Waggott v Waggott, Court of Appeal - Civil Division, April 11, 2018, [2018] EWCA Civ 727

Resolution Date:April 11, 2018
Issuing Organization:Civil Division
Actores:Waggott v Waggott
 
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Case No: B6/2016/0784

Neutral Citation Number: [2018] EWCA Civ 727

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM

RECORDER TIDBURY

SITTING AS A JUDGE OF THE FAMILY COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 11/04/2018

Before :

SIR JAMES MUNBY PRESIDENT OF THE FAMILY DIVISION

LORD JUSTICE MOYLAN

and

MR JUSTICE MACDONALD

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Between :

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Mr James Turner QC and Mr Thomas Dance (instructed by BP Collins LLP) for the Appellant

Mr Nigel Dyer QC and Ms Lily Mottahedan (instructed by Penningtons Manches LLP) for the Respondent

Hearing dates: 29th and 30th November 2017

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JudgmentLord Justice Moylan :

Introduction

This case raises issues about the application of, and the relationship between, the principles of need, sharing and compensation in the determination of financial claims under the Matrimonial Causes Act 1973 (``the 1973 Act''). The specific issues can be phrased in a variety of ways but I propose to express, what I regard as, the principal issues as follows:

(i) Is an earning capacity capable of being a matrimonial asset to which the sharing principle applies and in the product of which, as a result, an applicant spouse has a continuing entitlement to share?

(ii) How should the court assess whether an award determined by application of the sharing principle meets the party's needs? More specifically to the arguments advanced in this case, to what extent is it fair for the wife to be required to use her sharing award to meet her income needs when the husband will meet his needs from earned income?

Additionally, although as a subsidiary issue, the wife submits that the compensation principle has not been properly understood and applied because it is applicable, not only when the applicant spouse has sustained a financial disadvantage, but also, separately, when the respondent has sustained a financial advantage during the marriage.

It has been said in many previous decisions that there are few cases in which the available resources exceed those required to meet the family's future financial needs. On one view, having regard to the substantial amount of the resources available in this case, the issues raised might, therefore, be considered to have limited application. However, as explained below, this is not necessarily the position and it is important that, when determining the arguments raised in this case, I should at least consider how those arguments and their determination might impact on a broader range of cases.

This is important because of the obligation on the courts to achieve, what Lord Nicholls in Miller v Miller; McFarlane v McFarlane [2006] 2 AC 618 (``Miller'') (para 6) referred to as, ``an acceptable degree of consistency of decision from one case to the next''. I would also note in passing that the statistics published by the Ministry of Justice for the years 2006 to 2016, whilst accepted not to be entirely accurate (and thought to underestimate the overall number of applications), show that a very significant percentage of cases started (which have numbered, very broadly, between 38,000 and 65,000 per year) are either uncontested or become uncontested because they are resolved by agreement between the parties. It is only a very small percentage, in many years well under 10% (between about 3,000 and 3,800 cases), that are determined after a contested hearing. This is not to diminish the impact on the families involved in those contested cases but to remind me of the importance of adhering to Lord Nicholls' observation and, as he went on to say, that the articulation by the courts of the applicable principles have the objective, as an ``important aspect of fairness'', of providing an appropriate degree of clarity and predictability in the manner of their application.

The final financial remedy order which is the subject of this appeal was made by Recorder Tidbury sitting in the Central Family Court on 16th September 2016. The parties had agreed that their capital resources, including pensions, should be divided equally. Centred on the issues of principle referred to above, they disagreed about the extent to which the wife should receive additional provision by way of maintenance.

In simplified terms, the effect of the court's order has been as follows. The wife's share of the parties' capital resources totalled £8.4 million and the husband's £7.8 million. The difference reflected specific adjustments made by the judge to ensure that the resources were shared equally (for example, because the wife had not yet incurred the cost of purchasing alternative accommodation). The wife received an additional sum of just under £1.4 million comprising differing percentages of deferred remuneration received by the husband after the parties had separated. The award, therefore, totalled £9.76 million. In addition, the judge ordered the husband to pay the wife ongoing maintenance for joint lives at the rate required to meet her income needs which he assessed to be £175,000 per year.

