Big money divorce

On 17 March 2008 Bennett LJ handed down his judgment in McCartney v McCartney. Quite apart from the intense and unsavoury public interest in the case, on a more legitimate basis, practitioners had been eagerly awaiting the decision in the hope that it would provide much sought after guidance and clarity to the courts' approach to ‘big money’ divorces following the pivotal change in the law by the decision of the House of Lords in White v White [2001] 1 AC 596. Following in the wake of White there has been a run of high profile ‘big money’ cases which arguably has muddied the waters in ‘explaining’ White. This has not been helped by the fact-specific nature of cases, the discretionary nature of ancillary relief law, and the ever innovative approach of lawyers in introducing new concepts and arguments. The House of Lords decision in Miller v Miller, McFarlane v McFarlane [2006] UKHL 24 created further turmoil in the state of the law with the introduction of such new doctrines as compensation for relationship-generated disadvantage and sharing the fruits of the matrimonial partnership. Their Lordships reaffirmed the principles of fairness, non-discrimination, and equality. They also firmly put back in its place conduct as a factor that is irrelevant in all but extreme cases, contribution as a factor that has to be of a wholly exceptional nature, and discredited claims based on legitimate expectations.

Not useful as a template

This was the unsettled backdrop of the law in which the decision in McCartney was made. In turn, practitioners have scrutinised the decision to seek answers to the courts' approach to short marriages where there is a significant disparity of wealth between the husband and wife. What they have found is, as always, a case that is fact dependent and should be treated with caution in using it as a template for other cases. There is a consistency with the main doctrines, concepts, and principles introduced by White which have then been developed by subsequent case law particularly with the elevation of the equality of division from that of just a yardstick or check, to that of a principle of financial provision law by the House of Lords judgment of Charman v Charman [2007] EWCA Civ 503 at paragraph 65), but McCartney shows a redirection and re-emphasis on awards being assessed by reference to the more limiting factor of needs ‘generously interpreted’ as opposed to an equal share of the marital acquest arising from claims relying on non discrimination, an equal contribution to the marital assets and a presumption of equal division irrespective of whether the marriage was long or short.

Background

Bennett LJ found on the facts that this had been a marriage of just under three years with no relevant period of cohabitation. There was one child of the marriage who was now four years old. The husband was a well-known musician with a wealth of about £400m. Nearly all of the husband's wealth had been acquired pre-marriage. The wife was not wealthy or independent by the time she had met the husband.

The Judge awarded the wife £24.3m comprising £14m as a fair capitalisation figure for the wife's income needs which he assessed at £600,000 per annum; £2.5m to buy a London property; the wife's personal assets which included properties at Pean's Wood and Angel's Rest, to a total value of £7.3m, and £500,000 add back to represent ‘completely unreasonable expenditure’ over the post-separation period. The total lump sum award to the wife was based on her reasonable needs generously interpreted. For the child, the husband would pay periodical payments of £35,000 per annum, and for a nanny not to exceed £25,000 per annum. He would discharge the school fees, uniform and reasonable extras, and health insurance premiums.

The judgment

The husband argued that his was a straightforward case: 'Because of H's enormous pre-marital wealth and because of the brief duration of the marriage W's claim should be determined by reference to the principle of need alone. This is not a case where the principle of sharing of the ‘marital acquest’ is engaged at all. Nor is it a case where the principle of compensation will arise. W's needs fall to be fairly assessed, not predominantly by reference to the standard of living during the marriage. W's award should be reduced to reflect her post-separation misconduct.' (paragraph 8). The husband did not seek to rely on his ‘exceptional contribution’ as a basis for assessing the wife's award.

The wife's case could not be ‘so succinctly summarised’ (paragraph 9). She claimed to have been wealthy and independent pre-marriage; that the relevant duration of the marriage was six years including cohabitation; she sought compensation for foregoing a lucrative and successful career during the marriage; she sought an award commensurate with being the wife of, and the mother of the child of, an icon; she placed great weight on her contributions; she asserted the husband to be worth in excess of £800m and that she was entitled to a share of the ‘marital acquest’, and she asserted that the husband's conduct throughout their marriage and post separation should be reflected in the award.

The judge found

Length of marriage

While the judge was prepared to accept that the wife and the husband from 1999 to the date of their marriage on 11 June 2002, spent many, many nights together, holidayed together, became engaged and had a very close relationship, this did not equate with a settled, committed relationship moving seamlessly into marriage. So the period of co-habitation was ignored in determining the marriage length.

Contribution and compensation

A good reason for departing from the presumption of equality can be based on the doctrines of contribution, financial and non-financial, and compensation. The wife did not make out a case on the facts that her contribution throughout the marriage was ‘exceptional’. The judge made reference to and concurred with the words of Lord Nicholls of Birkenhead in Miller, McFarlane (at paragraphs 66 and 67) that parties should not seek to promote a case of ‘special contribution’ unless the contribution is so marked that to disregard it would be inequitable.

A good reason for departing from equality is not to be found in the minutiae of married life. See also the words of LJ Thorpe in Lambert v Lambert [2003] Fam 103, 117 paragraph 27.

The second rationale of compensation for relationship-generated loss ‘is aimed at redressing any significant prospective economic disparity between the parties arising from the way they conduct their marriage’ (Miller, McFarlane at paragraph 13). Far from the husband dictating to and restricting the wife's career and charitable activities, he did the exact opposite in encouraging and lending his support, name and reputation to her business and charitable activities. The facts in no way supported the wife's claim and compensation did not arise.

