A meal ticket for life? The issue of maintenance payments in divorce cases
On 11 April 2018 the Court of Appeal in England and Wales issued its judgment in the English case of Kim Waggott -v- William H Waggott.
Parties had married in 2000, had a child in 2004 and separated in 2012. Whilst both had started off as accountants, Mrs Waggott subsequently gave up work. Mr Waggott went on to have an extremely successful career. Mrs Waggott received a capital settlement of £9.6 million and indefinite spousal maintenance.
This case is interesting both for English and Scottish family lawyers because of its approach to the issue of maintenance.
Mrs Waggott appealed the original decision in her case. She argued that Mr Waggott’s very high earning capacity should be treated as a matrimonial asset, meaning the sharing principle should apply and in turn she should continue to share in his earnings even although parties had separated. Mrs Waggott argued that she should not have to make any use of her capital settlement to meet her income needs. She also sought an increase of £23,000 per year in spousal maintenance.
Mr Waggott cross appealed, submitting that the Judge should have only ordered spousal maintenance for a defined period of five years, to February 2021, rather than on a “joint lives basis” (until one or other dies).
The appeal court held that a spouse’s earning capacity is not capable of being a matrimonial asset to which the sharing principle applies. Mrs Waggott was therefore unsuccessful on this point. The Court’s decision is in line with the Scottish position; earning capacity is not part of the matrimonial pot for sharing though it is a resource.
The appeal court did not accept Mrs Waggott’s submission that the compensation principle should be applied not only when the applicant has sustained a financial disadvantage in his or her prospective career but also when the respondent has sustained a financial benefit. The court held that compensation is for the disadvantage sustained by the party who has given up a career. So, Mrs Waggott failed on this point also. Again, this is in line with the Scottish position; whilst the applicant must show not only that s/he has suffered economic disadvantage but that the other party has sustained an economic advantage, the purpose of an award of spousal aliment (being the term used before divorce is granted) or periodical allowance (after divorce) is to enable a party to adjust to loss of support or to compensate for serious financial hardship on divorce or dissolution.
Mrs Waggott was also unsuccessful in her attempt to increase the yearly amount of maintenance.
Even worse for her, Mr Waggott’s cross appeal was successful. The court held that maintenance payments should end in February 2021. The court took the view that Mrs Waggott would be able to adjust without undue hardship to the termination of maintenance.
Why is this case important in Scotland?
We are quite regularly involved in cases with a cross-Border dimension. The law relating to separation and divorce in Scotland differs from the position south of the Border. It is vital that clients select the correct place (“jurisdiction”) in order to secure the best possible outcome for them.
Historically, there has been a perception, reinforced by English cases such as White, Miller and MacFarlane, that the less well-off person will generally do better in England & Wales because the courts there have been more willing to award spousal maintenance on a joint lives basis, rather than just for a fixed term. The decision in Waggott suggests that this is no longer the case.
The barrister for Mrs Waggott was clearly aware that media attention would focus on the very high sums involved in the case. He referred to what he called unfair use of the expression “meal ticket for life” which he suggested was often used without regard to a spouse’s fair entitlement, which might properly include long term maintenance. Lord Justice Moylan stated that he acknowledged that “long term maintenance can be required as part of a fair outcome”. He went on to add, however, that his determination of the appeal was based on his view of the proper application of the Matrimonial Causes Act 1973 and the principles contained within that legislation.
This case is unusual in terms of the very significant sums of money involved. However, the decision shows that the court was alive to the “statutory steer”, to quote Mr Waggott’s barrister, in the Matrimonial Causes Act 1973 (the governing family law legislation in England & Wales) towards a clean break where this can be fairly achieved. The 1973 Act states that a court must consider whether a clean break is possible immediately or whether it can be achieved by a fixed end point but only if that adjustment can be made without undue hardship.
This case highlights that the courts in England and Wales, despite what we might think from past headline cases, do expect a party to make some effort to go back to work and to be willing to adjust at least to some extent. The case shows that there is not an automatic entitlement in England and Wales for the less well-off person to get indefinite maintenance, but rather it will only be awarded where it can be justified as fair in the circumstances of that case.
Is the English position moving closer to the Scottish position?
The view in England and Wales seems to be that in light of recent case law, and going forward, there will be more cases where term orders for maintenance are made rather than maintenance on an indefinite basis. Awards will be assessed on the basis of avoiding financial hardship rather than on the basis of financial entitlement, arguably bringing the position south of the Border more in line with the Scottish position.
What is the Scottish approach to maintenance payments in divorce cases?
In Scotland the principles governing our family law legislation are set out at Section 9 of the Family Law (Scotland) Act 1985. In common with the position in England & Wales, we have a principle of fair sharing.
We also have a principle which is designed to consider whether a party at the time of divorce/dissolution of a civil partnership seems likely to suffer serious financial hardship as a result of the divorce/dissolution. This provision can be used to seek an award of indefinite maintenance. Why, therefore, has it been so much rarer in Scotland for the court to make awards of indefinite maintenance for spouses? Is it because our assessment of fairness has been somehow less fair than in England and Wales? Or are we still focused on avoiding financial hardship but with the expectation that a party must take some responsibility for that too rather than relying on the other party?
Arguably, it is the latter. In the 2016 Scottish case of CG v GG the wife pursuer sought indefinite financial support on account of health issues. She was unsuccessful, despite undisputed psychiatric evidence that she was unlikely to work again in any capacity. She was awarded financial support, but only for an adjustment period of time. The Judge was clear that the purpose of the award was to enable the pursuer to adjust to her new circumstances, not to enable the standard of living enjoyed during the marriage to be maintained for an indefinite and extended period.
Maintenance, but only for an adjustment period?
The award of support in CG v GG was made under reference to another principle in our legislation. This principle sets out that where a person can show that he or she has been dependent to a substantial degree on the financial support of the other, that person should be awarded such financial provision as is reasonable to enable him or her to adjust over a period of not more than three years from the date of decree of divorce/dissolution. The principle is argued where, for example, one person has given up work or worked part-time in order to look after children of the relationship or where one person has contributed financially to an asset, such as the family home, which is not owned by him/her. However, although in theory the adjustment period can be for up to three years following divorce/dissolution, in practice, it tends to be shorter, around 18 months.
It is fair to say that in Scotland a party will have an uphill struggle to argue s/he should receive ongoing financial support for more than three years following divorce. The courts in Scotland have tended to take the view that any economic disadvantage suffered in having given up work is balanced by the advantage in having been supported by the higher earning person and by benefiting from a share of the matrimonial assets accrued as a result of the higher earner’s contributions. Whilst these are valid points, it does not alter the stark reality that at the end of the adjustment period of support, that party must be able to support him/herself financially.
This is why it is often essential when considering settlement options to obtain financial advice. This will show what the various options will deliver in real terms, not just now but looking to the future too. So, as an example, whilst it might appear attractive initially to receive a capital sum, in fact it might be better to receive a share of the other person’s pension, in order to build up pension provision.
How we can help
Our family team at Harper Macleod will help you to get the best possible settlement in your particular circumstances. We have the right connections to ensure you get all the information you need, whether that means getting input from a family lawyer in England & Wales or from a financial adviser or accountant.
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