of assets. While not destitute, Malcolm is struggling financially and believes that all post-marital assets such as Claudia’s inheritance and shares in the tobacco company should be shared equally. Claudia rejects this suggestion believing that she should be entitled to most of the assets in light of her stellar contribution as an award-winning architect and owing to Malcolm’s foolishness in squandering his money. She also believes that the court should penalise Malcolm for committing adultery with Bethan.

Advise Claudia on how the court might divide the couple’s assets.

Instructions : Please write 1000 words. I have attached my notes on financial remedy in this file, please refer to my notes and please include more cases from my set of notes. You can make use of sub headings and please make the structure of the essay clear.

If financial remedy is not the set of notes needed to answer the question, please let me know instead which set of notes is needed from the below lecture schedule.

Lecture 2-4 : marriage and civil partnership – formalities and nullity

Lecture 5-7 : divorce and dissolution

Lecture 8-10 : financial remedy orders and prenuptial agreements

Lecture 11-13 : cohabitation

Lecture 14-15: children Act 1989, the welfare principle and paraental responsibility

Lecture 16-17: child arrangement orders

Lecture 18-19 : child protection

LECTURE OUTLINE

The Doctrine of Separate Property: The Married Women’s Property Act 1882

Separate Property versus Community of Property

The Operation of Financial Orders

The Statutory Framework

Embellishment of White v White [2000]

The Rationales of Financial Remedy Orders: Need, Compensation and Sharing

The Types of Orders the Court can Make: Financial Provision & Property Adjustment

The Principle of Clean Break

NB: The term ‘ancillary relief’ features heavily in this area and denotes the relief that is ancillary to a divorce petition. Following Rule 2.3 Family Procedure Rules 2010, the terminology has changed so that ancillary relief is now termed the making of ‘financial remedy orders’.

The Historical Property Consequences of Marriage

Historically, marriage had profound consequences on the legal capacity of the wife. This stems from the doctrine of unity of person. Upon marriage the husband and wife became one person (unsurprisingly, that person was the husband).

See G. Williams, ‘Legal Unity of Husband and Wife’ (1947) 10 Modern Law Review 16.

The rationale behind this was usefully summed up by William Blackstone in his Commentaries on the Laws of England 1765-1769:

‘The very being or legal existence of the woman is suspended during the marriage, or at least is incorporated into that of the husband…We may observe that even the disabilities which the wife lies under are for the most part intended for her protection and benefit. So great a favourite is the female sex of the laws of England’

The rationales behind this were paternalism, humanitarianism and protection of the wife.

By changing from a feme sole (single woman) to a feme covert (married woman) through the ceremony of marriage the following profound consequences occurred:

WIFE’S PROPERTY

  • All personal property, such as her earnings (pre- and post-marital), vested in the husband (known as her baron).
  • All real property including any profits vested in the husband who administered the property on her behalf. He could not sell it without her consent.
  • If the wife acquired property independently during the marriage it was vested in both the husband and wife but under the exclusive control of the husband.
  • If the husband died, the wife was only entitled to specific legacies for herself and her ‘paraphernalia’ (clothes and jewels).
  • The common law mitigated this by recognising dower (a life interest in one-third of a husband’s real property) coupled with the wife possessing a right to be supported or maintained according to the husband’s ‘estate or condition’. Problematically, claims to dower could be thwarted by the husband placing his land in the names of third parties and a wife’s right to be maintained was heavily restricted and difficult to enforce.
  • Equity tempered this situation further by recognising the wife’s separate estate in real property (her interest as a beneficiary under a trust could be dealt with directly by herself subject to restrictions known as ‘restraint on anticipation’).
  • Equity intervened later to protect a trust of personal property / savings.

WIFE’S ABILITY TO CONTRACT

  • The wife was unable make contracts in her own name (unless a local custom existed recognising the wife’s private capacity to trade).
  • Any contract made by a wife was void and could not be sued upon.
  • The wife could not sue or be sued in her own name – she had to be ‘joined’ by her baron in any legal proceedings.

WIFE’S CAPACITY IN TORT

  • If a wife committed a tort, the husband had to pay any compensation.
  • If a tort was committed against a wife, the husband had to bring the claim and any damages belonged to the husband.

See A. Hayward, ‘The Married Women’s Property Act 1882’ in R. Auchmuty and E. Rackley, Women’s Legal Landmarks: Celebrating 100 Years of Women and Law in the UK and Ireland (Hart, 2018)

The Doctrine of Separate Property

A fierce campaign for separate property reform occurred in the mid 19th century, particularly instigated by affluent married women who argued that they:

‘worked from morning till night to see the produce of her labour wrested from her and wasted in a gin palace’.

