The case of Charman v Charman hit the headlines when it was decided, as it involved the largest ever award in a contested application for financial remedies following divorce in this country. That is not, however, why it appears as one of my important cases.
I have already written here about the decisions in White v White and Miller and McFarlane, which clarified the approach that the courts should use when deciding upon financial settlements following divorce. The Court of Appeal’s judgment in Charman follows those decisions.
Charman is slightly different from White or Miller and McFarlane as it does not, I would suggest, do much to break new ground. Rather, it confirms the principles set out in those earlier decisions, and provides a little more guidance along the way. As with the earlier cases, Charman dealt with various issues, but here I will concentrate upon the main one: departure from equal sharing of assets under the ‘sharing principle’ first enunciated in White.
The facts in Charman were fairly straightforward, albeit involving vast sums of money. The parties were married in 1976. Neither brought any capital into the marriage. The wife gave up work when she was expecting their first child. The husband worked in insurance and was hugely successful, amassing an enormous fortune. The marriage broke down and the wife issued divorce proceedings in 2004, followed by an application for a financial/property settlement.
The wife’s application was heard by Mr Justice Coleridge in February 2006. He valued the wife’s assets at £8 million and the husband’s assets at £123 million, making the total joint assets £131 million. The wife conceded that the husband’s contribution (known as a “special contribution”) had been of such significance as to justify a departure from equal division of assets and proposed a division of 55/45 per cent in the husband’s favour. Mr Justice Coleridge agreed that the husband had made a special contribution, but felt that it entitled him to 63.5 per cent of the assets, with the wife getting the other 36.5 per cent (the husband’s share was also slightly inflated because he was to take the higher risk assets). On this basis, Mr Justice Coleridge ordered the husband to pay to the wife a lump sum of £40 million, leaving her with a total of £48 million.
The husband appealed. He felt that Mr Justice Coleridge had made insufficient allowance for his special contribution. He contended that the wife should have received a lump sum of, at most, £20 million.
The Court of Appeal disagreed. Its single unanimous judgment was handed down by Sir Mark Potter, the then President of the Family Division. He reviewed, confirmed and added some clarity to the relevant law on the sharing principle and special contributions justifying a departure from equal division. In particular, he suggested guidance on the appropriate range of percentage adjustment to be made in cases in which the court is satisfied that a special contribution justified a departure from equality. He said that such a contribution should normally at least entitle the person who had made it to 55 per cent of the assets. However, it would be unlikely to entitle that party, after a very long marriage, to receive more than twice as much as the other party, and therefore the maximum that the ‘special contributor’ was likely to receive was two thirds, or 66.6 per cent of the assets.
Mr Justice Coleridge’s award lay very near the middle of that range, and the Court of Appeal considered that this was appropriate in the light of the scale of the husband’s special contribution. Accordingly, it did not consider the award to be vulnerable to appeal, and the husband’s appeal was therefore dismissed.
Sir Mark Potter’s judgment concluded with a call for a review of the law on determining financial settlements following divorce. Whilst cases such as White and Miller and McFarlane had provided some guidance, there was a need for the law to be reformed to provide greater clarity and certainty. Unfortunately, more than seven years later, that reform seems as far off as ever.
Photo by Teresa via Flickr