You might expect a settlement to include the wealth you accrued together during your marriage. But should you be entitled to a share of your ex-partner’s earnings after the divorce?
That was the question that arose in the recent appeal hearing of Waggott v Waggott. Kim Waggott argued she should be entitled to a share of ex-husband William Waggott’s future earnings, as well as part of his income whilst they were married.
What did the appeal judge decide? I’ll reveal that shortly. But first, see how it looks from each ex-partner’s point of view.
The couple were both working when they met and married. William Waggott was offered a job which involved moving from Manchester to London; consequently Kim Waggott left her job and apart from one brief spell in employment, did not work again. William Waggott went on to become CFO of TUI, with an estimated income of £3.7m for the 2015 tax year.
In the original settlement, the judge ordered William Waggott to pay Kim £9.75m in cash and assets, plus £175,000 annually for life, with ongoing payments to make up any shortfall between her income from interest on the assets and the £175,000.
A fair settlement? Not from Kim Waggott’s point of view. She argued her ex-husband’s future earnings were marital property that should be shared, as they were the product of an earning capacity he’d built up during the marriage. Her QC claimed she was entitled to 35% of his net bonuses up to 2019 and that her maintenance payments should be increased by a further £23,000 a year.
From William Waggott’s point of view, the settlement wasn’t satisfactory either. He argued it was an unfair burden and gave his ex-wife no financial incentive to go back to work. At the appeal court, his QC asked “How long should an order based on sharing last for? When does the clock stop ticking?”
The appeal court decided in favour of William Waggott. It rejected the notion that earning capacity is an asset generated during marriage. Lord Justice Moylan also explained that extending the settlement to include post-separation income would prevent the court’s ability to draw a line under a divorce and establish a clean break.
This landmark decision will undoubtedly impact other divorce cases. It means future earnings are unlikely to be considered matrimonial assets and underscores that ongoing maintenance must be linked to a demonstrable income “need” rather than a sense of entitlement. This will be a welcome decision for those whose income still includes a healthy bonus; for the dependant spouse, a disappointment. Either way, it is helpful to have some clarity on this issue and an indication that the court’s approach on such matters remains consistent with previous decisions.
However, Lord Justice Moylan did comment, “I acknowledge that long-term maintenance can be required as part of a fair outcome in a divorce.”