Incrementally the position changed. The Married Women’s Property Act 1870 made some inroads on the wife’s earning and capacity to retain them. The Married Women’s Property Act 1870 that enabled a woman to hold property for her separate use; yet a further Act was clearly required as it only related to a limited range of assets, namely, inter alia her earnings, savings bank deposits or real and personal property inherited by her through intestacy.

It was the Married Woman’s Property Act 1882 that forced marriage to no longer trigger the wife’s property to be transferred to the husband. It provided for a married woman to hold all the property brought by her to the marriage or subsequently acquired thereafter as her ‘separate property’. Combined with the husband’s common law duty to maintain, the Act enabled a married woman to possess for the first time the ability to acquire and dispose of all kinds of property ‘as if she were a feme sole [single woman] without the intervention of any trustee ’ (section 1).

In a similar vein because the wife had a separate estate she could form contracts herself and sue in her own name in tort. This was further echoed in s.37 Law of Property Act 1925:

‘A husband and wife shall, for all purposes of acquisition of any interest in property, under a disposition made or coming into operation after the commencement of this Act, be treated as two persons.’

The Significance of Separate Property

The concept of separate property is one of the foundations of property relations between husband and wife, along with the modern law governing the making of financial remedy orders. It has had an incredibly significant, perhaps damaging effect on legal progress.

The concept led Sir Jocelyn Simon in the 1964 Presidential Address of the Holdsworth Club entitled ‘With All My Worldly Goods…’ to famously and evocatively encapsulate the English position:

‘I invite you to accompany me to a village church where a wedding is in progress. The mellifluous cadences of the vicar’s voice fall hypnotically on the ear- “…honourable estate…mutual society, help and comfort…comfort her, honour and keep her…” Now he has reached the ceremony of the ring. The bridegroom bends a gaze of ineffable tenderness on his bride –“…with this ring…with my body…and with all my worldly goods I thee endow.” I hold my breath aghast. Will the vicar rend his cassock? Will he sprinkle on his head ashes from the ancient coke stove? Will he hurl the bridegroom from the chancel steps with imprecation and anathema? For the man has committed the most horrible blasphemy. In that holy place, invoking the names of the Deity, he has made a declaration which is utterly false. He is not endowing the bride with a penny, a stick, a clod. Nor does he intend to do so. And yet the service proceeds as if nothing untoward has happened. How does this come about?’

The answer is the doctrine of separation of property… throughout the marriage all property is held separately. Similarly all liabilities for debts are separate. Subject to restrictions on dealings with the matrimonial home, during the subsistence of marriage, both spouses can deal with property as they wish.

Separate Property versus Community of Property

With regard to ‘all my worldly goods I thee endow,’ England and Wales does not recognise what is termed a ‘community of property’ during marriage whereby ‘worldly goods’ can enter a communal pot which is then typically divided equally on dissolution. This is a standard property holding pattern during marriage in civil law jurisdictions.

As Cretney notes:

‘a matrimonial property regime is an institution unknown to English law’

The Supreme Court in Radmacher v Granatino [2010] UKSC 42 echoed this sentiment stating that the ‘[t]he system of separate property…remains the only matrimonial property regime applicable in the law of England and Wales’ (Lady Hale at [140]).

Community of property regimes are well established in civilian systems such as France and Germany. They are also recognised in other common law counties.

Cooke, Barlow and Callus define a ‘community of property’ in their proposal for a Community of Property in England and Wales:

‘Community of property is one example of a matrimonial regime: that is, the systematic organisation by the law of property rights that result as an automatic consequence of certain relationships – traditionally marriage and more recently registered partnerships. In its most traditional form, community of property provides for the automatic sharing of property and liabilities during the relationship; and all forms of community of property provide for a rule based sharing of property when the community is dissolved by divorce or death.’

The benefits of communities of property are numerous:

  • IDENTIFICATION OF ASSETS: The property that falls into the communal pot for subsequent 50/50 distribution is clearly specified.
  • DEFAULT PROTECTION: Most have default coverage and a tier of obligations that no derogation is permitted (known as the primary regime).
  • SELECTION OF COMMUNAL ASSETS: Parties can then elect a secondary community of property regime which will specify assets to be covered. If they fail to elect a secondary regime, a default one would be imposed.
  • PROTECTION OF AUTONOMY: Most importantly, parties can conversely oust the secondary regime through a marital contract i.e. prenuptial agreement thereby shielding particular assets from a claim on breakdown.
  • FLEXIBILITY: During the marriage parties can change the regime to adapt to changed social circumstances – most English family lawyers consider community of property regimes as rigid and structured but in reality they are quite dynamic.
  • COMMUNITY OF DEBTS: Communities of property do not merely allow the community of property but also debts would be placed into the communal pot.

