Mr Justice Moor has just decided a case in which a female lawyer who took a step back in her career to take a lead childcare role in her marriage has received a financial award on divorce in excess of 50% of the parties’ assets. The judge split assets of £10m equally but ordered an additional £400,000 to be paid to the wife.
The fact that the award is more than 50% is unremarkable. In many, if not most, “ordinary” cases, a straight 50/50 split may not meet one party’s needs. For example, if you have a pot of £200,000 and divide that equally, a party who has a lower earning capacity – typically because they have paused or sacrificed their career progression in order to care for children – may be unable to get a big enough mortgage to rehouse themselves in an appropriate area (near extended family and children’s schools etc.).
This case is different. The departure from 50/50 has been ordered, not on needs grounds, but on grounds of “compensation”. This term inevitably has echoes of a claim for damages in an area like personal injury. However, the term has a special meaning in the context of financial proceedings upon divorce.
Back in 2006, the case of Miller and McFarlane set the tone for the division of finances on divorce or civil partnership dissolution and continues to do so. It clarified how that division should be undertaken to avoid discriminating against a married person (usually, but not always, the wife) whose contributions were predominantly domestic rather than breadwinning, a principle taken from the ground-breaking case of White v White. The law lords (this was before the Supreme Court was established) gave us three principles to guide the search for “fairness”. These were needs, compensation and sharing.
In this context, compensation does not mean paying someone in recognition of a wrong that has been done to them. It means making an award beyond meeting their needs and beyond the sharing of matrimonial property in order to address something called “relationship generated disadvantage”: another technical term. Lord Nicholls gave a great summary of this in Miller and McFarlane itself: it is “significant future economic disparity, sustained by [a party], arising from the way the parties conducted their marriage”.
For most couples, addressing economic disparity is subsumed within the process of structuring each party’s share in order to meet their respective needs. In cases where there are surplus assets in excess of needs, a sharing award will result in a fair outcome.
However, in a very small proportion of cases, the facts will be such that neither a needs-based nor a sharing-based award gets you that elusive “fair” outcome. An award based on compensation for relationship generated disadvantage is rarely encountered in practice or in the reported cases. This approach is available, generally in cases where a very successful and rapidly developing career comes to an end or is irreversibly curtailed by someone’s decision to care for the children of the family.
This most recent case was between solicitors in their 40s who are to remain anonymous to protect the privacy of their children. The judge is quoted as saying:
“I have come to the conclusion that an appropriate sum to award for relationship-generated disadvantage, over and above her half share of the assets, is the sum of £400,000.”
We do not have access to the full judgment yet. No doubt family lawyers will be poring over it when it lands in order to assess whether it will be of assistance to clients who find themselves in a similar situation. The judge was reportedly keen to stress that such cases remain an exception. However, in any case where you have a married or civilly partnered party who has accepted a significant setback to an otherwise high-flying career path, their lawyers are likely to draw upon this case for inspiration. That setback is highly likely to involve childcare responsibilities but it there is no reason why it should not encompass caring for elderly relatives.
The law has not changed but relationship generated disadvantage is definitely back on the radar.