Financial Provision (Ancillary Relief)
By Rebecca Fairbairn14th July, 2014
An analysis of the law of ancillary relief in England and Wales with consideration of recent authorities.
Overview of topic
1. The range of orders that a Court can make to resolve the financial affairs of persons is known as financial or ancillary relief.
2. The Court will have regard to the statutory framework as set out in section 25 of the Matrimonial Causes Act 1973.
3. Following White v White the Court must check its decision against the yardstick of equality of division.
4. The section 25 criteria is not a hierarchy, the weight attributable to each factor will depend on the facts of the case.
5. Unmatched or stellar contributions may justify a departure from equality of division.
6. In “big money cases” the Court is concerned with achieving fair division of assets taking into account the principles of sharing and compensation.
7. The sharing principle applies to all property but where assets are non-matrimonial there is a greater justification for a departure from equality.
- The Matrimonial Causes Act 1973
- Legal Aid, Sentencing and Punishment of Offenders Act 2012
- Key Subordinate Legislation
- The Family Procedure Rules 1991
- Key Quasi-Legislation
- Key European Union Legislation
- Relevant publications
- Marital Property Agreements Executive Summary (11th January 2011)
- White v White (1998) 2 FLR 310
- Miller and McFarlane (2006) UKHL 24
- McCartney v Mills – McCartney (2008) EWHC 401
- Cowan v Cowan (2001) 1 AC
- Lambert v Lambert (2002) EWCA Civ 1865
- G v G (2004) 1 FLR 1011
- Parlour v Parlour (2004) EWCA 872
- R v R (1992) 1 AC 599
- GW v RW (Financial Provision: Departure from Equality)
- RP v RP (2007) EWHC 779
- H v H (2007) EWHC 459 (Fam)
- Robson v Robson (2010) EWHC Civ 1171
- Radmacher v Granatino (2010) UKSC 42
Discussion of detail
1. The range of orders that the Court can make to resolve the financial status of parties to a divorce, judicial separation or nullity is known as ancillary relief. It is defined in the Family Proceedings Rules 1991 (FPR 1991) as:
- a) An avoidance of disposition order,
- b) A financial provision order
- c) An order for maintenance pending suit,
- d) Property adjustment order,
- e) A variation order or
- f) A pension sharing order.
2. The FPR defines an avoidance of disposition order as an order under section 37 (2)(b) or (c) of the Matrimonial Causes Act 1973, namely where the Court is satisfied that one party has made a disposition with the intention to defeat a claim for ancillary relief. A variation order is set out in section 31of the MCA 1973 and which provides the Court with the power to amongst others, discharge, extend or capitalise financial orders.
3. A financial provision order includes periodical and secured periodical payments orders and lump sum orders. A property adjustment order is a property transfer order, a property settlement or an order varying a benefit under a marriage settlement. The Court may also make an order for sale of property.
4. Section 25 Matrimonial Causes Act 1973 sets out the factors a court will consider when making an Order under sections 23, 24 and 24A of the MCA 1973;
- (1) It shall be the duty of the court in deciding whether to exercise its powers under section 23, 24 above and, if so, in what manner, to have regard to all the circumstances of the case, first consideration being given to the welfare while a minor of any child of the family who has not attained the age of eighteen.
- (2) As regards the exercise of the powers of the court under section 23(1)(a), (b) or (c), 24 above in relation to a party to the marriage, the court shall in particular have regard to the following matters—
- (a) The income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future, including in the case of earning capacity any increase in that capacity which it would in the opinion of the court be reasonable to expect a party to the marriage to take steps to acquire;
- (b) The financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future;
- (c) The standard of living enjoyed by the family before the breakdown of the marriage;
- (d) The age of each party to the marriage and the duration of the marriage;
- (e) Any physical or mental disability of either of the parties to the marriage;
- (f) The contributions which each of the parties has made or is likely in the foreseeable future to make to the welfare of the family, including any contribution by looking after the home or caring for the family;
- (g) The conduct of each of the parties, if that conduct is such that it would in the opinion of the court be inequitable to disregard it;
- (h) In the case of proceedings for divorce or nullity of marriage, the value to each of the parties to the marriage of any benefit which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring.