Strictly speaking, England and Wales does not recognise a community of property providing a regimented and reasonably certain reallocation of assets on marital breakdown.

However, through judicial glosses and the absorption of prevailing societal trends as to the sharing of assets between spouses, the case law, discussed below, suggests that England and Wales might be moving towards a de facto ‘deferred community of property’. A deferred community of property is one that arises on relationship breakdown. It enables the parties to deal with their assets separately during the marriage but then upon breakdown the court can look at the entirety of the parties assets and reallocate them accordingly. Crucially, where there are surplus assets, the courts lean towards trying to ensure equal division.

This view is not widely accepted though – Baroness Hale noted in the landmark decision of Miller v Miller; McFarlane v McFarlane [2006] 2 AC 618 at para 151 that

‘We do not yet have a system of community of property, whether full or deferred’

The Operation of Financial Remedy Orders

Over time the maintenance obligation of the husband was strengthened and in 1963 capital provision (lump sum payments) was permitted. This was then extended by the Matrimonial Proceedings and Property Act 1970 to order property adjustment (recalibration of property rights).

Crucially, this could be done with regard to contributions made by each to the welfare of the family. Thus, no longer would the wife get a share merely on the basis of a financial contribution to the home but instead could acquire a share through her home-maker contributions. See Wachtel v Wachtel [1972] Fam 72.

The current provisions governing reallocation of assets on the breakdown of marriage are now found in Part II of the Matrimonial Causes Act 1973. They provide a ‘structured’ judicial discretion that is vast and virtually unfettered.  Similarly, Schedule 5 of the Civil Partnership Act 2004 has recreated this regime for the division of assets on the breakdown of a civil partnership.

When a court is exercising its financial remedy orders jurisdiction it must have reference to various elements. The resort to various sources makes the exercise very discretionary which has been accepted by the House of Lords as inherent in this adjudicative process. Even Lord Nicholls in White v White [2000] 2 FLR 981 sought to ‘identify’ and ‘spell out’ as clearly as possible the relevant principles yet conceded the sheer breadth of discretion utilised.

Over the years and owing to the fact that area is one of the most highly litigated areas of family law, the courts have embellished and manipulated the law governing the making of financial remedy orders in the most extreme manner.

The main sources are:

  • The Statutory Framework (s.21-40A MCA 1973, more specifically s.25)
  • The Embellishment from White v White [2000] 2 FLR 981: The ‘Yardstick of Equality’
  • Unifying concept of Fairness.
  • The ‘Rationales’ of Need, Compensation and Sharing

There is also recognition that whilst these principles have application to all cases there is a distinction drawn between EVERYDAY cases (i.e. parties possessing limited assets that may struggle to cater for both of their needs) and BIG MONEY cases (i.e. where the assets exceed the needs of both parties).

There is a strong incentive for parties to reach an out of court settlement (cost, absence of legal aid, acrimony) and various alternative dispute mechanisms can be used (arbitration, mediation, collaborative law). If an agreement is reached, the parties may jointly apply to a court for a judge to convert that agreement into a consent order (see below).

If the parties cannot agree, the case is contested. Parties must exchange financial particulars and then attend court for a directions hearing which determines what information is needed for the case to proceed. They return to court for a financial dispute resolution hearing before a judge. Normally this results in the parties settling. If they cannot settle it will go to a full hearing before a different judge. The process from start to finish normally takes about six months.

See E. Hitching, J. Miles and H. Woodward, ‘Assembling the Jigsaw Puzzle: Understanding Financial Settlement on Divorce’ [2014] Family Law 209.

The Statutory Framework

Sections 25(1) and (2) Matrimonial Causes Act 1973 lists the factors that the court can consider when working which of the orders are most suitable.

Lord Nicholls stated in Miller v Miller; McFarlane v McFarlane [2006] 2 AC 618:

‘The Matrimonial Causes Act 1973 gives only limited guidance on how the courts should exercise their statutory powers. Primary consideration must be given to the welfare of any children of the family. The court must consider the feasibility of a ‘clean break’. Beyond this the courts are largely left to get on with it for themselves. The courts are told simply that they must have regard to all the circumstances of the case.

Of itself this direction leads nowhere. Implicitly the courts must exercise their powers so as to achieve an outcome which is fair between the parties. But an important aspect of fairness is that like cases should be treated alike. So, perforce, if there is to be an acceptable degree of consistency of decision from one case to the next, the courts must themselves articulate, if only in the broadest fashion, what are the applicable if unspoken principles guiding the court’s approach.’

Despite its ambiguity, s.25 is regarded as one of the most fundamental and important legislative provisions for family lawyers.

