The Modern Approach to ‘Meal Tickets’
The Court of Appeal (CoA) yesterday reaffirmed the Court’s more modern approach to spousal maintenance, championing “clean breaks” between divorcing couples and limiting claims for ongoing spousal maintenance (reports of the story are accessible both here and here).
In Waggott v Waggott  EWCA Civ 727, the CoA overturned a previous ruling that would have granted the ex-wife of a millionaire travel boss £175k for life by ruling that her maintenance payments should cease after just three more years.
In 2012, Mrs Kim Waggott (“W”) petitioned for divorce against her former husband, Mr William Waggott (“H”), after finding about affairs he had over the course of their marriage.
H and W both trained as Accountants and met in 1990 when working for Coopers and Lybrand. They married in 2000 and had a daughter with W giving up her job of 5 years with UCI Cinemas in 2002 to stay at home and look after their child. H continued to climb the corporate ladder and in early 2011, he became the Chief Financial Officer of TUI Travel, formerly Thomsons.
Shortly thereafter, W discovered that H was having an affair with a colleague at work. That affair allegedly ended after W confronted H about it. Unfortunately, in Autumn 2012, W found out that H was having another affair with a different woman. This time, after W confronted H about it, he moved out of the former matrimonial home and they separated.
W then issued divorce proceedings together with substantive financial remedy proceedings against H. In 2014, when they divorced the couple’s overall assets were valued at £16.4m with W being awarded capital resources of £8.4m compared to the £7.8m awarded to H. W also received an additional sum of just under £1.4m, representing a share of deferred remuneration that H received post separation, bringing her total award to £9.76m.
On top of this, W was awarded annual spousal maintenance payments of £175,000 for the rest of her life, or until her remarriage. At the time, W’s successful argument was that fairness dictated that her maintenance award should continue due to the support she gave H and the sacrifices she made for the family during their long marriage rather than on the basis of an argument based on having a financial need for ongoing support. However, this line of reasoning has not been readily followed in subsequent cases.
In November 2017, W went back to Court and asked for a £23,000 per year increase in her annual maintenance payments to take account of H’s future earnings, in particular a 35% share of future bonuses. W argued that due to the disparity in earning capacity she was entitled to a share of H’s post separation earnings as this was built up over the course of their marriage.
In response, H challenged both W’s appeal and original Order granting the maintenance payments for life. H sought to kill two birds with one stone by advancing an argument that a marital partnership does not stay alive for the purposes of sharing future resources unless justified by the needs of either party. The long and short of H’s argument was that “surely with £9.7 million [W had] sufficient resources for the Court to be able to fairly to effect a clean break.”
Lord Justice Moylan (“LJ Moylan”) laid down a comprehensive judgment (accessible here) in which he dismissed W’s appeal holding that earning capacity is not a matrimonial asset to be shared out and that “any extension of the sharing principle to post-separation earnings would fundamentally undermine the Court’s ability to effect a clean break.”
In line with the Court’s recent approach, LJ Moylan went on to accept the Husband’s argument on the basis that W not only wouldn’t face any “undue financial hardship” by stopping the maintenance payments but she had considerable earning capacity herself. There was nothing to prevent a clean break and on that basis, he ordered that her maintenance payments shall cease in March 2021.
In a rather candid closing, LJ Moylan went on to suggest that W could even make up the “shortfall” of the maintenance payments by investing roughly 10% of her original award and simply living off the interest; should the remainder of her £9.76 million pay-out not be enough she could always go back to work.
As reported by the Family Law Gazette here, this is just the latest in a trend of cases which underscore the Court’s growing reluctance to award ongoing spousal maintenance awards when a clean break remains a genuine possibility. The days of Court’s making generous provisions for ongoing spousal maintenance certainly seems to be on the wane with former spouses now more often than not expected to seek to become financially independent following a divorce; especially when it is apparent that they will not suffer any “undue hardship” from a clean break.
Taking stock of recent case law we believe that going forward we will see more use now of term orders (where maintenance is set for a fixed number of years rather than on a joint lives basis); that there will be less spousal maintenance orders made and the ones that are in general are likely to be for lower amounts than may have been awarded in the past if they are to be assessed on the basis of avoiding “financial hardship” rather than on the basis of financial entitlement.