English divorce law: the golden goose?

In White v White [2000] UKHL 54, Lord Nicholls said: 'Sometimes, different minds can reach different conclusions on what fairness requires. Then fairness, like beauty, lies in the eye of the beholder.'

Lord Nicholls' comments preceded his explanation how, in the search for equity, the courts had wrongly applied a gloss to the statutory criteria for determining financial provision on divorce. The courts had constrained a wife's claims by reference to her 'reasonable requirements' '“ no matter how much wealth had been accumulated in the marriage, she was entitled only to a sum that met her needs, with the remainder to be retained by her husband.

The effect, said the Lords, had been to impose an artificial ceiling, discriminating against the homemaker in favour of the breadwinner. Fairness had been subverted.

The decision in White removed this judicial fiction of reasonable requirements, which had been so objectionable, and paved the way for development of the principle of equal sharing by the House of Lords in its later decision of Miller v Miller [2006] UKHL 24.

And yet, seven years on from White, the Court of Appeal, where the fiction of reasonable requirements had been developed, appears to remain unconvinced.

Charman ruling

Last week its President, Sir Mark Potter, acknowledged in the Charman case that the development of the law by the House of Lords in White had ensured fairness and banished discrimination (Charman v Charman [2007] EWCA Civ 503). Those innovations, Potter said, 'were well founded on profound social change, particularly in the recognition that marriage is a partnership of equals and that the role of man and woman within the marriage are commonly interchangeable'.

But, it seems, some are more equal than others.

Whilst the President was prepared to commend the 'timely and beneficial' consequences of White, he could do so only for the 'majority of divorcing couples'.

In the view of the Court of Appeal then, White is not universally commendable.

An explanation, of sorts, for this extraordinarily backward looking approach is provided in the postscript to the Court of Appeal's judgment, in which the judges express their reservations that the removal from the court's armoury of reasonable requirements has impacted on the attainment of fairness in big money cases.

From the mid 1970s until 2000, said Potter, the emphasis on reasonable requirements as the yardstick of the award had 'satisfied the anxiety of judges and others that we should not be drawn into the extravagance of some US states, particularly California, where very large awards were commonplace'.

Thus said the Court, while in the past the fiction of reasonable requirements had moderated awards for a generation, now: 'In big money cases the White factor has more than doubled the levels of award and it has been said by many that London has become the divorce capital of the world for aspiring wives.' In such cases, White had raised 'the aspirations of the claimant [wife] hugely'.

These ramifications, albeit for only a tiny proportion of litigants, have led Sir Mark together with Thorpe and Wilson LLJ to call on the Law Commission to review the legislative framework for determining the division of assets on divorce.

Rarely will a litigant's inherently subjective view of fairness coincide with the court's objective view. But when the Court of Appeal is so equivocal about its own judgment there is real cause for concern.

The judges said that as a member state of a European Union which promotes the free movement of its citizens, 'we are a common law jurisdiction among largely civilian fellows and that in the determination of issues ancillary to divorce we apply the lex fori and decline to apply the law more applicable to the parties.'

So, the unspoken concern of the Court of Appeal is that it is not just Mrs Charman and her ilk, but also the wives of our (rich) European partners who are queuing up to get divorced here to achieve the inflated awards available only in this jurisdiction.

Emboldened by the Court's comments, John Charman has called for different rules to apply 'where all the extraordinary assets are earned by one of the couple, allowing the other simply to wait to claim an enormous proportion of it on divorce, without contributing materially to the acquisition of that wealth at all'.

Degree of ambiguity

Chair of Resolution Jane McCulloch believes: 'The uncertainty created by a number of high profile and sometimes contradictory judgments around financial settlements, has introduced a large degree of ambiguity into what divorcing couples can expect to pay and receive.'

This, she says, means there remains much for divorcing couples to argue for and therefore litigate over.

McCulloch's view is confirmed by the fact that the Charmans' legal fees and expenses, before they set foot in the Court of Appeal, amounted to over £5m. A huge sum on any analysis, but unsurprising given the extent and nature of the litigation in this jurisdiction and elsewhere.

Even with tongue firmly in cheek, Coleridge J was forced to concede that: 'The multi-coloured asset and other schedules (in the husband's case laminated for durability in the style of a restaurant menu) have been simply invaluable.'

And presumably the fees charged by the solicitors on both sides along with the four QCs and five juniors who were retained for the appeal would represent a fair proportion of the matrimonial assets of most divorcing couples.

Since a two-tier system for determination of these cases is utterly objectionable for all of us other than those hugely wealthy husbands who may stand to benefit, what are the alternatives?

If the legislation as developed by the common law is to be revised, the identification of an alternative, better, system for a one-size-fits-all redistribution of the assets and income following divorce is required.