The discretion is incredibly broad as this list is non-exhaustive; other factors can be taken into account if deemed relevant. As s.25(1) states:

‘It shall be the duty of the court in deciding whether to exercise its powers under section 23, 24 or 24A above and, if so, in what manner, to have regard to all circumstances of the case’

This means that the court’s exercise is holistic enabling a consideration of all relevant factors. Before accessing the non-hierarchical list of factors in section 25(2), the must have regard to section 25(1) (replicated in Schedule 5 para 20 CPA 2004 for civil partners):

‘first consideration being given to the welfare, while a minor, of any child of the family who has no attained the age of eighteen’

The interests of the child are important, but they are not the ‘paramount’ consideration like they are when we are dealing with orders governing the upbringing of the child under the Children Act 1989 (this is known as the ‘paramountcy principle’). This was introduced in the Matrimonial and Family Proceedings Act 1984. See Suter v Suter and Jones [1987] Fam 111 emphasising the child’s welfare is not the overriding consideration but naturally is a weighty consideration.

Thus, the interests of the child are the ‘first consideration’ but the key issue is the economic result between the divorcing parties themselves. As Baroness Hale noted in Miller / McFarlane, the ‘security and stability of children depends in large part on the security and stability of their primary carers’.

The court must also have regard to s.25(3) which lists further factors to take into account where children are present such as the ‘financial needs of the child,’ ‘any physical or mental disability’ or the current financial resources of the child.

Whilst child support obligations are a separate issue, you cannot completely sever the interests of the child from those of the parents.

Interests of the child relate to ‘children of the family’, defined in s. 52 MCA 1973, thus children who have lived with the divorcing spouses and are naturally below the age of majority.

The section 25(2) factors are as follows:

…the court shall in particular have regard to the following matters:

(a)                    ‘the income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future, including in the case of earning capacity any increase in that capacity which it would in the opinion of the court be reasonable to expect a party to the marriage to take steps to acquire’ (s.25(2)(a) MCA 1973)

This is looking at the entire economic position of the parties both during the marriage and after the marriage. Legal or equitable entitlements to property will be considered and some degree of speculation is permitted, for example, the court will take into account the potential for one spouse to lose their job or the fact that, with training, another spouse could increase their earning potential.

Full, frank financial disclosure is essential – see Young v Young [2013] EWHC 34 and, more recently, Sharland v Sharland [2015] UKSC 60; Gohil v Gohil [2015] UKSC 61. Hiding assets may result in a costs order against the wrong-doer or, in extreme cases, can be taken into account as conduct that was inequitable to disregard under s.25(2)(g) (see F v F (Ancillary Relief: Substantial Assets) [1995] 2 FLR  45). The courts may also assume a party has an asset which they have failed to disclose or reverse transactions attempted to defeat the making of financial remedy orders.

As England and Wales does not have a community of property regime which could permit ring-fencing, ‘financial resources’ encompasses ALL of the parties’ assets. (See H v H (Financial Provision) [2009] 2 FLR 795).

The Potential for Exclusion of Assets and Recognition of Matrimonial versus Non-Matrimonial Property

The controversial position here is where assets:

  • were acquired prior to the marriage (for example the dynastic family home) (see Mills v McCartney [2008] Fam. Law 507)
  • were acquired through an inheritance (see B v B (Ancillary Relief) [2008] 1 FCR 613)
  • were acquired after separation (see Rossi v Rossi [2006] 2 FLR 1482 and H v H (Financial Provision) [2006] 2 FLR 1482)

Theoretically, these assets would be ‘up for grabs’ but there are ways of trying to exclude this asset – the argument here would be that the spouse independently brought this property to the marriage and therefore it would not be fair to put it into the pot for distribution.

Firstly, in everyday cases with ‘needs’, the source of the asset will be acknowledged but it can be disregarded to cater for party needs. Thus, the dynastic home can be sold if needs require it.

However, in Big Money cases, the courts have started to recognise that some assets may be non-matrimonial. Whilst the courts can disregard title to property, numerous cases have suggested, most notably Miller v Miller; McFarlane v McFarlane [2006] 2 AC 618,that some assets are marital (and by implication, others, non-matrimonial thus can be excluded from any prospective division). See Baroness Hale and Lord Nicholls in Miller/McFarlane but note the different interpretations of ‘marital assets’ or ‘family assets’ further explored in Sharp v Sharp [2017] EWCA Civ 408 (the wife’s bonuses generated during the marriage were deemed ‘unilateral assets’ and thus ‘non-matrimonial property’ consistent with Baroness Hale’s approach in Miller).

