Divorce Ruling – Sharing Principle Does Not Apply to Future Earning Capacity
It is only right that assets built up during a long marriage to which husband and wife have contributed equally should be shared 50:50 in the event of divorce – but does that apply to income generated after the marriage ends? In a guideline ruling, the High Court has answered that burning question in the negative.
The case concerned a couple in their 60s who had four children during their 30-year marriage. When their relationship broke down, their overall assets were worth more than £5.8 million. They included a successful business, 90 per cent owned and run by the husband, which had an agreed net value of about £2.4 million.
Following divorce proceedings, a family judge found that, given the duration of the marriage and the equality of the couple’s respective contributions to the acquisition of marital assets, it was a paradigm case to which the sharing principle applied. On that basis, the wife was awarded a lump sum just short of £3 million. The husband did not challenge that award, which he had paid in full.
The judge, however, went on to order the husband to also make periodical payments of £150,000 a year to the wife for five years, until he reached the age of 66. He found it fair that the wife should continue to receive a portion of the husband’s income from the business, which generated profits of about £1 million annually.
In upholding the husband’s appeal against the periodical payments order, the Court found that the judge had erred in law. The husband’s post-divorce earning capacity was not matrimonial property to which the sharing principle applied. The wife could only be awarded a share of his future income on the basis of financial need. After assessing the extent of her income and accommodation needs, the Court reduced the periodical payments to £68,000 a year.