The wife made it clear from receipt of the judge's first draft judgment that she intended to seek permission to appeal. Permission was refused by the judge but was granted by Gloster LJ. The husband responded by filing a Respondent's Notice. I gave him permission to cross-appeal.

In summary the parties' respective cases are as follows.

As to the issue set out under (i) above, Mr Turner QC on behalf of the wife (as I will call her) submits that the judge failed to award her a fair share of the husband's post-separation earned income. He submits that the husband's earning capacity is a matrimonial asset in which the wife is entitled to share as with any other such asset. It was built up during the marriage and is, therefore, the product of marital endeavour. Accordingly, post-separation income received by the husband from the deployment of this earning capacity should be shared as being referable to or the product of marital endeavour.

As to the issue under (ii), Mr Turner submits that the wife should not have to make any use of her capital share, including by the attribution of a notional investment return, to meet her income needs.

Mr Turner further submits that she is entitled to a share of the husband's earned income by application of the compensation principle. This principle, ``properly understood'', applies not only when an applicant has sustained a financial detriment but also when a financial benefit or advantage has accrued to a respondent by reason of the relationship and which has produced a surplus of resources over needs.

In summary, the wife submits that she should have been awarded 35% of the husband's net bonuses payable in respect of the years up to and including 2019 (payable until 2022) and maintenance at the rate of £190,000 per year for the parties' joint lives.

Mr Dyer QC on behalf of the husband (as I will call him) submits that an earning capacity is not an asset to which the sharing principle applies. However, although this was, what might be called, his headline submission, he conceded that, as a matter of practice, an award of a share of post-separation bonuses sometimes occurs even though they were not earned during the marriage.

As to (ii), Mr Dyer's simple submission is that the court only has to look at the amount received by the wife, namely £9.7 million, to be able to conclude that she will have sufficient resources to justify effecting a clean break. During the hearing Mr Dyer, albeit with some apparent reluctance, appeared to be willing to extend this submission to include some consideration of how the wife's resources might be deployed to enable her to meet her needs.

As to the issue of compensation, Mr Dyer submits that this was correctly rejected by the judge who found that the wife had not sustained a financial disadvantage greater than the sum awarded to her by application of the sharing principle. Absent such a finding there is, he submits, no basis for an award to be made by reference to this principle.

In summary, Mr Dyer submits that the judge should have ordered maintenance for a term only. He proposes a 5 year term from 2016, namely to February 2021, with a section 28(1A) bar to take effect at the end of a 5 year term from 2016, namely February 2021.

Background and Judgment

At the date of the order the husband was aged 53 and the wife 47. They started living together in 1991, married in 2000 and separated in 2012. They have one child who was born in 2004.

When the parties started living together they were both working as accountants for the same well-known firm, Coopers & Lybrand. They had no significant capital resources. In 2001 the husband accepted employment which required the family to move from Manchester to live near London. This move led to the wife leaving her then employment and, apart from a short period in 2002/2003, she has not worked in paid employment again.

The final hearing did not take place until September 2014. A draft judgment was sent to the parties in November 2014. This was followed by a number of further hearings to deal with additional points raised by the parties. These were in part because further evidence was required to deal with pension issues which, for reasons which are not clear, had not been sufficiently clarified by the date of the final hearing and also because of subsequent developments. The subsequent developments led the judge to change his draft judgment in two respects. One was to reduce the amount he had determined it would be reasonable for the wife to spend on purchasing alternative accommodation. The other was to alter the rate of interest applied to the wife's capital for the purposes of calculating her income needs. I will deal with these developments further below.

The parties had agreed that there...

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