The Approach of the Court

When parties are unable to decide how their wealth shall be divided on the breakdown of their marriage, the first port of call for the district judge is The Matrimonial Causes Act 1973. Although now in excess of thirty five years old, The Matrimonial Causes Act 1973, although amended since that time, continues to be the main Act of Parliament to which the courts must turn.

Section 23 sets out the various orders the court can make in connection with divorce proceedings.

Of prime importance are the following:

1. Periodical payments by one spouse to the other (spousal maintenance).
2. Periodical payments by one spouse to the other for the benefit of the child(ren) (Child Maintenance).
3. An order that one party shall pay to the other a lump sum.

Section 24  allows the court to order that one party to the marriage shall transfer to the other party or to any child of the family property and under Section 24(A) the court has the power to enforce the sale of the property.

Section 24(B) grants the court power to order pension sharing orders.

The key section to this act is Section 25 which effectively tells the court to which matters it shall have regard in deciding how to exercise its powers under Sections 23 and 24.  The section states that firstly the court must have as its paramount concern the welfare of any minor children. Secondly, it refers the court to the following key matters.

1. The income, earning capacity, property and other financial resources of each party including the position they are likely to be at in the foreseeable future and to include, in the case of earning capacity, any increase in that capacity which in the opinion of the court it would be reasonable to expect a party to achieve.
2. Financial needs obligations and responsibilities which each of the parties has or is likely to have.
3. The standard of living enjoyed by the family before the breakdown of the marriage.
4. The age of each party to the marriage and the duration of the marriage.
5. Any physical or mental disability of either of the parties to the marriage.
6. The contributions that each of the parties has made or is likely to make in the foreseeable future.
7. The conduct of the parties but only if that conduct is such that it would, in the opinion of the court, be inequitable to disregard it.

In relation to the children of the family the court must have regard to:

1. The financial needs of the child.
2. The income earning capacity, property and other financial resources of the child.
3. Any physical or mental disability of the child.
4. The manner in which it was being and which the parties to the marriage expected it to be educated or trained.

It must be appreciated that the act has from time to time been amended and there has been from time to time additional statutory developments but these principles are at the very heart of matrimonial law.

How in fact the courts use Section 25  and apply the guidelines set down therein on a day to day basis is of course instrumental in developing the law and practitioners look for an understanding to the cases that are decided in the higher courts. Indeed since 1973 the guidance for family law practitioners and to the judges who administer these cases has developed case law over the years.

There was a substantial sea change in the interpretation of the Section 25 criteria in the case of White v White decided in The House of Lords in 2001. The facts were as follows:

This was a long marriage of thirty three years in which both parties had been farmers and indeed continued to farm in equal partnership after the marriage. The wife sought a lump sum of £2.2 million to enable her to continue farming alone while her husband retained the family farms.

When the matter first came before the court the judge found that the net assets of the marriage were £4.6 million of which £1.5 million was the wife's.  The judge awarded the wife a lump sum of £800,000 on a clean break basis declining to break up the faming business.

Understandably the wife appealed saying the judge had not taken proper account of the duration of the marriage and the value of her contribution to the partnership and arguing that he had failed to acknowledge that her contributions were a factor under Section 25 of The Matrimonial Causes Act 1973. She argued that the award of £800,000 constituted one fifth of the assets which she contended was unfair given that going forward her husband's needs were no greater.

The matter went to the Court of Appeal. That court considered the wife's future needs or reasonable requirements to be the basis for their decision and increased her award to £1.5 million reflecting her contribution to the business and the family.

This time the husband appealed and the matter went to The House of Lords. They dismissed his appeal and stated that when exercising his discretion, the judge should check his views against the "yardstick of equality of division" and stated that equality should only be departed from if there was good reason for so doing.

The House of Lords held that the determining factor should not be the claimant's financial needs rather these needs should be considered as one of several factors particularly when the asset pool exceeded the parties' needs.

Effectively, the House of Lords said that the starting point particularly in big money cases where the assets exceeded the parties' needs should be the yardstick of equality. It did not state (as is a popular misconception), that assets should be divided between husband and wife in every case on a 50/50 basis. It highlighted however that perhaps a starting point for the court particularly in a long marriage, with large assets would be 50% and not simply the needs of the parties.

In previous cases where there were substantial sums of money prior to White v. White wealthy husbands employed "the millionaires defence" which effectively said that where there was a wealthy husband all he had to do was ensure that his wife had enough money to lead a comfortable lifestyle.

White v White went further than that and effectively stated that there should be no distinction drawn between the work of a wife in caring for the home, the children and the husband's day to day needs and the husband's success in business.

The next defended case to appear in the High Court before (Mr Justice Coleridge) post the decision in White v White  was N v N a case conducted by Graham Walker of Premier Divorce who acted on behalf of the wife. In this case the husband was a chartered accountant but also the managing director and major shareholder of a security business. The assets were £2.2million. The husband argued that the business could not be sold as it generated the income from which he paid the maintenance for the wife and the three children of the marriage. Mr Justice Coleridge felt obliged to follow the decision in White v White. Although the wife had not been involved in either of the husband's businesses, this had been a long marriage in which she had borne the husband three children and cared for them, the home and the husband's domestic needs for a substantial period of time and it would be unfair and discriminatory to say that the functions she performed in her capacity as home carer were of less value than the work the husband performed in developing his businesses. The wife was awarded £1 million, just short of 50% of the total assets. This judgment confirmed the court's approach in White v White.

