The Recent Case of Waggott v Waggott [2018]

The Recent Case of Waggott v Waggott [2018] EWCA Civ 727Duggests the Spousal Maintenance Tide May Be Turning

For many years, English courts have had a reputation for providing generous financial settlements to the wives of high earning husbands.  An example of this is a 2017 case  involving the wife of billionaire former oil and gas trader Farkhad Akhmedov. She was awarded a £453 million divorce settlement, thought at the time to be the largest ever divorce settlement awarded by an English court. However, in subsequent proceedings, it was revealed that the wife, Tatyana Akhmedova, had yet to receive her settlement and in April 2018, the court ordered Mr Akhmedov to hand over his £350 million super yacht to Ms Akhmedova. The 377ft (114 metres) boat “Luna” is thought to be the second largest personal luxury vessel ever built.

Despite such eye-watering settlements, there has been a gradual move back towards the ‘clean break’ principle and imposing time-limits on how long spousal maintenance can expect to be paid. In 2015, Lord Justice Pitchford, sitting in the Court of Appeal, caused controversy when he effectively told the ex-wife of a millionaire to “get a job” and that she had no right to expect to support from her ex-husband while living in a mortgage-free £450,000 home. The 2018 case of Waggot v Waggot indicates a further change in attitude to awarding on-going spousal maintenance payments, especially in cases where the capital of a lump-sum settlement can be invested to generate future income. The judgment of Waggott v Waggott also resulted in the court imposing a time-limit on maintenance payments.

Facts of the Case

Mr and Mrs Waggott married in 2000 and separated in 2012. They had one child. When they started living together in 1991, they were both working as accountants and had no great wealth. In 2001, Mr Waggott took up new employment which required the family to move home and Mrs Waggott to leave her job. She did not return to work. By the time they separated, the couple had capital assets worth £14.4 million. Mr Waggott’s estimated income for the 2015 tax year was £3.7 million; a substantial proportion of which consisted of discretionary bonuses. The judge at first instance determined Mrs Waggott’s housing needs as £3.25 million and her annual income needs as £175,000. She was awarded continuing maintenance to bridge the gap between her assumed net income from her free capital and the sum of £175,000. No reduction was made for assumed future earnings on the wife’s part.

Mrs Waggott appealed, claiming entitlement to 35% of her ex-husband’s net bonuses payable in respect of the years up to 2019 and on-going annual maintenance of £190,000.

She told the court her husband’s future earning capacity was a product of their joint contribution to the marriage and therefore it should be classed as a matrimonial asset in which she was entitled to share. In addition, she argued she should not have to make use of her capital share to meet her income needs.

The Court of Appeal Decision

The Court of Appeal rejected the argument that earning capacity was a marital asset, recognising that future earnings would fundamentally undermine the court’s ability to affect a clean break as it could result in spousal maintenance being paid for many years.

It was recognised by the court that a balance needed to be struck, referring to Lady Hales quote from McFarlane v McFarlane [2006] UKHL 24: “too strict an adherence to equal sharing and the clean break can lead to a rapid decrease in the primary carer’s standard of living and a rapid increase in the breadwinner’s. The breadwinner’s unimpaired and unimpeded earning capacity is a powerful resource which can frequently repair any loss of capital after an unequal distribution.”

However, the court then went on to consider Sir Mark Potter’s comments in VB v JP [2008] 1 FLR 742: “… on the exit from the marriage, the partnership ends and in ordinary circumstances a wife has no right or expectation of continuing economic parity (‘sharing’) unless and to the extent that consideration of her needs, or compensation for relationship-generated disadvantage so require. A clean break is to be encouraged wherever possible”.

Noting that the Court of Appeal had twice approved the above approach, Lord Justice Moylan, in delivering the judgment, felt this statement was significant to the “outcome of the present case”.

McFarlane was distinguished on the grounds there was insufficient capital available to achieve a clean break. In this case, Lord Justice Moylan said Mrs Waggott could make up any shortfall from losing her annual payments by investing around 10% of her initial payment and using the interest. The court, therefore, ruled payments should stop from March 2021.

Final Words

Lady Hale made it clear in Mcfarlane that “a clean break is not to be achieved at the expense of a fair result”. However, the inconsistent approach of English courts when it comes to making financial orders in high-net-worth divorce cases is also providing a barrier to fairness. At present, it is difficult for those coming to the law regarding a financial settlement to know what to expect. It is unreasonable for people, whose entire financial future depends on a fair judicial ruling, to feel they are at the mercy of whether a particular judge favours a more generous approach to financially weaker spouses. Up until this point, it has been observed that Lord Justice Moylan has always leaned towards providing generous settlements – this latest judgment may indicate a more limited approach, not only to the amount of spousal maintenance awarded, but also its duration.

Due to the complexity in financial settlements it is always important to get expert advice from a solicitor specialising in this area of law.  Call Wannops specialist matrimonial finance solicitors today on 01243 778844 (Chichester), 01903 228200 (Worthing) or 01243 864001 (Bognor Regis).

About Adam Workman

Adam has extensive experience in private practice throughout UK, Europe and the United States. Adam spent eight years in the United States and worked as an attorney with a large Midwest law firm with branches across the US dealing with company commercial, corporate finance and company reorganisation and insolvency for a variety of pan European, national, regional and local emerging manufacturing and service sector businesses.

Since his move back to the UK in 2003, Adam has advised and led the negotiation of a variety of transactions of varying size and scope including joint ventures with European based international corporations and procurement and supply contracts with large UK plc’s as well as the acquisition and disposal of a variety of businesses.

In addition to being admitted as a solicitor in England and Wales, Adam is licensed as an attorney in the United States and is admitted to practice at the Missouri Bar and the United States Court of Appeals for the Eighth Circuit.

Adam owns his own vineyard and brewery and is a member and life long supporter of founder member and some time champions of the Football League and five times winner of the FA Cup, West Bromwich Albion Football Club.

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