There are two approaches that can be discerned:

  • One approach will state that if party needs have been satisfied, one party may receive a slightly larger share representing half the assets under the sharing exercise PLUS the non-matrimonial property. So non-matrimonial forms part of the assessment of sharing. See Charman v Charman [2007] EWCA Civ 503, Robson v Robson [2010] EWCA Civ 1171 and Y v Y (Financial Orders: Inherited Wealth) [2012] EWHC 2063. This may align with the views of the Law Commission emphasising that non-matrimonial property is not exempt from sharing.
  • The other approach would view non-matrimonial property as something that shouldn’t form part of the sharing exercise (it has a distinct quality). See Jones v Jones [2011] EWCA Civ 41 that excluded non-matrimonial from the sharing exercise but recognised that, IF there are needs, the non-matrimonial asset can be accessed.

However, confusingly, the courts recognise that the importance attached to the source of an asset can diminish over time. So after a lengthy marriage, distinctions between what is marital and non-marital break down. See K v L [2011] EWCA Civ 550. More recently, courts have questioned whether a clear distinction between these types of property can be maintained – Hart v Hart [2017] EWCA Civ 1306.

This trend towards recognising non-matrimonial property must be explored alongside the judicial movement towards recognising prenuptial agreements (which, if followed, would enable parties to ‘ring-fence’ assets).

(b)                   ‘the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future’ (s.25(2)(b) MCA 1973)

This is the big factor in financial remedy order cases and it usually drives the court’s exercise of discretion, particularly in everyday or low money cases. See Dart v Dart [1996] 2 FLR 286

Before 1984, this aspect was linked to the ‘minimal loss principle’ which told the courts to keep the parties in the financial position in which they would have been if the marriage had not broken down. This gave the idea that financial obligations endured after the relationship had terminated and was antagonistic to the clean break principle (see below). This was removed by the Matrimonial and Family Proceedings Act 1984 and instead ‘needs’ were emphasised and as will be shown below this has become the key issue in these cases.

However, to talk of ‘need’ also seems quite unusual when the courts are adjudicating on the ‘big money’ cases (such as Charman v Charman (No 4) [2007] EWCA Civ 503).

Needs focus on the economic requirements of the parties and mostly will concern where the parties will live. For example, a particular distribution of assets may mean one of the spouses has no place to live or will fall onto state support; in this instance, the court may transfer financial resources to the spouse ‘in need.’

The problem with need is that it’s variable and the courts bring their own perspective on what ‘need’ is.

It’s very controversial – Baroness Hale in Miller v Miller; McFarlane v McFarlane [2006] 2 AC 618 wanted to confine ‘needs’ to those generated directly from the marriage, whereas the statutory provision is clearly broader.

Financial obligations would include any debts that the parties currently have or school fees for dependant children.

(c)                    ‘the standard of living enjoyed by the family before the breakdown of the marriage’ (s.25(2)(c) MCA 1973)

This is a very controversial factor and generally applies to the ‘big money’ cases. The media particularly latches onto this aspect often comparing extravagance with the real ‘needs’ of most divorcing parties.

If a party became accustomed to quite an extravagant lifestyle then the court can take this into account when looking at their needs. See G v G [2012] EWHC 167.

So if, for example, a footballer’s wife was accustomed to spending £25,000 on shoes during a marriage, then the court would take that into account and set aside that amount to satisfy her ‘reasonable requirements’ (needs). See Preston v Preston [1982] 1 All ER 41.

As a rule the shorter the marriage, the less accustomed you become to a standard of living and therefore cannot argue perpetuation of that high standard. See Lady Hale in Miller / McFarlane on the transition towards independent living. Also note that the standard of living is not to be perpetuated for life – there is no expectation that a particular standard will always be maintained (see BD v FD [2016] EWHC 594).

(d)                   ‘the age of each party to the marriage and the duration of the marriage’ (s.25(2)(d) MCA 1973)

Age is an issue that the court analyses when exercising its discretion, particularly as it factors into the future i.e. whether the parties can re-enter the labour market.

The duration is quite important and the courts have extensively generated principles through the case law.

If the marriage is short, the court will be less inclined to make an award as the potential for pooling assets is decreased. But see Miller v Miller [2006] 2 AC 618 where a three year marriage generated a £5 million award. More recently, Sharp v Sharp [2017] EWCA Civ 408, McFarlane LJ affirms that the sharing principle may need to be modified in short, childless, two career marriages with limited pooling.

If the marriage is of a longer duration, the courts will be more inclined to utilise an equal division.

The court will also take into account any cohabitation prior to marriage, if it progressed directly into marriage (see GW v GW [2003] EWHC 611). In particular, any assets accrued during this period can be considered (often not under this limb though but under all the circumstances of the case – see Co v Co [2004] 1 FLR 1095 and Kokosinski v Kokosinski [1980] 1 All ER 1106).

(e)                    ‘any physical or mental disability of either of the parties to the marriage’ (s.25(2)(e) MCA 1973)

This is straightforward – if one of the spouses needs constant medical attention or supervision then this will be factored into the court’s award.

