Wife’s appeal against ‘compensation award’ allowed

Divorce|December 5th 2014

You will search long and hard through Section 25 Matrimonial Causes Act 1973 to find the phrase “relationship generated disadvantage” in the same way you won’t find “the yardstick of equality” either.

Yet both are phrases that lawyers are familiar with, the first less so than the second, a product of the leading case of White v White, which is routinely applied in every decision. And it is the first that we will look at in this post.

What is it? In the leading case of Miller v Miller; McFarlane v McFarlane, which is where it all began, the House of Lords was considering whether and, if so, to what extent a high earning wife should be “compensated” for the loss of her high flying career which she had given up to become a mother and housewife, caring for the family and in effect becoming the “home maker.”

At the beginning of the marriage, she had been earning more as a lawyer than her accountant husband. She was undoubtedly headed for the top of her profession. He, meanwhile, also made his way up the ladder and was a high flying partner in Deloittes at the time the marriage came to an end. He now had a fabulous income and position, and the wife wasn’t going to share in it.  There was insufficient capital for a clean break.

The House of Lords had to consider whether her maintenance should be increased not only to cover her reasonable needs, but also to cover the disadvantage she had suffered as a result of her leaving her own job to become the family homemaker. Lady Hale gave the leading judgement and the Court decided she was entitled to a compensatory award for the relationship generated disadvantage she had suffered.

How so if the statute doesn’t expressly mention it?

James Turner QC who appeared in that case (and White v White) succinctly put it for me yesterday on Twitter:

“In a particular case, if a fair outcome is presumed to be the objective. strands identified in Miller/McFarlane are simply examples of principled reasons that MAY justify redistribution”

However, the Court of Appeal approved Mostyn J’s dicta in the case of SA v PA (Pre Marital Agreement: Compensation) as to the limits of the principle, namely:

“i) It will only be in a very rare and exceptional case where the principles will be capable of being successfully invoked;

ii) such a case will be one where the court can say without any speculation, i.e. with almost near certainty, that the claimant gave up a very high earning career which had it not been foregone would have led to earnings at least equivalent to that presently enjoyed by the respondent;

iii) such a high earning career will have been practised by the claimant over an appreciable period during the marriage. Proof of this track-record is key.

iv) once these findings have been made compensation will be reflected by fixing the periodical payments award (or the multiplicand if this aspect is being capitalised by Duxbury) towards the top end of the discretionary bracket applicable for a needs assessment on the facts of the case. Compensation ought not to be reflected by a premium or additional element on top of needs based award.”

So, in H v H, the judgement on a similar case, was out this week from the Court of Appeal.

The couple married in 1983 having met as accountants for the same firm. They separated after 21 years together. While married, they had two children who are now both adults. They received decree absolute in August 2005. The husband has since remarried and had two more children.

The husband became the Chief Operating Officer of an international financial firm’s tax division, the wife stopped working in 1990 in time for the birth of their first child. Upon the couple’s divorce, the initial judge ordered the husband to pay the wife £90,000 a year. She was also awarded approximately £1.37 million after the division of assets.

However, the wife applied for a change to be made to that decision, based on the compensation principle which the trial judge had found to be appropriate in the circumstances of the case. A judge noted that this part of her claim was based on loss rather than need, as she had given up a career many years ago to be a full time mother. There was a significant discrepancy between the husband and wife’s wealth as a result of the divergence in their pathways thereafter. Without the compensation award she sought, properly calculated, the wife was facing the possibility of selling her home in order to make ends meet. The judge had accepted her argument for compensation and increased the annual payments to £150,000.

In November 2012, the husband applied to stop the annual payments upon his retirement. He had expressed a wish to retire in order to become a full time parent to his two youngest children. The wife contended that the application was premature.

However, despite her initial objection, she was willing to agree to of a capital sum representing the capitalised maintenance figure the Judge was asked to fix payable upon her ex-husband’s retirement. As a result of the award from Coleridge J she would have to sell her house and downsize.

The wife appealed the award.

Sitting at the Royal Courts of Justice, Lord Justice Ryder allowed the Appeal but warned:

“I emphasise that I do not intend to suggest that application of the compensation principle involves reconsideration of the lump sum award originally made: it does not or that downsizing is incompatible with the application of the compensation principle. As an issue downsizing is a commonplace in applications of this kind – whether or not the compensation principle applies and the court has been taken to eight decisions to demonstrate that point (footnote). My point is that the court needs to undertake a more sophisticated exercise than was undertaken here in order to avoid discriminating against a wife who is entitled to compensation.”

To read the full judgment, click here.

Photo of the Royal Courts of Justice, London by Nick Garrod via Flickr

Author: Stowe Family Law

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