Pre-marital wealth

One of the most apparent features of the McCartney case is the enormous pre-marital wealth that the husband had generated before marriage. The courts have made a distinction between the 'marital acquest', being those assets built up during the marriage, that are legitimately up for grabs on the divorce and pre-marital wealth which is a resource to be dipped into if the marital assets are insufficient to achieve a fair settlement.

The judge had seen no evidence that the husband may be worth more than (very roughly) £400m. The wife had, at an earlier hearing, sought to persuade the judge to permit further investigation into the husband's business assets, his personal expenditure, and to obtain further valuations of certain properties. The husband opposed this on the basis that he could satisfy the award the wife was seeking without any difficulty at all; this was wholly a needs case, and it would be disproportionate to allow a detailed inquiry into the extent of the husband's assets. He found that it was unnecessary in this case to arrive at a precise figure for the total wealth of the husband given its enormous size. Nevertheless, he found that the husband's total wealth amounted to approximately £400m.

This approach sees a re-emergence of the use of the Millionaire's Defence based on the wealthy spouse seeking to avoid disclosure and an investigation into his wealth because, he claims, he can satisfy any award the court orders. Many practitioner's foretold the death knell of this defence in consequence of the decision in White. However, this needs to be viewed with caution because as always cases are fact dependent, and the Millionaire's Defence was argued by the husband successfully in the limited context of opposing further disproportionate investigation after there had already been considerable disclosure.

Standard of living

The wife's case that there should not be such a disparity between her lifestyle and that of her husband's such as could or might impact on their child overlooked the fact that all of the husband's properties were acquired before the marriage.

The husband's vast wealth could not found a reasonable expectation that the lifestyle the wife perceived she enjoyed during the marriage could or should continue after its breakdown. The judge adopted the words of Baroness Hale of Richmond in Miller v Miller [2006] UKHL 24 paragraph 158 that the standard of living provision in s 25(2)(c) ‘should enable a gentle transition from that standard to the standard that the wife could expect as a self-sufficient woman’. The judge added that ‘after a short marriage to a very wealthy man it is unfair to expect that she should continue to live at the same rate as during the marriage. Such an expectation is completely unrealistic’ (paragraph 240).

The basis of the assessment

Bennett LJ's judgment is succinctly stated at paragraph 311. The needs of the wife generously interpreted are not simply a factor in the case, but one of magnetic importance. He accepted the husband's case that in a short marriage case it is legitimate to look at the claimant's needs more conservatively than in a long marriage, because the standard of living which has a bearing on the assessment of needs will have been enjoyed for a shorter period. After a marriage lasting just under four years it is unreasonable for the wife to assert that the marital standard of living should be reproduced for her lifetime. The level of maintenance of £600,000 per annum was assessed as the amount that would allow the wife to adapt to a standard of living that she could expect as a self sufficient woman. After a short marriage to a very wealthy man it is unfair to expect that the wife should continue at the same rate as during the marriage.

He further accepted the husband's case that if a fair sharing of the marital acquest had any legitimate role to play in the case, it must be as a cross-check against the provisional assessment of the wife's needs. With this is mind he stated that, 'fairness requires that the wife's needs generously interpreted are the dominant factor in the s 25 exercise. Any other radically different way of looking at this case would, in my judgment, be manifestly unfair'.

Publication of the judgment

Bennett LJ considered making the judgment public without anonymising it. The wife applied for permission to appeal to the Court of Appeal on whether the judgment should be made public. The wife submitted that; the judge should have excluded her daughter's date of birth so people would not know when her trust fund would be made available to her and that the wife had no expectation until the second day of the hearing that the judgment might be made public. If she had known, she may have conducted the case differently. Permission to appeal was refused on the grounds that the child's date of birth was on the public record and the case was in a traceable line of cases that were heard in private and then the judgment put into the public domain.

Due to the nature of family law and the sensitivity surrounding the issues that it raises, the family courts sit in private. This contributes to the secrecy that surrounds it, leading to a lack of understanding and mistrust. in the judges and their judgments The publication of this decision was in response to the frenzied media interest and so that the public and legal profession could understand how the judgment had been reached in an attempt to promote transparency. Anonymising the names would have proved fruitless and was not necessary. This merely continues an existing judicial practice of publishing judgements to assist practitioners in advising their clients. The distinction with the McCartney decision is that it was not anonymised.

The law is a balancing act and as stated by Wall LJ in Clayton v Clayton [2006] EWCA Civ 878, the decision to publish should be based on ‘the rights and interests to be balanced in the individual case’, in particular those of any children involved in the proceedings.

Conclusion

What then are practitioners to make of this decision? The McCartney case has not, and never could have, brought an end to the confusion in the courts' approach to the division of assets in short marriage cases with a disparity of wealth, as every case is fact dependent. The court has a broad discretion, the aim of which enables them to tailor solutions to the needs of the parties. However, we welcome the direction LJ Bennett has taken in applying the principle of fairness to depart so substantially from equality by assessing this wife's award on the basis of her reasonable needs generously interpreted where the short length of the marriage and consequent short period of enjoying a high wealth standard of living, have a bearing on the assessment of needs and where the fact of the huge pre-martial wealth is the basis for limiting the wife's awards to needs.

But it is too early to say the wheel has turned and in the really big money cases wives are now going to receive significantly smaller awards.