The case of Waggott v Waggott
The swinging pendulum of spousal maintenance orders
Last week was a big week – for me personally and for family law. For me, it saw the start of my new role here at Rayden Solicitors. In family law, more than 500 Family lawyers gathered in Bristol for the 30th annual Resolution conference (the association of family lawyers) and, if things couldn’t get more exciting, there was a hugely important Court of Appeal case about spousal maintenance awards in England.
Waggott v Waggott (2018) EWCA Civ 727 was heard in the Court of Appeal in November and the reported case was published last week. At our family law conference last weekend, the headlines of this case were met with a sharp intake of breath as we all considered our clients and the impact of this case on our advice.
The important facts of the case are as follows :
- The husband (H) was 53, the wife (W) was 47. They have one child and lived together from 1991 (marrying in 2000).
- the couple separated in 2012. A final financial order in the divorce was made in September 2016.
- The Judge ordered a division of capital which gave W £8.4m and H £7.8m. W received additional capital in the form of a share of H’s deferred compensation. The Judge also made a maintenance order giving W £175,000 per year on a joint lives basis ( meaning the amount was to be paid until the death of one party, remarriage or further order of the court). H’s net income was £3m per year.
- W appealed and H cross appealed the Judge’s decision
The Court of Appeal had to decide 2 main issues:-
- is a party’s earning capacity a matrimonial asset which should be shared on divorce?; and
- should W be required to use her sharing award (the capital provision ordered for her) to meet her income needs going forward?
In the judgment, Lord Justice Moylan gives an excellent summary of the case law to date. If you go to see a solicitor about the financial implications of divorce in England, he/ she will explain that we have a statute, section 25 of the matrimonial causes act 1973, which sets out a list of factors which will be taken into account. Those factors have been interpreted in subsequent case law which has identified 3 main principles which will be considered in financial disputes on divorce:
Needs, compensation and sharing.
The case of Waggott looks at the interplay between these principles. W sought a “fair share” of H’s income post separation, arguing that his earning capacity was a matrimonial asset and that the principle of compensation should be applied because she had given up her job early in the marriage , enabling H to focus on his career.
H’s appeal sought a term order for maintenance (for a period of 5 years) on the basis W should use her significant capital award (which was much more than she needed to rehouse herself) towards her income needs.
The Court of Appeal rejected the wife’s appeal and imposed a term maintenance order for only 3.5 years, deciding as follows:
- a person’s earning capacity is not for sharing on divorce. To do so would undermine the court’s duty to consider a clean break between the parties (a clean break is where there is no ongoing maintenance payment). The sharing of future resources – ie earnings – is only justifiable if it is referable to need or compensation. The court clarified the principle of “compensation” ; it is there to redress any disadvantage to the party who has given up work and not relevant that H’s earning capacity may have been advantaged.
- W should use her capital award (the part not needed for her housing) to meet her income needs. The generation of income from that excess capital cannot be ignored.
I predict I will look back in 10 years time , remembering this week and the change in approach that this case has brought about. The English courts are viewed as generous to wives on divorce – unlike our near neighbours Scotland and France where maintenance claims are very limited. In my view, over the last 5 years, we have seen the pendulum gradually swinging back towards less generous awards to wives and this case is no exception.
Please contact me or one of the team here for advice on your circumstances and how this case may impact you.