To avoid a sale of the security business, Mr Justice Coleridge allowed the husband three years to make the payment.

In Charman v. Charman the court had to consider an issue of "stellar contribution". In this case the parties had married in 1976 and at the time of the marriage neither party had any valuable assets. There were two children of the marriage and in 2004 the wife issued divorce proceedings and applied for ancillary relief. At this time she was fifty four years old and was not employed and lived in the former matrimonial home which had been transferred to her by agreement and was worth £8 million.

The parties' total assets were valued at £131 million, the husband owning £123 million worth of assets, the wife £8,000,000.00.

The judge at first instance ordered the husband to pay the wife a lump sum of £40 million giving her total assets of £48 million representing 36.5% of the parties' assets.

The husband appealed and highlighted the fact that his wife acknowledged that his had been a special contribution in accumulating such wealth for the family and this therefore justified him in retaining a higher proportion of the assets. He argued that the judge at first instance had approached the division of the assets in the wrong way.  He should have started at a point of equal division and then factored in the special contribution argument under Section 25 of The Matrimonial Causes Act 1973 and had he properly taken that into account the wife should have received £20 million to £28 million. He also argued that the judge should not have taken into account an off shore discretionary trust valued at £68 million.

The appeal was dismissed and the wife retained her £48 million of assets. The court reiterated that the sharing principle meant that all property should be divided equally (unless there was good reason to depart from an equal split/unless there was good reason to depart from equality). In this case the court felt that the stellar contribution of Mr. Charman was exceptional and should be reflected in a reduction from a 50/50 split.

There have been further substantial developments in the case law arising from the cases of Miller v Miller and McFarlane v McFarlane.

In Miller the husband was a successful business man who pre-marriage had arranged to move to a new company. This move took place after the marriage after which time the husband's wealth increased significantly. The marriage broke down after less than three years and the wife applied for ancillary relief in divorce proceedings. The judge acknowledged that the marriage had broken down as a result of the husband's conduct and that to ignore this would be unfair to the wife.

He awarded her a total award of £5 million. The Court of Appeal upheld that decision and the husband then appealed to the House of Lords, particularly given that this was a very short marriage.

In the case of McFarlane v McFarlane the husband and wife were both successful professionals pre-marriage. On marriage it was agreed that the wife should give up her work to raise their children. The marriage broke down and the wife applied for ancillary relief. It was agreed that the family's capital would be divided but it was insufficient to allow for a clean break. In other words there were insufficient assets for both parties to re-house themselves and have enough money to meet their needs. There had to be a maintenance order for the wife. She sought maintenance and it was determined that the husband's income exceeded the needs of the family in excess of £500,000 per year and it was expected that his income would continue to rise until he retired. The wife estimated her needs at £128,000 a year. The judge ordered the husband to make maintenance payments to the wife in the sum of £250,000 per annum. On appeal this figure was reduced to £180,000 and the judge indicated that this would be a figure that would allow sufficient monies over her needs of £128,000 for her to save and accumulate further capital by saving the difference between £128,000 and £180,000. The wife appealed to The Court of Appeal which restored the higher figure of £250,000 but fixed this payment for five years only. The wife then appealed to The House of Lords.

Both appeals in the Miller and McFarlane cases were heard by The House of Lords. In Miller's case The House of Lords dismissed the husband's appeal against the award of £5 million to the wife and they determined that three principles should guide the court when trying to achieve fairness in the division of property. This was a new approach and a significant one.

1. The needs of the parties.
2. Compensation which would redress any significant prospective economic disparity between the parties as a result of the way the marriage was conducted.
3. Equal sharing.

It was made clear that in most cases conduct would not need to be considered and it would only be considered in exceptional cases where, under the provisions of Section 25 (2) (g) of The Matrimonial Causes Act 1973 it would be inequitable to disregard it.

In McFarlane's case the Lords accepted Mrs McFarlane's appeal and decided that she should receive £250,000 per annum but for life, not limited to five years subject to possible future revision if circumstances change.  This judgment confirms that for 'stay at home' spouses, the settlement will not be based on just an assessment of their needs but also on their contribution to the wealth of the family. In addition the Lords took account of the loss to Mrs McFarlane caused by foregoing her career.

In is judgment. Lord Nicholls said that in the cases of short marriage fairness may well require that the claimant should not be entitled to a share of the other's non-matrimonial property i.e. property that was brought into the marriage rather than acquired during it. He also emphasised that unless the misconduct by one spouse is such that it would in the opinion of the court be unfair to disregard it, it cannot be a factor in the financial settlement. This should enable more divorce cases to avoid the courts and the negotiations to be conducted in a more conciliatory manner.

Therefore these cases confirm that the House of Lords has emphasised that marriage is a partnership and that the relative contributions of the couple to the marriage will be relevant to the financial settlement terms as will the legitimate expectations of the couple. The judgments will be used by divorcing spouses who have sacrificed their own careers for those of their partner or who marry with the expectation of a well-to-do lifestyle only to have that prospect dashed. In delivering his judgment Lord Nicholls of Birkenhead stressed that marriages were partnerships of equals and that this principle is as relevant to short marriages as long ones.