- (3) As regards the exercise of the powers of the court under section 23(1)(d), (e) or (f), (2) or (4), 24 or 24A above in relation to a child of the family, the court shall in particular have regard to the following matters—
- (a) The financial needs of the child;
- (b) The income, earning capacity (if any), property and other financial resources of the child;
- (c) Any physical or mental disability of the child;
- (d) The manner in which he was being and in which the parties to the marriage expected him to be educated or trained;
- (e) The considerations mentioned in relation to the parties to the marriage in paragraphs (a), (b), (c) and (e) of subsection (2) above.
- (4) As regards the exercise of the powers of the court under section 23(1)(d), (e) or (f), (2) or (4), 24 or 24A above against a party to a marriage in favour of a child of the family who is not the child of that party, the court shall also have regard—
- (a) To whether that party assumed any responsibility for the child’s maintenance, and, if so, to the extent to which, and the basis upon which, that party assumed such responsibility and to the length of time for which that party discharged such responsibility;
- (b) To whether in assuming and discharging such responsibility that party did so knowing that the child was not his or her own;
- (c) To the liability of any other person to maintain the child.
- i) that the implicit objective in section 25 is to achieve a fair outcome giving first consideration to the welfare of children,
- ii) fairness demanded that the court take account of all the circumstances, which did not permit discrimination between the parties based on their roles within the family. The division of labour should not prejudice or advantage either party when considering their contributions to the family, and so it mattered not who earned the money and built up the assets. Before dividing the assets a Judge should check his decision against the yardstick of equal division. Generally the court should only depart from equality where there was good reason for doing so.
- i) Adherence to the section 25 criteria,
- ii) The criteria are in no hierarchical order and the weight to be attached to each factor will depend on the particular facts and circumstances of the case,
- iii) The exercise of discretion allows for flexibility in order to find the right answer to the circumstances of the case,
- iv) The objective is to achieve a fair and just result between the parties,
- v) The needs, sharing and compensation principles will guide the search for fairness,
- vi) Inherited wealth forms part of the matrimonial property and must be taken into account however,
- vii) The fact that it is inherited wealth and not earned justifies different treatment and the nature and source of the asset may provide a good reason to depart from the sharing principle,
- viii) The duration of marriage and duration of time that wealth had been enjoyed will be relevant, as will the standard of living enhanced by the added wealth. Also the way that property has been preserved, enhanced or depleted will be taken into account. The longer the wealth has been enjoyed the less fair that it should be ring-fenced.
5. These statutory guidelines are the principal factors to be taken into account when considering an application for financial relief. Whilst appellate authorities demonstrate how the criteria have been applied in one particular case their guidance may have limited relevance; since each case is fact specific. In White v White (1998) 2 FLR 310, CA Butler-Sloss LJ stated “ there is a danger that practionners in the field of family law attempt to apply too rigidly the decisions of this court and of the Family Division, without sufficiently recognising that each case involving a family has to be decided upon broad principals adapted to facts of the individual case. All ancillary relief applications are governed by the statutory framework set out in the Matrimonial Causes Act 1973 as amended by 1984. Sections 25 and 25A provide the guidelines and require the court to have regard to all the circumstances of the individual case and to exercise the discretion of the court to do justice between the parties”.
6. Although section 25 sets out the factors that will be taken into account it does not provide a starting point or a prescribed calculation by which the assets would be divided between the parties. The lack of such formula is at odds with the position in many other jurisdictions where the division of assets is prescribed, often depending on the length of the marriage. Although some would welcome adopting such a formula within Statute, the present guidelines simply cannot accommodate it. It remains the position that each case must be considered on its own facts but with reference to the section 25 criteria. Despite this the House of Lords have been able to reach general agreement about important principles that should be applied.
