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Translating Big Money principles in Divorce

It is one of the great ironies of family law that the divorce cases that hit the headlines and the law reports are by and large those where the family is very wealthy and can afford to pay the costs of litigating their case through the final hearing, and then onwards through to the Court of Appeal when someone alleges an error in the initial judge’s treatment of the case. In our common law tradition, where judicial decisions of the higher courts become binding precedents, the big money cases affect how judges decide the outcome of the cases of the vast majority who don’t have those limitless resources, and how we as lawyers inform and advise our clients. So how do the principles devised when dissecting the lifestyles of the rich and famous filter down to apply where there’s not quite enough to permit the comfortable forging of two homes from one?

It is worth mentioning to start with that there is a list of factors set out in an Act of parliament that judges must consider when dealing with financial division on divorce. These are known as the “Section 25 factors” for they are set out in s.25 of the Matrimonial Causes Act 1973, and for civil partnerships the list is set out in Schedule 5 to the Civil Partnership Act 2004. You can download our factsheet about those statutory principles here. The factors are such fundamental matters as the needs of both parties and their resources, their ages and the length of the marriage, and any disabilities. The first consideration is always the welfare of any children.

It was only relatively recently in legal terms (in 2000) that the idea of fairness and equality was introduced to family law with the landmark decision in White v White, which enshrined the procedure of measuring a proposed financial distribution against ‘the yardstick of equality’. Then in 2006 in the headline grabbing House of Lords case of Miller; MacFarlane, the law lords declared that the overarching objective of a fair outcome required the court to consider three principles in addition to the statutory factors: the parties’ relationship-generated needs (generously interpreted), compensation for relationship-generated disadvantage and sharing of the financial fruits of the relationship. These have been abbreviated in every day family lawyers’ usage to “needs, sharing and compensation”.

We will look in detail at what amount to “needs” in a future blog (coming soon!), but of the principles arising from case law, it is naturally the one which dominates most cases, as even at fairly high asset and income levels it can be difficult to divide one household into two while retaining a similar standard of living. The question is what do the adults and the children need, and how can this be achieved from available resources? In most cases needs are established by looking at what it will cost to house the parents and the children, and the requirements of an income stream to meet essential outgoings on each home. Often there is no room for needs to be “generously interpreted”; the children’s need for a secure home tends to have to come first, and the rest falls into place where it can.

Sharing of the assets is what tends to happen when each person’s needs can be met, so in reality it is only relevant when there is more than enough to go round, although this tends to happen more often when there are no children to consider. In big-money cases, this tends to become the battleground where each ex-spouse gives reasons why they should have more of what’s left than the other – perhaps, because of non-matrimonial property, which is less easily divided as part of the financial settlement. “Matrimonial property” tends to cover the family home and anything acquired during the marriage. “Non-matrimonial property” covers things owned before the couple got together and gifts or inheritances received by one or other of them during the marriage. In a short marriage it may be that matrimonial property is divided equally, but each party keeps their own non-matrimonial property. The longer the marriage, the more blurred the distinction becomes, and when a case is all about needs, then judges may put everything into the proverbial pot so that roofs can be put over the family’s heads.

Concepts such as “relationship generated disadvantage” and “compensation”, where the stay-at-home parent‘s career has been curtailed by the duties of running the home and caring for the children, are rarely applied in practice as there are rather narrow criteria to fulfil.

In many cases, the principles that emanate from the higher courts when dividing assets on divorce, despite their memorable labels, are of little relevance to the couple involved. What a court is striving to achieve in all cases is “fairness”. That may require one party to be kept out of his or her share of the assets until the children have left home, or both parties moving into much smaller properties than they are used to, or dipping into one party’s inheritance to adjust the capital more evenly. Where trusts or companies hold the bulk of the wealth used by the family, lawyers and the courts often have to be very creative to find a way to get to a solution that might be seen as fair by an impartial observer. At higher asset levels and when matters get international, they are often very complex in legal terms.

So whilst the principles and bons mots handed down by the best legal brains in the biggest money cases can be helpful reading for judges across the country, their aim remains achieving fairness through a pragmatic approach to the case in front of them. All cases turn on their own facts, but in most instances, needs and resources are the important factors.

If you would like to talk to us about any aspect of family law, please give us a ring on 01223 443333 to make an appointment to see Gail, Sue, Simon or Adam. Or from November, our new partner Tricia Ashton!

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