Family Finances 3
A fair deal for wives or a gold digger's charter?
First Footballers' Wives and now an ex-Beatles wife keep the complex subject of the proper allocation of assets and income on marriage breakdown in the headlines. The doings of celebrities and the very rich get the publicity but lawyers have to deal with everyday matters and will mostly applaud the latest House of Lords decisions in the cases of Miller and McFarlane. While they do concern the wealthy or even, in the Miller case the very wealthy, aspects of the judgments are of general application.
Visitors to this website may refer to the earlier pieces "Family Finances 1" and "Family Finances 2" which touched upon these cases at the Court of Appeal stage. In the case of Miller labelled "as £5m for less than three years of marriage" the husband appealed. In McFarlane the wife appealed and the issue was whether a wife who had given up a promising career as a city solicitor to be a homemaker for her top-flight accountant husband and carer for their children should be compelled to have her justified maintenance limited to a five year period instead of the conventional joint lives order.
The House of Lords in a unanimous decision taking both cases together dismissed Mr. Miller’s appeal and upheld that of Mrs McFarlane. So Mrs. Miller keeps her award of £5m and Mrs McFarlane her £250k per year maintenance for herself and the three children until either she or Mr. McFarlane dies or she remarries or until some other order may be made by the court in the future.
Following the 2000 case of White there is now a perfect trio of House of Lords big money cases; a long marriage as in White, a short childless marriage (Miller) and a medium length marriage with dependent children (McFarlane). Perhaps we may in due course read about a super rich short marriage age differentiated dependent child case and no doubt the knives are already being sharpened.
All the Law Lords (except Lord Hoffman) gave reasoned judgments which will receive careful attention. Lord Hope drew an interesting comparison with Scottish law which is more inflexible. (In any case where either jurisdiction is available husbands will be advised to issue North of The Border.) However the main judgments were from Lord Nicholls and Baroness Hale.
The principles to be extracted may be summarised as follows:-
1. Fairness. The object of the legislation is to produce a fair non discriminatory result treating spouses as equal partners in the marriage. In case there was any previous doubt the White approach to treat the contributions of home-maker and breadwinner during the marriage as of equal merit applies universally to all marriages not just the long ones. What matters is what the parties have produced by their joint efforts. The period of the marriage extends to prior cohabitation and "engagement".
2. A "fair outcome" is not necessarily equality. Needs and, for example, the welfare of minor children may demand an unequal division of assets but the White yardstick of equality test was confirmed.
3. Short marriages. The older cases which suggested that the court was only required to restore the parties to their former positions are now overruled. The White principles apply as previously stated. The length of the marriage may be taken into account in relation to property which one party brings into the marriage. The shorter the marriage the less likely it will be that that property will be fully available for division. Conversely the longer the marriage lasts the more the property will be subsumed into the matrimonial property (as to which see later).
4. Conduct. All practitioners - if not all their clients - will be grateful that the House of Lords firmly disapproved of the views of Singer J. in Miller, surprisingly upheld by the Court of Appeal, that the husband's adultery or indeed other misconduct should be taken into account in determining the division of finances. There will be no need for long affidavits throwing routine accusations about the ordinary cut and thrust of married life. Lord Denning would be delighted that the "gross and obvious" test of misconduct was cited with approval.
5. Also despatched, it seems, will be the need to file affidavits setting out the spouses' respective contributions within the marriage in relation to the "minutiae of family life" as Lord Nicholls put it. Assets built up during the marriage will be subject to the yardstick of equality. Hence in Miller significance was given to ascertaining the value of such assets compared with what Mr. Miller had brought in to the relationship. So Mrs. Miller received less than one third, not one half of the assets acquired during the marriage, since some of the increase in value was held to be attributable to her husband’s activities prior to the marriage. Lady Hale went as far as to assimilate contribution within the marriage to conduct - i.e. the disparity between the respective contributions would need to be such that it would be inequitable to disregard it.
6. Legitimate Expectation. Great emphasis was placed on the need for the court to take account of the standard of living previously enjoyed by the parties. To that extent only the expectations of the parties may be relevant. But beyond this the hopes/fears which a spouse may have regarding the future are to be disregarded and in Miller the courts below went too far in taking them into account. There was to be no question of reviving the long abandoned requirement to put the parties in the same position as if the marriage had never broken down.
7. Compensation. This was a vital aspect of the judgments in both cases. The lump sum aspect of an award was to remedy any past and present discrepancy between the home maker and the breadwinner but the court must also take into account "future loss" or disadvantage - i.e. any future disparity between the respective positions. This was especially relevant to Mrs McFarlane who as a result of an agreed decision gave up her potentially well-paid career to be the home maker and baby carer and had no realistic prospect of recovering her position. Hence it was, in the view of the House of Lords, unfair to saddle her with the onerous duty to come back to the court to justify a continuation of her payments in five years time. Rather it would be for the husband to apply at some future date for a reduction or termination of her maintenance bearing in mind the court's power to award a further lump sum. Mrs. McFarlane's share of future income was one third of her husband’s current income - in excess of her needs - and while she had the general duty to act responsibly in relation to the surplus she was not, as the Court Of Appeal had found, obliged to apply it towards a future clean break.
8. Clean Break. How do we reconcile the McFarlane decision with the courts' statutory duty to consider whether it is appropriate to end the future financial relationship? To quote Lady Hale,"If capital has been equally shared and is enough to provide for needs and compensate for disadvantage then there should be no continuing financial provision". Lawyers will still look to see if that compensation can be provided by extra capital or a pension share.
There can be little doubt that these decisions will be popularly presented as further favouring wives over husbands. To treat a husband's future earning capacity as if it were an asset built up during the marriage as in McFarlane may prove especially controversial. Apart from the case of Scotland mentioned earlier wives’ lawyers will be looking to start proceedings in England where a choice of EU jurisdictions is available.
Practitioners will be focussing on the standard of living of the parties (more affidavits?) and very much also on the extent and value of the property and assets brought into the marriage. This is the subject of some complex reasoning by the Lords and there is a difference of opinion between Lord Nicholls and Lady Hale as to the scope of matrimonial property which is subject to the equality principle, and non-matrimonial property which may involve a departure from equality.
Disparity and disadvantage can be expected to feature in advisers’ and the courts’ thinking. Would it be too bold to say that we are gradually moving towards equality of outcomes in a suitable case? If future earnings are to be regarded as a matrimonial asset this may be the result.
There is bound to be a surge of interest in pre-nuptial agreements especially among wealthy husbands. Although not binding on the courts they may be taken into account as defining the parties’ respective interests and intentions. This is now particularly important given the distinction drawn between matrimonial and non-matrimonial property.
One curiosity of recent legislation is that division of finances on the breakdown of a Civil Partnership (see previous article) is now assimilated to ancillary relief. One awaits the first high profile case in this area with interest.
Finally, we should never forget that the court has a wide discretion and different judges may reach different decisions and both be right. These ground breaking cases may help to clarify how the division of assets should be approached but as they show, the judge who first hears the case will usually get it right if he/she gives due weight to the relevant factors to produce a result that as nearly as possible captures that elusive concept of fairness.
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