7. The parties had been married over 30 years and had two adult children. They both came from farming families and throughout their marriage carried on a dairy farming business in partnership. The parties jointly owned one farm that had been purchased using a small loan from the Husband’s father and a mortgage. Later the Husband utilised funds from his Father’s estate to purchase a second farm in his sole name. The parties’ overall assets were in the region of £4.6m. Holman J awarded the Wife £800,000 (in addition to the assets that she held in her sole name £193,000) on the basis that her reasonable requirements were £980,000 on a clean break basis. The Judge found that her desire to have a farm of her own was not reasonable and that it was unwise and unjustifiable to break up the existing farms. On appeal the Court of Appeal awarded the Wife £1.5m to take account of her contributions to the farming partnership and to the family as a wife and mother. Both parties appealed, the Husband seeking a restoration of the original order and the Wife seeking an equal division of the assets. In dismissing the appeals the House of Lords held;
8. The Lords did not rank the s.25 criteria in a hierarchy and the weight attributable to each factor will depend on the facts of the case. A party’s financial needs, was only one factor and the meeting of their needs did not make the other party’s assets immaterial. The Lords favoured use of the expression “needs” rather than reasonable requirements in order to avoid confusion. It was considered that this still afforded the court the degree of flexibility to determine the case depending on a person’s age, health and accustomed standard of living. Further the Lords considered that since some property was inherited it was one of the circumstances of the case and would be given the appropriate weight in light of the facts. Lord Nicholls also addressed the “Duxbury paradox” whereby an older wife would receive less than a younger wife on the basis of a pure Duxbury calculation. The Lords held that, in a case where the assets exceeded the parties’ needs an older wife would not automatically receive less than a younger wife and in fact an older wife might well expect to receive more.
9. Lord Nicholls confirmed the application of White to small money cases in the later case of Miller and McFarlane (below). Each party was entitled to a fair share of the available property and the search was always for what were “the requirements of fairness in a particular case.” The welfare of any children was first priority and required no further illustration. The next stage was to achieve interdependence. Lord Nicholls stated “ when the marriage ends fairness requires the assets of the parties should be divided primarily so as to make provision for the parties’ housing and financial needs, taking into account a wide range of matters such as the parties’ ages, their future earning capacity, the family’s standard of living, and any disability of either party. Most, but not all of these needs will have been generated by the marriage. Needs arising from age or disability are instances of the latter.” In the vast majority of cases one party’s needs will be determinative and there being insufficient assets to provide further.
10. The well known case of McCartney v Mills – McCartney (2008) EWHC 401 was an illustration of Lord Nicholls’ words in White v White that in particular (big money cases) cases a wife should be confined to her needs. The Husband has assets of £400m, the Wife £7m; the Wife’s contributions could not be said to be exceptional, nor were there grounds for a compensatory order. The Wife was awarded £16.5m on the basis of her income needs at £600,000 pa, £2.5m for a home on a clean break basis.
11. Following White v White practioners often deployed the argument that their client, usually the Husband had made an unmatched or “stellar” contribution to the parties’ financial position, such that justified a departure from equality. This argument succeeded in Cowan v Cowan (2001) 1 AC. The parties were in their sixties, with two adult children who had been married for 35 years. The net assets of £11.5m had been amassed by the Husband’ plastics business and his ingenuity genius in foreseeing the market potential of bin liners. At first instance Singer J awarded the Wife £1.775m in addition to the former matrimonial home, a Florida flat, pension and approximately £50,000 in other assets. This represented 28% of the net assets. The Wife’s appeal was successful in that the Court of Appeal increased the lump sum to £3m, which therefore represented 38% of the net assets. The Court did however find that the Husband’s particular skill and efforts justified him receiving the larger part of the surplus and a departure from equality.
