As we bid farewell to the Noughties, I pose the question: which case of the past decade has had the greatest implications for family law and its practitioners?
For me it is White v White: the decision of the House of Lords, delivered in 2000. This was when the concept of equal sharing became the accepted starting point (and usually the finishing point) for financial settlements between a wealthy divorcing couple, irrespective of one party’s role as the bread winner and the other party’s role as the homemaker. Gone was the entitlement of the breadwinner (usually the husband) to retain the lion’s share of the family wealth. The court made it clear that no distinction was to be made.
That decision is now ten years old. With the benefit of hindsight, has White v White unwittingly accelerated the decline of marriage in English society? In short, was it the right decision for our society as a whole? It is not a simple question to answer.
Until White v White, wives of wealthy men could not hope to argue successfully for parity or anything approaching it. They usually had to make do with the Duxbury tables to calculate their “reasonable needs” for life. The Duxbury tables, which are still used in some cases, give the wife a capital sum based on an income need determined by the court if the parties fail to agree. The lump sum is arrived at on the basis that every year the wife will spend some of the capital and some of the interest earned, so that when she reaches the actuarial age at which it is assumed she would die, there will be no capital left. It is therefore a cheaper option than a lifetime annuity. However it leaves recipients stuck to a rigid lifestyle from which they cannot depart, and in many cases unable to leave a penny to their children from their estate. In some cases a wife’s “reasonable needs”, as calculated prior to White, bore little resemblance to the lifestyle that she had enjoyed during her marriage. Since White, reasonable needs have been more generously interpreted.
Dart v Dart
The family law case of the 1990s adjudicated by the court was Dart v Dart (1996), which demonstrated the need for a new approach. The Dart family originated from Kentucky, USA, but was living in England when the husband began divorce proceedings. The wife tried in vain to have the case heard in the USA. She pursued every avenue to avoid the relatively derisory settlement that would be forthcoming at the hands of the English courts. The couple was spectacularly wealthy – the husband’s fortune was calculated at about £400 million – and had enjoyed a spectacular standard of living during the marriage. The wife sought in the region of £100 million for her settlement. However her legal team suffered a pasting at the High Court and subsequently the Court of Appeal. The wife was awarded £8.5 million and was ordered to pay her husband’s costs.
Dart v Dart was a watershed case for wealthy husbands – and had it been heard several years later, the result undoubtedly would have been different. Once again, hIndsight is a wonderful thing. When White v White came to court in 2000, it was welcomed by family lawyers who had been waiting for it on behalf of their female clients.
The judgments of the House of Lords, particularly of Lord Justice Nicholls in White v White, have now become the norm. If a couple begins married life with little, gathering wealth during the course of their marriage, the wife can reasonably expect to receive half of that wealth. She can do this even if she has never or rarely worked outside the home.
Charman v Charman
This was the argument opposed by Mr Charman, when Charman v Charman came to court in 2007. The couple had started married life with very little, had two children and were married for the best part of 30 years. By the time they divorced, Mr Charman had secured a place on The Sunday Times Rich List and the couple’s assets were assessed at £131 million. Mr Charman insisted that his wife should be satisfied with his proposed settlement of £20 million. He described her as “a housewife” and contended that his contribution to the couple’s wealth entitled him to the larger share.
The court rejected his argument. In the full glare of publicity Mr Charman was ordered to pay his wife some £48 million, with a discount on a 50:50 split only achieved because the court accepted that he had made a “stellar” contribution to the family fortune.
Most high earning husbands cannot secure such discounts. The 50/50 split is more often than not a given. The husbands concerned often believe that they deserve extra credit, having earned fortunes with blood, toil, tears and sweat. However the courts, following the case of White v White, usually disagree. Their fortunes are split 50:50. It is not just high earning men who find their fortunes divided in this way; the rule applies equally to high earning women.
Is it fair?
