Family Law

Family Law

How are capital assets and future income to be divided between spouses on marriage breakdown?

In the vast majority of cases involving matrimonial finances there are limited resources available. The court tries to ensure that those resources are distributed between the parties in the best way possible to reduce the financial hardship of divorce.

One of the effects of the 1973 Matrimonial Causes Act was the emphasis upon assessment of the parties ‘reasonable needs’, principally for accommodation, in determining the appropriate division of assets.

However that approach was challenged in 2000 by the House of Lords in the case of White v White. Here, Mr & Mrs White had built up a farming business with assets of 4.6 million over 33 years of marriage. The contributions by Mrs White were non-financial – in the main she stayed at home to look after the children and the family home. Mr White was the breadwinner. Initially, Mrs White was awarded £800,000 for her ‘reasonable needs.’ She appealed, arguing that she was entitled to more and that there should be no room for discrimination between Husband and Wife and their respective roles. This argument was accep0ted by the law lords and their ruling thus emphasised the principles of equality and fairness. Equality became the new yardstick.

In February of this year, The President of the Family Division, Sir Mark Potter, said that whilst in most ordinary cases the yardstick of equality applied in the splitting of assets, this approach was undesirable in the cases of the very wealthy. He stated that guidance was needed from the House of Lords on just how to split the assets in big money cases. His comments came as two landmark cases, Miller v Miller and McFarlane v McFarlane were being appealed at the House of Lords.

In Miller, the parties were married for just 2 years 9 months. There were no children and all the wealth had been brought into the marriage by Mr Miller. Mrs Miller gave up her £85,000 per annum job just after the wedding. Mr Miller’s asset management firm accrued a fortune of some £18 million during their short marriage. Following Mrs Miller’s claim to have played a vital role in ensuring the success of the company, she was awarded, without explanation, a settlement of £5 million. This was challenged by Miller who claimed that the settlement was excessive and that his wife, then aged 35, could easily resume her former earning capacity in any event. The Court of Appeal rejected his argument and ruled that by marrying her, Mr Miller had given his wife a reasonable expectation that her life as once again a single woman need not revert to what it was before her marriage. Mr Miller, describing his wife as a ‘spendthrift termagant’ made a further appeal to the House of Lords. The ruling from the law lords is imminent and is expected to clarify the law relating to the division of assets in big money cases.

At the same time as Miller, the House of Lords heard the appeal of Mrs McFarlane, which concerns her claim for a share of her husband’s future earnings. In this case, the Husband’s wealth was in the main from his £750 000 per year income. There were insufficient assets available for division to effect a clean break. Mrs McFarlane had given up her legal career to raise their 3 children and she claimed that as she helped her Husband establish his earning power she was entitled to share its benefits. The Court at first instance awarded Mrs McFarlane £250 000 per year for life, as well as the 1.5 million family home. On Mr McFarlane’s appeal to the High Court, the wife’s award for future income was reduced to £180,000 per year for life. The Wife appealed this decision and the court of Appeal reinstated the sum of £250 000 per year but limited to a period of 5 years only. She made a further appeal to the House of Lords arguing that her share of her husband’s future income should be for life. The ruling is currently awaited and should provide clear guidance in determining future earnings claims.

Printed with the kind permission of the East Anglian Daily Times