12. However just a year later and Lambert v Lambert (2002) EWCA Civ 1865 evinced a withdrawal on the issue of contributions. The Wife was 39 the Husband 57, they had been married 23 years. Their adult children were independently wealthy. The total assets were £20.2m, the former matrimonial home was £1.6m and the wife had sole assets of £2.6m. The large proportion of the parties’ wealth had derived from the Husband’s sale of shares in his business that he had set up shortly before the marriage. At first instance the Wife was awarded the former matrimonial home and £3.1m, giving her 37.5% of the net assets. On appeal the Wife was awarded 50% of the net assets with Bodey J stating “ I agree that it is not possible to define once and for all, by way of some formulaic label, the precise characteristics of the fortune-maker (or fortune-making) required in the paradigm case such as this, in order that when the proposed distribution of the resources is checked against the “yardstick of equality”, the fully contributing homemaker should receive a lesser share of the wealth than the fortune-maker. However, those characteristics or circumstances clearly have to be of a wholly exceptional nature, such that it would very obviously be inconsistent with the objective of achieving fairness (i.e. it would create an unfair outcome) for them to be ignored.” A number of principles had started to evolve which required consideration by the House of Lords. This came by way of the joined appeals of Miller v Miller and McFarlane.
13. The Wife was 36, the Husband 41 and an incredibly successful fund manager. They were married in 2000 and had no children. During the marriage the husband received shares in New Star capital a venture in which he was said to have a 20% interest and the option to purchase more. In 2003 the Husband left the Wife for another woman who he subsequently married. At the FDR the order contained a recital that the wife would not be relying on conduct. Later her solicitors retracted that and indicated that they would rely on G v G (2004) 1 FLR 1011 “to establish the facts that led to the end of the marriage, and as a defensive shield to the reliance that no doubt will be made by your client on the duration of the marriage”. At trial Singer J refused to be bound by the earlier recital stating that it was his statutory duty to look at all circumstances of the case.
14. The husband’s position was that the wife should be restored to the position she was in prior to the marriage; a professional woman living in a rented flat with an net income of £50,000 to £120,0000. Thus he offered £1.2m that included provision of £500,000 for a flat and income to cover the shortfall in salary while she worked her way back to her previous position. The husband considered his offer generous. The wife’s position was that her award should be by reference to the increase in the husband’s fortune during the marriage, thereby adopting White and the rule of marital acquest. The date when the husband’s wealth increased and by what extent, was in dispute. Both incurred considerable costs in instructing financial accountants. The wife’s accountant valued the husband’s interest in New Star at £20m and the husband’s at £14m. The wife sought £7.2m or 37.5% of the marital acquest. Singer J found in favour of the wife as to the breakdown of the marriage but made no specific finding on the value of the New star shares, and awarding the wife the London home (£3.2m) and a lump sum of £2.7m. He concluded his judgment with the following sentence “a global award equivalent to £5m (plus the furniture and chattels which have agreed) seems to me a fair outcome irrespective of what ever value the husband in due course may achieve for the New Star shares.”
15. The husband appealed. He submitted that Singer J was wrong to justify the higher award on the basis that the wife had a legitimate expectation to live at a higher standard of affluence following her marriage. He cited a number of authorities dealing with short marriage cases but his case was given short shrift. The wife’s counsel was asked to address two points, 1) whether the judge’s conclusion was sufficiently explained and reasoned and 2) was the judge’s overall award plainly excessive. Counsel submitted that the Singer J had plainly been impressed with the wife’s commitment to the marriage and that the short marriage argument had been neutralised by the wife’s comparable absence of responsibility for its breakdown. The award had regard to the wife’s needs. As to the scale of the award it represented 1/6th to 1/7th of the husband’s fortune and based on the product of the marriage of between £12m and £16m represented 34% of the marital acquest. The Court of Appeal held that they would only interfere with the Judge’s award if they were satisfied that the award was plainly excessive and that it was inadequately reasoned. They did not so find.