Miller v Miller and McFarlane v McFarlane
Almost ten years later, many high earners have found themselves on the “wrong end” of these decisions. Some have attempted to use the provisions of section 25 of the Matrimonial Causes Act 1973 (which is still in force) to escape the rigours of a 50:50 division. We have had variations on the White v White theme, some of which have been ingenious. In addition to the cases about stellar contributions, there have been arguments about illiquidity impacting upon a 50:50 split, the valuations of assets, the impact of premarital wealth on wealth acquired during the marriage, the impact of a short marriage on assets acquired during the marriage, assets placed into trusts before and after the marriage, the impact of post-separation wealth on equal distribution, and cases about sharing income and bonuses, when a clean break between the parties was not possible. Then there have been arguments about the validity of the deal after the agreement has been signed and court orders made. All of these cases have been determined in the shadow of White v White, and in a desire to achieve post-White “fairness”.
Some individuals have turned to the media. Headlines have told of angry husbands who have publicly berated the system. It is true that “the system” has its flaws. I have sympathy for fund manager Alan Miller, whose multi million pound payout to his wife – after a very short, childless marriage – seemed to me to be harsh because the approach followed the sharing principle of White v White. I also sympathise with accountant Kenneth McFarlane, who did not seek publicity but whose case was very public, because it took the arguments in White to even more esoteric levels. In his admittedly “paradigm” (i.e. rare) case, the wife had given up her career as a lawyer to raise the couple’s children. Her settlement was calculated to reflect the loss of earnings she had sustained by becoming a homemaker. As a result she now receives substantial slugs of annual income each year until her former husband retires, which are substantially in excess of her reasonable needs.
More seriously, it also appears that the numbers who marry have steadily declined over the decade; instead, many couples are choosing to cohabit. A coincidence? I think not. Many high achieving clients of mine decline to marry at all, knowing full well that their liability if the relationship breaks down will be peanuts compared to a divorce settlement. Others are exploring the possibilities presented by prenuptial and postnuptial agreements.
Politicians and judges are quick to lament the decline of family values, arguing that marriage should be the gold standard. Ten years ago these arguments did not exist. Ten years is clearly a long time.
We now have many prominent lawyers, academics and judges, all practitioners in the field, agitating for a change in the law. Some look to European models, which have no room for flexibility and no maintenance at all for wives, who are now perceived to have far too much.
There are now regular arguments about the rights and wrongs of divorce settlements. The media coverage appears to have polarised the public, but often it highlights uncommon cases and ignores the rest.
However that is all we are in fact discussing: a tiny fraction of cases, featuring wealth sufficiently substantial to attract media attention. The vast majority of cases – hundreds of thousands of them, every year – pass under the radar with nary a sound.
So in the wake of what appears to have become a vigorous campaign for change in financial divorce settlements, given what has happened to our society, was White v White correctly decided? Or do we need change?
From my perspective as a practitioner, as someone who sees ordinary people day in day out, we still need discretion coupled with flexibility in order to achieve fair maintenance and capital settlements. The 50:50 split of assets simply does not apply to most couples because it usually will not meet the parties’ needs. We need the flexibility that our law gives us, to allow for the individual circumstances of every couple’s case. We don’t need a change in the law.
What we do need, in my opinion, for the more high flying cases, is just one thing.
It is common sense.
We need to “temper justice with mercy”, so that the outcome reflects a practical, common sense approach to the case such that the ordinary man or woman in the street would think it fair. Many cases do deserve a 50:50 split, but many simply do not. I would not have awarded the 30 something Mrs Miller £5 million for her very short marriage. I would not have treated Mrs Macfarlane as exceptional. I would have awarded Mrs Charman £48million, as a fair sum that reflected Mr Charman’s “stellar” contribution but recognised also the vastness of the family assets and the contribution she made to the family.
And what of the next decade? What will we see happening? Ambitious legislation? Fresh approaches to divorce and financial settlements? The legalisation of prenuptial and postnuptial agreements?
If we have learned anything from the application of White v White during the Noughties, it is this. Innovation is not the catch all answer. Sought after reforms may solve a very few problems – but can create many new ones.
Hindsight is a wonderful thing. But usually by then the damage has been done.