McFarlane v McFarlane: A Divorce Seesaw

Stowe Family Law | 23 Jun 2009 9

Ivana Trump said, famously: “Don’t get mad. Get everything!” It appears that Julia McFarlane, the former wife of high-flying accountant Kenneth McFarlane, has taken these words to heart.

The judgment in the latest installment of the never-ending divorce saga that is McFarlane  v McFarlane, (2009 EWHC 891) landed on my desk yesterday morning. A judgment from Mr. Justice Charles, it is characteristically lengthy. Thirty-five pages in length, it takes a long time to read . It takes even longer to consider the meaning and impact, this judgment being his Lordship’s interpretation of what the House of Lords may have had in mind (but never expressly stated) by a “deferred clean break”, payable at some stage in the future, by Mr McFarlane to his former wife.

I was in two minds whether to write about the latest twist; after all, what relevance does any of it have to those of us who live relatively modestly in the real world? However, this case has wider implications. It reminds me of a seesaw. On one end: the stay-at-home wife and her children. On the other: the working wife and her children. In the middle, sliding from one end to the other: the husband. Does English family law substantially favour the stay-at-home wife, at the working wife’s expense? Does it curtail a second wife’s freedom to leave her job and become a stay-at-home mum?

Let me explain.

The McFarlanes litigated themselves all the way to the House of Lords in their original divorce. They split their capital roughly 50:50. Both came away with about £1.7 million. Both purchased substantial properties for more than £2.5milllion apiece.

In Europe the wife’s claims would have ended there. In England and Wales, however, Mrs McFarlane’s income needs still had to be met – and at the time there was insufficient capital to provide a clean break divorce. (NB. If any case shows how important it can be for a husband to try and obtain a clean break settlement in his divorce, it is this one!)

The divorce was dragged through four courts, yielding various decisions about the ongoing maintenance to which Mrs McFarlane was entitled. Her actual needs were estimated at £150,000 – £180,000 per annum. However the final arbiter, the House of Lords held that, as she had given up her career as a solicitor to care for the couple’s three children, she should receive more in recognition of her lost earning capacity. The House of Lords confirmed a higher award of £250,000 per annum, substantially in excess of her needs – with no cut-off point.

The words “relationship-generated disadvantage” became a buzz-phrase, until Mr Justice Coleridge pointed out that the phrase did not actually exist in statute. This prompted the President of the Family Division to issue a clarification in which he made it clear that in big money cases, the issue of “relationship-generated disadvantage” would arise simply as a strand or element of fairness. Precisely!

Mr McFarlane has remarried, to a partner at his accountancy firm. They have a son, who is now three years of age. Mr McFarlane’s career has continued to flourish. In 2007, one year after the House of Lords’ judgment, his former wife issued an application to the court for increased maintenance for the children, who are now aged between 13 and 20. She subsequently applied for an increase for herself and capitalisation of her maintenance claims. Last week the judgment was handed down…

The court has a duty to consider if a clean break is possible; if so it can, if it wishes, order payment over a term of years after which a clean break will occur. That is what Mr Justice Charles did, but he made an order to fund an eight-year, deferred clean break, all payable out of the former husband’s post-divorce income – to which his second wife contributes, and his first wife does not.

From 25 June 2007 (when Mrs McFarlane issued her original application for an increase), Mr McFarlane must now pay his former wife:

40% of his net income up to £750,000

20% of his net income up to £1 million

10% of his net income thereafter, until 31 May 2015 when maintenance stops and Mr McFarlane retires.

The judge calculated that this would give Mrs. McFarlane an unearned tax free income just shy of £350,000. As he backdated the award by two years, there will be the differentials to pay for those two years as well. In eight years’ time she could have received around £2.5 million.

What a whopping award! It makes you wonder why Mr McFarlane doesn’t just throw in the towel and live off his second wife’s income. It also makes you wonder how hard it is to earn this kind of money – and if this is sufficiently appreciated by the court. It certainly doesn’t grow on trees if all those professionals I represent or see on trains and planes, sweating profusely, banging on laptops, e-mailing and making non-stop mobile calls on a 24/7 basis are anything to go by!

From now on, the first Mrs McFarlane must have one of the highest unearned, tax-free incomes in the country. It amounts to £200,000 more than her needs as found by the Court.

So I ask myself the question: is the carve-up of Mr McFarlane’s income truly representative of “fairness”? Is this what the House of Lords intended? I ask this because in the same case, the High Court and the Court of Appeal were far less generous to Julia McFarlane. I must say, I find it hard to see why there should have been an adjustment in the current payments.  The wife’s compensation claim is one strand in the element of fairness.

Turning back to the seesaw: we must not forget the very substantial contribution of the second wife to Mr McFarlane’s post-divorce income, running the home and – as the judge acknowledged – taking on the brunt of the couple’s childcare while holding down her top-flight job as a senior partner at Deloitte.

I am certain that many first wives will rejoice at the huge financial success of one of their number. No doubt there is considerable sympathy for a wife who has been abandoned with children, and relatively little sympathy for the second wife. But several years ago the first Mrs McFarlane came out of the marriage very well, financially. She has now done even better, long after the divorce. One may feel that by now, she could – and should – be providing far more appropriately for her own future, off her own bat.