16. Guidance was evinced from the Court of Appeal judgments in Miller. Firstly, the old cases in relation to short marriages now have little value with the Court affirming that the old principle of putting the wife back on her feet was no longer appropriate. Secondly, conduct which fell short of s.25(2)(g) might still be relevant as a circumstance of the case. Thirdly, the relatively large award for just 2 ¾ years of marriage was justified on a clean break case. Seemingly they also endorsed Singer J’s reference to the wife’s legitimate expectation.
17. The parties were 44 and had married in 1984. They had three children aged 8, 13 and 15. The husband was a partner in a firm of chartered accountants. The wife was a qualified solicitor but by agreement had not worked since 1991. The capital assets were £3m and equal division had been agreed. The husband’s net income was £753,000 per annum. It was agreed he would pay the school fees and £20,000 per annum per child. There was dispute as to the wife’s income needs. The wife sought £275,000 per annum and the husband offered £100,000. District Judge Redgrave awarded the wife £250,000 per annum index linked which represented 33.18% of his net income. When this matter came before the Court of Appeal Thorpe LJ commented “implicit within the district judge’s reasoning is first the conclusion that the wife should have the same opportunity as the husband to make provision for the years of retirement and second the conclusion that she should have the means with which to insure herself and the children against the risk of premature cessation of the husband’s high professional earnings”.
18. On the husband’s appeal at first instance Bennett J found that the District Judge had been wrong to make a periodic payments order that enabled the wife to build up a retirement fund. He instead substituted an award of £180,000 pa. The wife’s appeal to the Court of Appeal was heard at the same time as the more famous case Parlour v Parlour. These cases were linked by the fact that Bennett J heard both; Parlour at first instance and McFarlane on appeal. Further Bennett J directed himself in Parlour according to his decision in McFarlane. The general question that was addressed at the Court of Appeal was the principal to be applied to periodical payments for joint lives or until remarriage in cases where the net income of the payer significantly exceeded what both parties needed to meet their outgoings at an appropriate standard of living. In both cases the parties’ past surplus of income had been converted into assets and divided by agreement. The issue therefore was the amount of the future surplus and how this could be converted into a clean break.
19. Thorpe LJ found fault with Bennett J’s failure to identify the importance of s.25A since the Court had a statutory duty to consider whether a clean break might be available in the future. This duty should be at the fore in cases such as this, where the future net income will far exceed needs. However often, as in Parlour where Ray Parlour was heading towards the end of his football career, the future surplus in these cases may be short-lived. Both parties have an obligation to achieve mutual financial independence. The paying party must prioritise the making of periodic payments out of his surplus income and the payee must invest wisely. Given the mutual obligations that both parties have it would be wrong to give the payer exclusive control over the surplus and the means of achieving this is through periodical payments, which would be variable and dependent on the payer’s income. The process of achieving a clean break must be within a relatively short time span, with a term of 5 years seen as towards the upper end of what was foreseeable.
20. In McFarlane the Court of Appeal held that Bennett J had erred in interfering with District Judge Redgrave’s order and restored it; however they removed the index linking provision and imposed a 5-year term. The Court of Appeal emphasised that Miller and McFarlane were exceptional cases; they both had very high incomes but insufficient capital to achieve an immediate clean break. Neither wife had the immediate prospect of improving her income capacity and in McFarlane the wife had the care of young children. The paramount factor therefore was the means by which a clean break could be achieved in the future. The Court of Appeal judgment set out a number of underlying principles: the importance of s.25A was reasserted, in conjunction with the ability to bring a clean break about through variation under s.31(7A)to(7F). Where a clean break could not be achieved immediately the Court had a statutory duty to consider whether it could be achieved in the future. And finally periodical payments were not limited to the payee’s needs, to do so would give prominence to s.25 (2) to the exclusion of the others. What the judgment did not do was assist with the proportion of the payer’s income that should be applied to the calculation. In Parlour the wife conceded that a departure from equality was appropriate and sought the same percentage as had been applied to capital. This succeeded but left unanswered whether if she had not made the concession the Court would have ordered equal division as to income in line with the parties’ agreement on capital.
