22nd May 2018

Can a wife share in income earned after separation?

Gone are the days where the financially weaker spouse (often the wife) can expect a ‘meal ticket for life’ – being supported by their former husband forever and a day. Increasingly the financially weaker party is being told to “go back to work” and that relying on their former partner to continue to pay for a certain lifestyle enjoyed during the marriage is a thing of the past.

The recent case of Waggott v Waggott [2018] EWCA Civ 727 (Fam) is no different and has shone a spotlight on the case against ongoing financial provision in divorce cases.

In this blog, Family Law in Partnership associate Carla Ditz looks at the recent case of the Court of Appeal in which the focus was on achieving a clean break and further, whether the wife in that case should be entitled to share in the husband’s continued high earnings post separation.

The case of Waggott v Waggott

Mrs Waggott had initially been awarded a settlement of £9.76m and £175,000 in annual maintenance payments for life (on a ‘joint lives’ basis) upon her divorce from her multimillionaire husband.

Mrs Waggott then appealed on the basis that the judge failed to award her a fair share of the husband’s post-separation earnings which she argued were a direct result of his earning capacity ‘acquired’ during the marriage. She sought an additional £23,000 per year in maintenance. The husband cross appealed.

Ultimately, Mrs Waggott’s appeal backfired. The Court of Appeal took a very different view from the court at first instance and ordered that the £175,000 annual maintenance should terminate after 3 years thus granting Mr Waggott a ‘clean break’. This seems to be the approach adopted by the courts more and more where the financial needs of the wife have been adequately met and where no ‘undue hardship’ is caused.

Further, the court ruled that Mr Waggott was entitled to keep his post-separation earnings – that his earning capacity was not a matrimonial asset to which the sharing principle applies (where the starting point for the division of assets acquired during the marriage is that they should be shared equally).

What does the outcome of Waggott v Waggott mean?

In every case, the court has a duty to consider whether it is possible to effect a clean break, essentially drawing a line in the sand, allowing both parties to become financially independent of each other at a time which is just and reasonable. Arguably, ordering maintenance to continue on a joint lives basis offers the recipient little or no incentive to return to work and become financially independent. Provided that no undue hardship is caused, we may increasingly see joint lives orders becoming few and far between save in certain circumstances. This may seem harsh where a wife may have given up her own lucrative career to raise a family and now finds herself in a less advantageous earning position. But the perceived culture of generosity in the family courts that once existed may indeed become a thing of the past.

Each case will of course be examined on its own merits. Ultimately, needs will prevail in order to produce a fair outcome but judges are certainly taking a much tougher stance in relation to wives who can and should be able to return to work. In many cases, it is of course accepted that it is not financially possible to achieve a clean break and joint lives orders will exist by necessity.

This case has also produced a ruling that an earning capacity acquired and built up during the marriage is not an asset capable of being shared on divorce. Crucially, it was held that by extending the sharing principle to post-separation earnings, this would undermine the court’s ability to effect a clean-break. It would also involve a rather complicated exercise required in order to calculate what proportion of income/earning capacity can be attributed to the ‘marital endeavour’. As a result, wives will increasingly need to look to their capital resources from which to derive an income as well as their own earning potential.

For advice on all aspects of divorce or separation, contact any of our specialist family and divorce lawyers on T: 020 7420 5000 or E: hello@flip.co.uk.