Courts have a wide discretion to share assets in such a way as to achieve fairness, and judges are not afraid to exercise it. This article discusses whether one half of a couple can claim more because they gave up their career to care for the family.
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Every situation is unique to their own set of circumstances, so it will be no surprise to learn that, consequently, there is no set formula when it comes to calculating financial settlements. For most divorces, there is a principle of equal division of the matrimonial assets, but this is merely a jumping off point.
Although division of matrimonial assets is governed by legislation, notably section 25 of the Matrimonial Cause Act 1973, how it is applied has been left up to the courts to decide. As a result, much of the guiding principles followed by the courts have grown out of precedent. This refers to decisions made by higher courts over many years.
Arguably, the foremost principle in financial remedies is to be found in the case of White v White in 2000. Here, it set out the starting point as 50/50, unless there is a good reason to depart from this. In shorter marriages, this is likely to take lesser effect, although the judge retains their discretion to determine exactly when that point occurs.
When it comes to sorting out matrimonial finances, the court is looking to achieve fairness. Whatever is decided should be fair to both parties when considering the case in the round. So, it is therefore not considered fair that after a particularly short marriage to someone who has made little or no contribution, they should leave with half the other person’s assets.
The ‘relationship generated disadvantage’
More recently, the 2006 cases Miller v Miller; McFarlane v McFarlane pivoted on the issue of ‘relationship generated disadvantage’. But what is this disadvantage? The theory is quite simple: one party to the marriage gives up or seriously restricts their own career prospects for the family and the marriage. Most married couples are familiar with this practice, and although not attributed to one particular sex, it does appear to disproportionately affect women. The cost of childcare can act as a real bar to getting anything other than part-time work, if any. And such work is generally low paid. Even if someone manages to retain their pre-children career, the reality is that their progression prospects are likely to be substantially reduced.
In these circumstances, most couples can, and do, decide who between them is going to be the parent who reduces their working hours, and, in some cases, gives up work entirely. It is often the larger earner that tends to be the one who pursues their career. For other couples, it can be a choice, rather than one that is financially driven. Perhaps they both hold strong views about someone being a hands-on parent, there to be at home, do school runs, activities and bedtime routines.
Whatever the situation, there will be potential consequences on earning power and career progression. Whilst one party steps back from their career to take on the family responsibilities, the other continues to further their own ambitions. They may work incredibly hard, often over long hours, but they had the freedom to do so only because the other party took on responsibilities in the home.
Since the landmark cases referred to above, the role of ‘breadwinner’ against the ‘homemaker’ is viewed equally. The departure from equality, therefore, in such cases can be applied to the homemaker: they cannot turn back the clock to restore their career and earning potential. The bottom line here is that the choices a couple makes at the beginning carry through into their future, and it is only fair the court acknowledges that.
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Departing from the equality principle
A party may argue that any assets acquired through their hard work should be considered as a ‘non-marital’ asset and excluded from the principle of equal sharing. However, cases where one party can argue they have made a ‘special contribution’ will be exceedingly rare. They would have to satisfy the court that they had generated substantial wealth because of their exceptional success as a businessperson or some other extraordinary talent.
Exceptional qualities and special contributions
In the 2017 case of Work v Gray, the husband was a very high earner generating £144m from his work as a private equity fund manager. The parties had two children and before getting married had cohabited, with a later marriage lasting over 20 years. Prior to getting married, they had signed two pre-nuptial agreements under US law keeping the property and earning of each of them separate. When the marriage broke down, the husband offered his wife $5m of her own individual property, relying on the pre-nup and his special contribution.
The judge dealing with the case stated that the sharing principle should apply and rejected the husbands special contribution argument. The husband appealed the ruling, however, the Court of Appeal dismissed his appeal.
In the earlier case of Cooper-Hohn v Hohn , special contribution was successfully argued. The scale of wealth was exceptional and the sum of $6m was built up during the marriage. The husband was a hedge fund manager and the wife director and CEO of the couple’s charitable foundation. She was also the primary carer of the children. The husband argued that his ‘financial genius’ and the vast assets he had generated should be classified as a special contribution. The judge found that even though the wife had made a full contribution herself, the husband had made an even greater one, over and above the wife’s.
This case shows that the threshold for special contribution sufficient to influence the division of assets is exceptionally high, and way beyond that of more ordinary wealth acquisition. However, the court is naturally reluctant to identify a figure as a threshold for the amount of special contribution.
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