21. The Lords delivered their Opinions on the combined appeals on 24th May 2006. In short order Mr. Miller’s appeal was dismissed and Mrs. McFarlane’s allowed in so far as the 5-year term was removed. However the Opinions highlighted important factors to be applied in considering the s.25 criteria.
22. The concept of compensation was given more prominence than it previously had. It was relevant in cases where financial affairs were arranged so as to greatly benefit the husband and leave the wife’s earning capacity frustrated. Often the wife suffers twofold, a loss of her own earning capacity and the loss of her share in the husband’s enhanced income. The Lords recognised that, although less so than in the past, women still suffered disproportionate financial loss on the breakdown of marriage due to their traditional roles of homemaker and childcarer. Whilst there was an overlap between needs and compensation they were cited as being distinct concepts and “far from co-terminous”.
23. Lord Nicholls observed the further notion of “sharing”. He referred to Lord Emslie’s observation in R v R (1992) 1 AC 599 at 617 that “husband and wife are now for all practical purposes equal partners in marriage.” This principal is of course now widely accepted. When parties commit to marriage and live and work together they are entitled to an equal share when that partnership ends “unless there is good reason to the contrary”. The yardstick of equality is to be applied as an aid not a rule.
24. The principle of sharing applies equally to short marriages and was expressly approved Foster v Foster. In doing so he did not agree with the approach taken by Mostyn J in GW v RW (Financial Provision: Departure from Equality), where he held that it would be fundamentally unfair that a party who made domestic contributions during a 12 year marriage should be awarded the same as one who had made contributions for more than 20 years. Lord Nicholls stated “ I am unable to agree with this approach. This approach would mean that on the breakdown of a short marriage the money-earner would have a head start over the homemaker and childcarer. To confine the White approach to the “fruits of a long marital partnership” would be to introduce precisely the sort of discrimination that the White case was intended to negate.” The court should be slow to distinguish between “family” and “business or investment” assets; Lord Nicholls warned and that the sharing principle should apply to both. He referred to this distinction as to property as a complication. The 1973 Act draws no qualification between the two and expressly requires the Court to have regard to the property and financial resources of the parties’ on a general manner. But statue demands the Court look at all the circumstances of the case including whether there is different source and a real difference in terms between, property acquired during the marriage (other than by way of inheritance or gift) “marital acquest” or matrimonial property and other property. The former usually the product of the parties’ common efforts while the second is not. Even where one party brings the matrimonial home to the marriage this should normally be considered as matrimonial property. Lord Nicholls had already considered the application of this principal in White. “In the case of a short marriage fairness may well require that the claimant should not be entitled to a share of the other’s non-matrimonial property. The source of the asset may be a good reason for departing from equality. This reflects the instinctive feeling that parties will generally have less call upon each other on the breakdown of a short marriage.
25. In longer marriages it is not as straightforward. Non-matrimonial property represents a contribution made by one party to the marriage, however as the years pass the weight to be attached to that contribution may be lessened. Further the way the parties’ have managed their financial affairs might also be relevant. Lord Nicholls highlighted the need for flexibility since it might not be possible in every case to draw a line between the two types of property. The case of Miller highlighted the costs of instructing financial experts and the difficulty in preferring one expert opinion from another. Often such detailed enquiry is of limited use when the Court will assess matrimonial and non-matrimonial property on a general basis, looking at the contribution that a party has made and then attach what weight is appropriate.
26. Lord Nicholls sought to address whether in big money cases, the needs and compensation elements should be addressed first, followed by the sharing principle thereafter? If this were the case then the parties’ financial needs would be subsumed by the sharing principle. However in some cases it would be more appropriate to address needs and apply the sharing and compensatory elements only to the residual assets. The appropriate method would depend on the facts of the case.