It does not sit comfortably with the dicta from Baroness Hale in Miller v Miller; McFarlane v McFarlane [2006] 2 AC 618 suggesting that ‘need’ must stem from the marriage itself.

(f)                    ‘the contributions which each of the parties has made or is likely in the foreseeable future to make to the welfare of the family, including any contribution by looking after the home or caring for your family’ (s.25(2)(f) MCA 1973)

The contribution that is relevant is one that goes to the welfare of the family. This is an important feature and it strongly highlights the difference in treatment between married couples and cohabitants.

Home-making services and child-care are crucial considerations in financial remedy order cases, whereas for cohabitants and in the context of trusts of the family home, they play a near non-existent role (particularly in relation to acquisition of a beneficial interest). The rationale for this different treatment in the marital context is the non-discrimination principle adopted in White.

‘Rare White Leopards’ Special or Stellar Contributions?

One of the most litigated areas under this heading is found in the ‘big money’ cases and centres on the concept of ‘special’ or ‘stellar’ contribution. It is premised on the breadwinner arguing that they made an ‘exceptional’ contribution, which justifies them being awarded more of the assets once needs have been met.

It was accepted in Cowan v Cowan [2001] 2 FLR 192 and Sorrell v Sorrell [2005] EWHC 1717 (Fam), [2006] 1 FLR 497 but questioned by the Court of Appeal in Lambert v Lambert [2003] 1 FLR 139. Miller v Miller; McFarlane v McFarlane endorsed Lambert saying that home-maker contributions must be treated the same as bread-winner contributions.

For consideration of special contribution in a ‘huge’ money case see Charman v Charman (No 4) [2007] EWCA Civ 503 and for the biggest financial award ever reported see Cooper-Hohn v Hohn [2015] 1 Fam Law 124 (a husband with assets between $1.3-1.6 billion). More recently see XW v XH [2017] EWFC 76 where the husband’s argument of special contribution was accepted.

(g)                    ‘the conduct of each of the parties, if that conduct is such that it would in the opinion of the court be inequitable to disregard it’ (s.25(2)(g) MCA 1973)

This has a very high threshold – attempting to murder the other spouse would invariably reduce an award (it is rare for the conduct to bar entitlement to an award completely). See Kyte v Kyte [1988] Fam 145, Clark v Clark [1999] 2 FLR 498 and H v H (Financial Relief: Attempted Murder as Conduct) [2005] EWHC 2911.

It has to be conduct that would be inequitable to disregard or as the case law has stated it must be ‘gross and obvious’ – simply committing adultery or mere misconduct would not engage this provision. In S v S [2006] EWHC 2793 it was termed the ‘gasp’ factor. Conduct was recognised in Bloom v Bloom [2017] EWFC B109.

Interestingly, it is one of the routes in which a prenuptial agreement is considered. 

(h)                   ‘in the case of proceedings for divorce or nullity of marriage, the value of each of the parties to the marriage of any benefit which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring.’ (S.25(2)(h) MCA 1973)

This covers loss of entitlements or benefits that would have otherwise occurred. The main focus of this provision is pension rights.

White v White [2000]: The ‘Yardstick of Equality’

The statutory framework is not the only source of inspiration when a court uses its discretion.

After the minimal loss principle was abolished in 1984, catering for the needs of the parties became key. For a low money case, need would be satisfied by channelling assets to the primary carer (and any children). However, for a big money case, to talk of needs would be odd and a home-maker would only be able to receive a relatively small amount of assets. For example, various cases evidenced the clear discrimination between the bread-winner and the home-maker:

  • Dart v Dart [1996] 2 FLR 286 – the husband was worth between £400 million to £800 million and the wife was awarded £9 million (see also Trippas v Trippas [1973] Fam 134.
  • Conran v Conran [1997] 2 FLR 615 – the husband was worth £85 million and the wife received just under £10 million.
  • A v A [1998] 3 FCR 421 – husband was worth £200 million and the wife was awarded £4.4 million after a 14 year marriage.

The House of Lords in White v White [2000] 2 FLR 981 provided a landmark decision. It destroyed the concept of ‘reasonable requirements’ and attacked the discrimination of typecasting the husband as bread-winner and wife as home-maker. To avoid discrimination, the House of Lords stated that any potential award must now be held up against the ‘yardstick of equality.’

This was a new gloss on s.25 and was generated by the social trend of perceiving marriage as a partnership. As Lord Nicholls stated:

‘In seeking to achieve a fair outcome, there is no place for discrimination between husband and wife and their respective roles. Typically, a husband and wife share the activities of earning money, running their home and caring for their children. Traditionally, the husband earned the money, and the wife looked after the home and the children. This traditional division of labour is no longer the order of the day. Frequently both parents work. Sometimes it is the wife who is the money-earner, and the husband runs the home and cares for the children during the day…If, in their different spheres, each contributed equally to the family, then in principle it matters not which of them earned the money and built up the assets. There should be no bias in favour of the money-earner and against the home-maker and the child-carer.’

