Appeal court attacks big money payouts

Divorce|Family Law|November 12th 2012

The Court of Appeal has made a forthright contribution to the ongoing debate about needs and non-matrimonial property following divorce by saying wives can no longer automatically expect large payouts in divorce cases and criticising the concept of ‘needs’ in such settlements.

Commenting on the case of multi-millionaire hotelier Andrew Morris Davies, Lord Justice Thorpe said: “We only talk about ‘needs’ when there isn’t a lot to go round.”

He added: “The bigger the family fortune, the less relevant needs become.”

Mr Davies, owner of the Cardiff Hotel in Bayswater, London, had applied for a cut in the £2.75 million awarded to his ex-wife Debra Ann Davies by Judge Martin O’Dwyer in August last year.

This consisted of a lump sum award of £2.2 million, plus the former matrimonial home in Acton, which is worth £550,000. The payout represented one third of the value of the hotel business. Judge O’Dwyer estimated Mrs Davies’ needs to stand at £1.55 million, with the additional money representing her contribution to the business.

The couple had been married for only four years when they divorced in 2009, but they had been together since 1997.

After the award, 50 year-old Mr Davies criticised the ruling, saying his 39 year-old former wife should not receive such a large payout because he had simply been a paid employee of the hotel. He told the original court that Mrs Davies was “the second best receptionist” he had ever employed.

He appealed and last week, in response to details of the original award, Lord Justice Thorpe cast vocal doubt on the concept of needs in moneyed divorce cases:

“Any mention of needs is completely inappropriate in a case of this scale.”

He added: “In a case like this, which is loosely categorised as ‘big money’, needs should not make much of a contribution to judicial reasoning…. In big money cases, the wife will often get twice what she needs. I don’t see what bearing needs have in this case.”

He was sitting with the Lords Justice Rimer and Elias.

Acting for Mr Davies, barrister Peter Duckworth argued that Judge O’Dwyer had been to wrong to say the hotel had been “entirely valueless” in 1997, when the former couple first began work at the hotel together. In reality, it had been a “cash generator” he said. Judge O’Dwyer had overestimated Mrs Davies’ contribution to the business, he claimed.

Speaking at the original hearing before Judge O’Dwyer, Mrs Davies insisted that she had worked long hours, overhauling the hotel’s advertising and both building and designing a website. She lived on the premises with Mr Davies, working “ceaselessly” to transform a “dowdy and unwelcoming hotel” into a successful business.

Speaking for Mrs Davies, Jonathan Cohen QC said he had worked hard and raised a family, and therefore fully deserved her award, even if her reasonable needs following divorce had been overestimated:

“When one comes to look at fairness, which is the touchstone of all these cases, this award is at the low end, bearing in mind that this was a lady who made a very active contribution to the business for 13 years and when the marriage broke down was left with two children.”

While we await the Court of Appeal ruling – judgement has been reserved – I wonder whether Lord Justice Thorpe’s remarks may herald a sea change in matrimonial finance cases. He was suggesting that the concept of need loses its meaning when the divorcing couple is wealthy. The question to be asked is ‘should the resident parent or least wealthy partner be entitled to continue in the manner to which they have become accustomed?’ Lord Justice Thorpe clearly doubts this.

Nobody could deny that a wife’s contribution to a husband’s business should be fairly reflected in their settlement, but should the needs element of an award mean actual needs, in the most literal sense of the term? To what extent should one partner in a divorcing couple be expected to met the needs of the other? This is a complex issue and the subject of much discussion in family law circles. Section 25 of the Matrimonial Causes Act 1973  says only that needs must be met in a divorce but offers no actual definition of needs. The Law Commission is now actively debating such a definition.

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