27. The McFarlane appeal raised the issue whether periodical payments could be used to provide an element of compensation in addition to the provision of maintenance. Lord Nicholls was clear “the court is required to have particular regard to the familiar wide-ranging checklist set out in s.25 (2). These provisions, far from suggesting an intention to restrict periodical payments to the one particular purpose of maintenance, suggest that the financial provision orders in s.23 were designed to be flexible in the application. In particular, I consider a periodical payments order may be made for the purpose of affording compensation to the other party as well as meeting financial needs. It would be extraordinary if this were not so.” The second issue was the effect of a clean break on a spouse awarded a compensatory periodical payments order. Lord Nicholls held that whilst the court was under a duty to consider whether a clean break was appropriate there was no express guidance as to what circumstances would make a clean break appropriate. The aim of s.25A (1) is that the parties’ financial obligations and responsibilities towards the other end at a time when is appropriate. It should not be exercised if it would cause unfairness or undue hardship (S.25A (2)). Thus it would be unfair in a compensation case where no capital is available, that the desirability of a clean break should deny the Claimant that compensation.
28. Lord Nicholls impressed that Court of Appeal had been correct not to adopt the principals set out in the previous short marriage cases. In big money cases the Court is concerned with achieving a fair division of the assets, taking into account the parties’ respective needs and the need for compensation. The starting point is whether good reason exits to depart from equality. In short marriages invariably there will be good reason for departing from equality in relation to non-matrimonial assets. In considering the “legitimate expectation” as referred to by Singer J, Lord Nicholls considered that he was doing no more than considering the parties’ standard of living as he was obliged to do, and that to go further would be wrong. Doubtless the parties had high hopes for the future but hopes and expectations were not an appropriate basis upon which to assess financial needs. However Lord Nicholls criticised Singer J and the Court of Appeal for having regard to Mr. Miller’s conduct when the Judge had found as fact that it did not meet the statutory criteria of conduct such was inequitable to disregard. In most cases conduct will not be relevant but in the exceptional case where it would be inequitable to disregard it, statute still permits it to be taken into account. Lord Nicholls further advised about special contributions. “The answer is that exceptional earnings are to be regarded as a factor pointing away from equality of division when, but only when, it would be inequitable to proceed otherwise. The wholly exceptional nature of the earnings must be, to borrow a phrase more familiar in a different context, obvious and gross.”
29. The concept of sharing has not enjoyed much prominence since Miller, McFarlane. In RP v RP (2007) EWHC 779 the parties had been married for 10 years with 4 years co-habitation. The wife had given up work as a director of a recruitment agency in order to support the husband who was working as an investment banker in Hong Kong. The couple had twins. At the time of trial the Wife had set up a design consultancy and was making profit of £15 to £20k per annum. The Husband was earning £400 to £500k per annum at the bank but was planning to leave and set up as a self-employed banking consultant in Australia. The Husband’s income was set to plummet but was estimated to increase to £150k per annum within 5 years. Both parties sought a clean break, the Husband accepted that he would pay child maintenance of £6k per annum index linked and pay school fees secured in a fund of £130k. The Wife sought £2M plus the fund with the Husband to receive £1M. The Husband sought £1.3M and asked the Judge to concentrate his focus on the Wife’s needs and the Wife sought compensation for the loss of her income as a result of their marriage. The Court awarded the Wife £1.8M including the pension which together amounted to 60% of the assets.
30. In H v H (2007) EWHC 459 (Fam) Charles J held that Miller, McFarlane had not set up a series of statutory tests which led to predetermined results as this would detract from the flexibility of section 25. A new methodology had not arisen likening ancillary relief cases to compensation in civil cases.