This is not to introduce the idea that the courts will always make 50/50 awards – it is not suggesting equal division as the template and invariably equal division is statistically rare.

Lord Nicholls further supported his views expressed in White in the later case of Miller v Miller; McFarlane v McFarlane [2006] 2 AC 618 stating that ‘discrimination is the antithesis of fairness.’

Crucially, Lord Nicholls argued that if there was to be a presumption of equality or an automatic 50/50 split then it was for Parliament to create and not the courts. His yardstick was merely a ‘referencing technique’ whereby a court would ‘use equality as a form of check.’

This is another controversial concept and for most marriages, equal division would represent a fair distribution of the assets. However, it is not a concrete rule and can be displaced (see below).

A Unifying Concept of Fairness

Lord Nicholls in White v White [2000] 2 FLR 981 further stated that the motivating force behind the court’s exercise of its MCA discretion should be ‘fairness’ and that to produce a fair outcome ‘all the circumstances of the case must be taken into account.’

‘Stated in the most general terms, the answer is obvious. Everyone would accept that the outcome on these matters, whether by agreement or court order, should be fair. More realistically, the outcome ought to be as fair as is possible in all the circumstances. But everyone’s life is different. Features which are important when assessing fairness differ in each case. And, sometimes, different minds can reach different conclusions on what fairness requires. Then fairness, like beauty, lies in the eye of the beholder.’

Owing to the nebulous and inherently subjective nature of ‘fairness’ an endorsement that this is the overarching rationale of ancillary relief is not very helpful.

Lord Nicholls again continues this line of argument in Miller v Miller; McFarlane v McFarlane but concedes the problems of using fairness:

‘Fairness is an elusive concept. It is an instinctive response to a given set of facts. Ultimately it is grounded in social and moral values. These values, or attitudes, can be stated. But they cannot be justified, or refuted, by any objective process of logical reasoning. Moreover, they change from one generation to the next. It is not surprising therefore that in the present context there can be different views on the requirements of fairness in any particular case.’

The Rationales of Needs, Compensation and Sharing

Transposed on top of the statutory framework, the ‘yardstick of equality’ and the overarching concept of fairness are various ‘rationales’ or ‘strands’. They are known as:

  • Needs
  • Compensation
  • Equal Sharing (linked to the ‘Yardstick of Equality’)

Some argue that they are embodied in the statutory provisions, others view them as embellishments. For example, the House of Lords in Miller v Miller; McFarlane v McFarlane [2006] 2 AC 618 states that catering for party needs and equal sharing generates a ‘fair’ outcome.

Needs

This is a difficult concept – does it refer to needs generated by the marriage or to needs that are extraneous to the marriage? In everyday cases, the matter starts and ends with this consideration as often there are not enough assets.

Sharing

This is based on the yardstick of equality but in Charman was elevated higher than merely a check. The issue is what assets should be shared?

Compensation

This is the most difficult principle and is the hardest to apply. It is centred on the concept that the marriage arrangement (perhaps looking after children and missing career opportunity) generated an economic imbalance to which the affluent party must compensate. It is based on the risks that parties take when structuring their lives and the responsibility they share for the consequences of taking those risks.

It was accepted in Miller v Miller; McFarlane v McFarlane but has only been applied in a small number of cases like H v H (Periodical Payments: Clean Break) [2014] EWHC 760. Indeed, in SA v PA (Compensation) [2014] EWHC 392, it was said to only apply in exceptional cases and it even suggested it would apply only if the career ‘given-up’ was equally as lucrative as that of the breadwinners. Similarly, the high earning career that has been ‘given up’ must be established to have existed for some time.

An award on this basis can also be side-stepped, as seen by cases before SA – for example, an award based on needs can be particularly generous which, in effect, compensates a party (see VB v JP [2008] EWHC 112). However, the House of Lords in Miller/McFarlane suggests that compensation is a separate element.

Many judges, practitioners and academics view it as a redundant concept believing that it should be incorporated into a needs-based analysis.

Applying Needs, Compensation and Sharing

Probert and Miles have critiqued the courts exercise of discretion looking at the recent House of Lords’ decisions and stated:

‘Three bases for reallocation were articulated: need, compensation and sharing. From a theoretical perspective this proliferation poses a problem in that each of the bases presupposes a slightly different model of marriage; from both a practical and theoretical perspective there is a challenge of deciding whether, and if so when, needs should take precedence over sharing and how compensation fits into the courts assessment.’