European experience

Perhaps we should look to our European partners for guidance.

In Austria and Poland, fault for the breakdown of the marriage is a factor that can be taken into account with the party deemed solely or mainly guilty for the break-up required to financially support the other.

The adoption of a fault-based system runs contrary to both Resolution's policy and to common sense. An increase in the number of defended divorces would be a predictable consequence and the potential for truly unjust outcomes would be heightened.

Other aspects of European jurisprudence are similarly unimpressive.

Maintenance throughout most of the EU is usually available only in the short term and where childcare issues, age or lack of current work on the part of the receiving party justify it '“ irrespective of the support given during the marriage which would have enabled the payer to pursue his career.

In France alimony is available only until the youngest child reaches three years of age. The Swedish system allows short-term, low-level maintenance while the receiving spouse looks for work. Maintenance in Denmark is uncommon.

And in Belgium, the Czech Republic, Estonia, France, Germany, Latvia, Poland, Scotland and Slovakia assets either inherited or acquired prior to the marriage are excluded, irrespective of the parties' and their children's needs.

None of these models appear objectively fair or able to provide for, say, the 50-something wife of a company executive who gave up employment in her 20s to raise the family and faces a dramatic fall in her standard of living, nor the 30-something single mother with primary care of a young family.

What of other common law jurisdictions? The Court of Appeal itself expressed reservations regarding the excesses of the US system and the inflexibility of the New Zealand system. As for Australia, its regime owes much to ours and has little to offer.

Having appreciated that the defect perceived to exist in the determination of matrimonial finance cannot be resolved through redrawing the statutory blueprint on the basis of EU or common law models, the Court of Appeal: 'If, unlike the rest of Europe, the property consequences of divorce are to be regulated by the principles of needs, compensation and sharing, should not the parties to the marriage, or the projected marriage, have at the least the opportunity to order their own affairs otherwise by a nuptial contract?'

Sharia law

So, perhaps, Sharia law provides the answer.

In Islamic law, to avoid disputes later on, the wife is given a set financial sum at the time of the marriage, which is contained as a term of the 'Nikah' or marriage contract.

It would be naive though to consider pre-nuptial agreements offer the panacea.

Indeed, under Sharia law, the sum to be paid to the wife, known as 'Haq Mehr', is only intended to give her enough on which to survive in the event of divorce.

That said pre-nuptial agreements have a place where, for example, inherited assets are brought into a marriage or in the event of a second marriage of an independently wealthy couple.

In the case of the Charmans, though, their entire wealth was accumulated during a marriage of 27 years' duration. Few couples who start married life with nothing could predict wealth generation at such a level '“ in those circumstances it is fairly inevitable that, without legal advice, they would, objectively fairly, contract to an equal division of their assets on divorce.

In its judgment, the Court of Appeal said that special contribution is 'immediately apparent as it is from here in these courts that the dome of St Paul's rises higher than the steeple of St Bride's'. If that is so, it follows that a special contribution can be identified only at the end of a marriage, not at its beginning.

So a pre-nuptial agreement would be as unlikely to be able to predict at the beginning of a marriage a future special contribution as it could to provide the formula to fairly reflect the distribution of unquantified future assets accumulated by operation of that special contribution.

And if, during the marriage, the germ of special contribution becomes apparent, what incentive is there for a wife to renegotiate, to her disadvantage, the terms of a pre-nuptial agreement?

Special contribution

Certainly to avoid these difficulties, a husband at the beginning of his career may choose to predict rightly or, statistically more likely, wrongly the possibility of a special contribution later existing that generates extraordinary wealth.

No doubt if the Law Commission takes notice of the Court of Appeal's postscript every pre-nuptial agreement will contain a formula, utterly irrelevant to the circumstances of the vast majority of marriages, for the division of surplus wealth that does not exist.

But what of the multitude of other relevant events that the courts have the discretion to resolve but whose inclusion would render a pre-nuptial agreement utterly unwieldy and thus the division of their assets uncertain?

It is accepted that in the majority of cases, pre-nuptial agreements could provide some certainty for the vast majority of litigants enabling them to avoid the expense, financial and emotional, of divorce. For that alone, the call for an amendment to the law is to be echoed.

Of course, that majority is the very same majority for whom the Court of Appeal said the innovations resulting from White were timely and beneficial.

As for the rest, the higher echelons of the The Times Rich List and international contempories, they should find some comfort in the developments in matrimonial jurisprudence post-White.

Despite what they may think, the jurisprudence developed by and following White makes this the most sophisticated and flexible regime, and therefore the fairest jurisdiction, in which to resolve financial issues on divorce.

Copyright & permissions