Second wives are frequently castigated by the first family, and are frequently left to bear the brunt of the marital breakdown alone. The husband sits helplessly in the middle of the seesaw. Second wives have complained to me that their husbands never overcome the guilt of leaving their first wives. Instead, these men allow themselves to be turned into tireless “dogsbodies”, to try and demonstrate to the world that they are nice guys after all. Meanwhile, first wives complain that these men are under the thumbs of their second wives and do not pay as much as they should to them and their children.

In many cases, the second family’s standard of living slips. The pressure to keep earning, to keep two families living well on one income means that a second wife can have no choice but to keep working. Her desire to stay at home and look after children can be thwarted by the large monthly payout to the other household. The resulting bitterness, pressures and remonstrations – “why is she doing nothing with her life, when I’m working like this to keep them in luxury?” – can destabilise even the strongest second marriages.

I wouldn’t dream of denying Mrs McFarlane her fair share. However from a personal perspective as a working wife and mother, who has always contributed to the family budget, overall I believe that Julia McFarlane’s latest award is excessive. I also believe that it pays scant regard to the impact of this award, in a number of ways, upon Mr McFarlane and his second family.

The founder of Stowe Family Law, Marilyn Stowe is one of Britain’s best known divorce lawyers. She retired from Stowe Family Law in 2017.

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Comments(9)

  1. Deborah Smithies says:

    Fascinating. I’m inclined to agree with you, not that I’m an expert! I’ll have a look at the judgment – it’ll be interesting to see the reasoning.

  2. John Wyatt says:

    This is Iniquitous! I was on the wrong end of a Mcfarlane 1 decision despite having been divorced by my ex-wife 7 years ago. She came back to court in 2006 and effecitvely got 1/3 of everything I earned plus child maintenance, plus school fees!

    Am I now going to face a further smash and grab raid?, particualrly as i have just finished paying school fees.

    i thought slavery was abolished in the UK – yet this is eage slavery by any other name. Mr Mcfarlane is now trapped – if he were to go for a modest job – his ex- wife would still get 40% if he were to give up entirely he would no doubt find himself lacking in self respect and certainly not doing the”right thing” by his new wife.

    Why did the courts allow Mrs M to come back so soon after getting her award of £250 000 p.a. – as if that wre not enough.

    Given that English Law now seems to be in a complete and utter mess in this field I would recommend to Mr M that he emigrates and becomes an economic fugitive!!!!!

    I can only suggest to Divorce Lawyers that they get the law looked at in this area – before someone takes the law into their own hands!

  3. John Wyatt says:

    I should have added:

    Why should Mrs M benefit from the increased salary of Mr M, given that the increase has been achieved after the end of the marriage?

    If we have the concept of no fault divorce in England, then why should one party be penalised and then having paid the penalty be penailsed again? – we would not send someone to prison for, say, 5 years and then at the end of year 4 say actually old chap we have decided to increase your sentence by another 3 years!!

    What the law has effectively done is creae an implied lien over anything Mr M now earns – after all – who is to say Mrs M will not think of another reason to come back and have another shot and what if Mr M is made redundant ??

  4. Michael McNaughton says:

    I have already commented that one crumb of consolation for Mr M was that the payments will finally cease ion 2015. He will have to pay an extra £800,000 over 8 years but at least he can look forward to his eventual discharge How much would he have had to pay to capitalise a lifetime order of £250,000 a year, even allowing for a reduction on retirement ?

    Of course, as Mr Wyatt says, Mrs M could apply for an extension but it would take some pretty ingenious reasoning to argue that she could not adjust without undue difficulty to the termination of maintenance payments.

  5. Marilyn Stowe says:

    From a practical perspective I am sorry to report I have noticed that demands in relation to capitalisation of maintenance have already increased substantially since this judgment was handed down in cases in which my firm is involved- including for ‘non Macfarlane’ former wives who have not given up careers to be homemakers. It has made the task of resolving capitalisation claims amicably more difficult and husbands caught up in such cases deeply resentful.
    I am struggling to see why long after divorce when the husband has gone on to earn significantly more than he did during the marriage, a wife is entitled to hugely increased payouts, far in excess of her acknowledged need out of his increased post divorce income to which she has made no contribution.

  6. val says:

    if a clean break divorce was in 1993/95 can i go back to court to claim any of his pension as he is self employed with plenty of money and i have not been able to work since due to ill health. He lied in court about what the business was taking, thanks

    • Marilyn Stowe says:

      Val
      If the order ended all your claims then you are in serious difficulty. Check the order with a lawyer to make sure there is no loophole at all.
      I doubt very much that a final clean break order made 20years ago would be reopened unless there was substantial evidence of fraud.
      Regards
      Marilyn

  7. High Court considers compensation in rare ruling - Marilyn Stowe Blog says:

    […] SA v PA concerned a wealthy Dutch husband and English wife who were married for 18 years. They were both lawyers, with four teenage children. The couple were unable to reach a financial settlement during their divorce, with the husband setting great stock by a premarital agreement the couple had signed before their wedding in Amsterdam, and the wife claiming that her ‘periodical payments’ (maintenance) should be increased in line with the principles set out in the 2006 case of McFarlane v McFarlane. […]

  8. walk in bathtubs says:

    What’s up, I check your new stuff like every week.
    Your writing style is awesome, keep doing what you’re doing!

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