Has the ‘meal ticket for life’ expired?

Financial matters

posted: 23rd April 2018

Spousal maintenance is something many separating spouses fear, no-one wants to be supporting their ex-spouse indefinitely following the breakdown of a relationship. However when considering spousal maintenance, there are a number of factors that are taken into consideration and applied on a case by case basis. Maintenance can be awarded for a fixed term or for the parties joint lives. There may also be ‘trigger’ events such as the party receiving maintenance remarrying which brings this to an end.

The Case of Waggott –v- Waggott was recently before the Court of Appeal in respect of the Wife’s spousal maintenance award.

By way of background, the parties met whilst working at the same accountancy firm and began living together in 1991. The parties married in 2000 and moved from Manchester to near London when the Husband accepted employment. The Wife then worked for a short period in 2002/2003 and the parties had their only daughter in 2004. The Wife subsequently divorced the Husband in 2012 and a final Order in respect of finances was made in 2014.

Whilst the parties were dealing with their finances, they agreed their capital resources should be divided equally, but could not agree on what sum of maintenance the Wife should receive.

The Judge at the final hearing in 2014 determined a division of the capital assets which the parties were content with. In respect of maintenance, the Judge directed that in order to meet the Wife’s income needs, the Husband should pay a sum of £175,000 per year for the party’s joint lives. The Judge made this decision as there was uncertainty as to whether/what the Wife might be earning in the future. The Judge also believed the wife would suffer undue hardship adjusting to the termination of maintenance.

On Appeal, Lord Justice Moylan set out the two main issues as:

“(i) is an earning capacity capable of being a matrimonial asset to which the sharing principle applies and in the product of which, as a result, an applicant spouse has a continuing entitlement to share?

(ii) how should the court assess whether an award determined by application of the sharing principle meets the party’s needs? More specifically to the arguments advanced in this case, to what extent is it fair for the wife to be required to use her sharing award to meet her income needs when the husband will meet his needs from earned income?”

Counsel for the Wife argued that the Husband’s earning capacity is a matrimonial asset and as such should form part of the matrimonial pot because, it was built up during the marriage and is a ‘product of marital endeavour’. As the Trial Judge did not do so the Wife has not received a fair share of the Husband’s income earned post separation.

Counsel for the Wife further argued that it would be unfair to state the Wife should use her share of the capital to meet her income needs.

In essence the Wife argued that she should be awarded 35% of the Husband’s net bonuses for years up to and including 2019 together with maintenance of £190,000 per year for the party’s joint lives. It was argued that any other award would be unfair and discriminatory.

Counsel for the Husband argued that earning capacity is not an asset that the sharing principle applies to. He did concede that in practice post separation bonuses are sometimes shared despite them not being earned during the marriage.

It was part of the Husband’s argument since the Wife is receiving a total sum of the capital assets worth 9.7 million; a clean break is justified in this matter. Allowing maintenance to be extended in accordance with the Wife’s wishes would contravene the principle of a clean break and is thereby unfair. The Husband argued that the Trial Judge should have awarded maintenance for a term only, proposing 2016 – February 2021 when a section 28(1A) bar will become effective. A section 28(1A) bar means the party in receipt of maintenance cannot apply to the Court for the maintenance to be extended once that term comes to an end.

Counsel for the Wife argued against maintenance being imposed for a term stating the joint lives element of the same can be brought to an end if the wife remarries or if the matter is brought back to Court and a determination is made that maintenance should cease. It was further advanced that it is unfair to make the Wife use her her capital award to meet her income needs as the Husband will not be using his capital to meet his income needs.

Lord Justice Moylan in reaching a decision stated an “extension of the sharing principle to post-separation earning would fundamentally undermine the court’s ability to effect a clean break”. He further went on to provide that if the sharing principle applied to earnings once parties separated, then it could be applied in every case regardless of need. There is a lack of clarity as to how this would be determined by the Court and would thereby undermine the process of fairness and it would be unclear when each case would be able to achieve a clean break. It is stated that leading case law on this matter namely; Miller, Jones and Scatliffe does not support the extension of the sharing principle to income earned post separation and indeed only applied to marital assets. Marital assets are defined in the case of Charman as “the property of the parties generated during the marriage otherwise than by external donation”.

In respect of the second issue, Lord Justice Moylan did not agree with the Wife’s Counsel that her capital award should not be used to meet her income needs. He states that to accept this would conflict with a clean break being reached between the parties and the Wife can make a further claim for an additional award to meet her income needs if she so required. In making a decision, the Court should have regard to all the circumstances affecting a clean break and the issue of whether undue hardship will occur.

In regard to the Husband’s cross appeal that maintenance should be for a fixed term, Lord Justice Moylan states the Trial Judge’s approach was too narrow and a broader approach should have been taken to include whether the wife could ‘deploy part of her capital to meet her income needs’. This is to ensure the question of whether undue hardship will occur is addressed fully and whether a clean break can be achieved.

Lord Justice Moylan reviewed the figures determining that once maintenance ceases the total shortfall the Wife will have is in the region of £950,000 before she reaches pensionable age. The Wife would use approximately 10% of her total capital award to meet her income needs. It was considered by comparison, the Husband will generate an income to increase his financial position however, he did not believe the Wife would suffer undue hardship. Further upon considering all the required factors set out in section 25 of the Matrimonial Causes Act it is not unfair for the Wife to use a proportion of her award to meet her needs.

Lord Justice Moylan, Sir James Munby President and Mr Justice MacDonald were all in agreement. The Husband’s appeal was allowed and maintenance was imposed for a fixed term expiring on the 1st March 2021 with a section 28(1A) bar attached.

Here at PMC Family Law solicitors in Liverpool, we have an expert team of family lawyers headed up by Pauline McNamara on hand to help you. We specialise in high net worth financial cases and can be contacted by telephone 0151 375 9968 or email .