Family Finances 1
Some reflections on "Footballers' Wives"
When the Matrimonial Proceedings and Property Act 1970 (which became the familiar Matrimonial Causes Act 1973) came into force to accompany the Divorce Reform Act, it was against the background of a social milieu of a bygone age. Most divorcing couples had probably been married in the 1940s or 1950s and the matrimonial home would have been in the husband's sole name. The wife had probably never worked let alone had any pension or assets of her own. Discrimination law had yet to appear on the Statute Book. When Lord Denning reviewed the new law in Wachtel he set guidelines which were followed for many years. The starting point for the non-owning spouse (almost invariably the wife) was one third of the joint assets and one third of the joint incomes. As customs changed, so did the interpretation of s. 25 of the Matrimonial Causes Act 1973. The 1980s ushered in a period when the requirement to put the parties back into the same position as if the marriage had never broken down was abolished and of the s. 25 criteria, the reasonable needs or requirements of the wife was developed as if not the dominant principle then at least "first among equals". Once the wife's reasonable requirements were satisfied as to both income and capital, then the husband could keep the rest. In the normal case those needs might take the greater part of the assets, particularly where the wife had the care of dependent children - hence the feeling that the law was "unfair" to husbands instead of discriminatory against wives. But in "big money" cases where there was a surplus of assets over needs, the husband did indeed keep the surplus. This remained the case until White -v- White (HL 2000). At first instance, although the major asset of the parties was in the joint names, nevertheless the Judge saw fit, applying the law as he then very properly understood it, to adjust the wife's half share down simply to accommodate her reasonable needs, so the wife ended up with less than she already owned. The House of Lords however changed that (although in the case itself the wife did not end up with half the assets) but restated that fairness was the target outcome and this needed to be measured against a "yardstick of equality". After one or two hiccoughs this has come to mean from subsequent cases that in long marriages and "big money" cases, the distribution of assets became resolvable by dividing by two.
This left incomes untouched but it was clear that logic demanded that if it was discriminating unfairly against wives to leave the husbands with surplus capital, why should not the same principle apply to surplus income now and for joint lives or until remarriage or further order of the court? So, the attack came in two cases which were recently decided by the Court of Appeal and which achieved a great deal of press coverage and known as the footballers' wives case. As you would expect most of the press coverage was ill informed. In fact there was only one footballer's wife, the other being the wife of a successful City accountant. However, the Court of Appeal, which heard the appeals together did not decide that spousal periodical payments should be measured against the yardstick of equality. Instead the court took the desirable concept of a clean break and fashioned it to cover a case where there were not sufficient assets available to achieve an immediate clean break. It decided that once the parties' reasonable requirements were satisfied the parties should strive to achieve a clean break. In Parlour the facts were unusual in that the premier footballer's earnings were at their peak and were set to fall. So the Order which in effect provided for the wife to receive one third of the husband's £1.5 million approx income (£444,000 per annum) for a period of four years commencing March 2003 and ending in March 2007. Mrs. Parlour will have to come back to the court before the expiry of that term if she wishes to apply to extend her periodical payments. If not they will lapse. It was clear that she was expected to save for a clean break. Given Wachtel no doubt Lord Denning would be looking on approvingly at an apparent although unintentional restoration of the one-third rule, although he probably would have been astonished by the figures.
In McFarlane the court ordered periodical payments of £250,000 per annum which was about twice the wife's stated needs but approximately one third of the husband's current net income of £753,000 but limited it to a term of 5 years. Again this was intended to be a saving for the day of the clean break. The McFarlane case is one which contains elements more typical of the kind which family law practitioners have to meet, namely a long marriage, a steadily rising graph of husband's income which, unlike Parlour was found likely to continue.
So where does this leave wealthy husbands and wives? The reasonable requirements dam has now been breached for income as well as capital but the court has by no means gone the whole way of equality. One suspects that advisers will be warning their wealthy husband clients that they are now at risk of paying more than the wife's stated needs. The court will look at the surplus over both parties' needs and decide how this should be dealt with. It is clear that a husband can no longer be coy about his expenses since the court will have to identify the needs of both parties in order to dispose of any surplus. Similarly White itself is generally thought to have ended the so called Millionaires or Baron von Thyssen defence whereby the super rich husband could avoid financial disclosure simply by saying that he would submit to any reasonable order that the court might make.
Is it right to treat income in the same way as capital? You could identify what assets have been built up during the marriage and decide how they are to be shared. Should future income be treated in the same way? Mrs. Parlour's team argued that she had earned this right by weaning her husband off the drinking culture of a certain well known football club. The Court of Appeal's decision is a half way house only because future surplus income was to be treated as enabling the wife to save i.e. acquire sufficient future capital to achieve a clean break. It follows that a wife who has spent this very well but unwisely would get short shrift from a court if she came back to extend the term for periodical payments.
If either case ends up in the House of Lords no doubt we shall get a definitive but probably different view. In the meantime Mr. Parlour has been transferred from Arsenal to Middlesborough and if his income is severely reduced, presumably he will come back to court to try to cut the figure down.
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