29. The Court of Appeal decision in Charman was a crucial one, covering a number of important issues. The first was how the “yardstick of equality should be approached”. There was dispute as to whether the Court should start with equality and then depart from it where appropriate or whether the s.25 criteria should be applied with the result being checked against the yardstick of equality. The Court made reference to the sharing strand which Miller had introduced, “although in White the majority of the House agreed with the speech of Lord Nicholls and thus with his description of equality as a “yardstick” against which tentative “views” should be checked. Lord Cooke at p.61D, doubted whether use of the words “yardstick” or “check” would produce a result different from that of the words “guideline” or starting point”. In Miller the House clearly moved towards the position of Lord Cooke. Thus Lord Nicholls, at  and  referred to the “equal sharing principle” and to the “sharing entitlement”; those phrases describe more than a yardstick for use as a check.” Any doubt was dispelled when Baroness Hale stated, “I agree that there cannot be a hard and fast rule about whether one starts from equal sharing and departs if need or compensation supply a reason to do so, or whether one starts with need and compensation and shares the balance.” It appears therefore that equal sharing is now more of a starting point than yardstick.
30. The Court of Appeal again sought to tackle the issue of non-matrimonial property stating that the sharing principle applied to all property, although where property is non-matrimonial there is likely to be greater justification for a departure from equality. Charman was a case involving considerable assets £138m that it was agreed were almost entirely the product of the Husband’s ingenuity. The Court of Appeal held that the Husband’s “special contribution” survived the decision in Miller but they declined to specify a threshold above which special contributions were protected. They did however indicate where special contributions had been made out the adjustment from equality should be significant as opposed to token. In percentage terms they opined it should be no nearer equality than 55% to 45%. Equally however the adjustment should not be too great especially in a long marriage and stated that rarely, even in an extreme case should it be farther from equality than 66.6% to 33.3%.
31. The case of Robson v Robson (2010) EWHC Civ 1171 is useful for LJ Ward’s summary of the correct approach in “big-money cases”.
32. In 2011 the Law Commission reported on the approach taken by the Courts in Marital Property Agreements Executive Summary (11th January 2011). It contrasted the law of ancillary relief in England and Wales and the community of property jurisdictions in continental Europe. It identified two differences, the first being the comparative lack of uncertainty here, as to the extent of property subject to the sharing principle. Our system is discretionary and the enunciation of the “yardstick of equality” preserves flexibility, whereas the community systems are rule based. Further community systems define matrimonial and non-matrimonial property. It concluded that in the minority of cases where assets exceed needs that there was “a less than clear principle of equal sharing”, especially in short marriage cases or where there is a form of unusual property. It identified that in the big money cases the uncertainty was of a different nature since once needs had been met, the court had to find a fair and non-discriminatory solution. The uncertainty lies in the fact that equal division is not an absolute rule and legal advisors face genuine dilemma in advising clients on settlement. Thus there have been calls for the potential for couples to contract out of the uncertainty. Although a marital agreement does not guarantee certainty the Supreme Court’s decision in Radmacher v Granatino (2010) UKSC 42 has demonstrated the Court’s greater willingness to exercise their discretion in accordance with the agreement provided fairly entered into. The Law Commission report posed the question whether the law relating to marital property agreements should be changed so as to permit such agreements to oust the jurisdiction of the courts in ancillary relief and if so, to what extent. Reform of ancillary relief law would be a major undertaking and would require extensive consultation.
33. Sir James Munby suggested that practice and procedure needed to be reconsidered to utilise mediation and other out of court methods, while at the same time streamlining the judicial process for those cases that require it. He felt the need for change had been accelerated by the legal aid cuts introduced by Legal Aid, Sentencing and Punishment of Offenders Act 2012.
34. Despite the Judiciary calling for root and branch reform of family law in England and Wales Governments seem reluctant to act. Thus, practionners will still yet have to grapple with the extensive and highly discretionary law of ancillary relief.
By Rebecca Fairbairn
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