Based on established cases and expressed at a generalised level, the current trend in ancillary relief appears to be:

  1. Try to achieve equal division to fairly give effect to ‘partnership’ between the spouses (but recognise there is no starting presumption of 50/50).
  2. If there are party needs, satisfy those party needs and rebut equal division (in all cases, whether big money or small money).
  3. If there are no party needs, again seek to apply equal division.
  4. If equal division fails to compensate a party who has made particular sacrifices (earning capacity / career prospects), apply unequal division.

Orders Available

The orders that a court can make are numerous and illustrate of the scope in which a court can reallocate assets. Here is a brief outline of the three main types of orders (other orders exist and are outside the scope of this course).

FINANCIAL PROVISION ORDERS

  • Lump Sum Payment (known as a Lump Sum Order (LSO))

One party may be compelled to provide a lump sum payment to the other. This can be staggered which makes it look like a periodic payment but all of the payments must be included within the order. However because the lump sum is fixed, a triggering event such as remarriage would not stop its operation (contrast the position with a periodic payment).  Section 31(1) MCA enables the court to vary or discharge an order regarding the payment of instalments.

Example: Husband pays £100,000 to the wife. Once wife has claimed that, no further financial provision is allowed.

Example: Husband pays £100,000 to the wife but in instalments of £20,000. Once the wife has claimed £100,000 the financial provision ends (this is a staggered LSO).

  • Periodical Payment (known as a Periodic Payment Order (PPO))

These orders are similar to maintenance – they enable the court to compel one party after the breakdown of marriage to make periodic payments to the other, normally monthly. They are calculated by reference to the recipient’s needs and the ability for the respondent to pay.

Example: Wife pays £1,000 a month to the husband.

The term may vary. It can be a specified term, or rarely, for the duration of the lives of the parties (known as a joint lives order). It can also be capped i.e. non-extenable using s.28(1A) MCA.

Triggering events apply whereby the right to periodic payments is lost, for example remarriage of the party in receipt of the periodic payment.

This PPO can be secured (i.e. attached to a particular asset so in the case of default the asset can be sold, for example shares or a trust fund) under s. 23(1)(b) or unsecured.

PROPERTY ADJUSTMENT ORDERS

These orders recalibrate property and focus on the ‘capital’ aspect of the affected property.

The main order is a transfer of property order which enables the court transfer most often a beneficial interest in the matrimonial home to another party (s.24(1)(a) MCA). The other type is a settlement order under s.24(1)(b) MCA settling the property concerned on trust for the parties.

Equally personal property is covered so the court can transfer title to a chattel such as a painting over to the other party. 

They are often subject to a ‘trigger’ meaning that if a certain event happens, certain consequences follow in relation to the property. These could be death, remarriage or cohabitation of the occupier of the property concerned. Another example, known as a Mesher order, enables a party to live in a property until the triggering event of the youngest child reaching 18 (named after Mesher v Mesher and Hall [1980] 1 All ER 126.

PROPERTY SALE ORDERS

Under s.24A Matrimonial Causes Act 1973, the court has the ability to order sale of property which will then allow the parties to take the proceeds of sale through a lump sum order (LSO). They work in conjunction.

This is commonly used where the matrimonial home is the only valuable asset the parties own and it needs to be sold to redistribute wealth. 

The Principle of Clean Break

The court is statutorily required to consider whether to make a clean break order. They are not presumptions in favour of clean break and should only be used where the facts warrant their use (see SRJ v DWJ (Financial Provision) [1998] EWCA Civ 1634.

If they decide to make one, the court will insert a clause into a financial remedy order thus terminating further claims. This order acts as a bar to parties which prevents them subsequently unpicking orders and trying to have continued financial support after divorce. It is not possible to have a clean break order in relation to an obligation to support children (see Crozier v Crozier [1994] Fam 114)

It was introduced in 1984 and is important owing to the difficulties of enforcing continuing financial obligations after marriage. It fosters an idea of moving on and ‘beginning a new life.’ It’s an order that severs the financial ties between parties however will not affect child support obligations.

It is comprised of various elements:

  • Section 25A(1) forces the court to consider terminating financial obligations between the parties.
  • Section 25A(2) encourages the court set a time limit for periodic payments.

There are other powers to block parties coming back to court to renegotiate settlements. This practice is controversial as seen recently in the Supreme Court decisions in Wyatt v Vince [2015] UKSC 14 and Mills v Mills [2018] UKSC 38.

Type of service-Academic paper writing
Type of assignment-Essay
Subject-Law
Pages / words-4 / 1000
Academic level-Undergraduate
Paper format-OSCOLA
Line spacing-Double
Language style-UK English

get essaywriters

Related Post