Marilyn Stowe Blog

First Wife v Second Wife: which one gets priority?

The recent case of Vaughan v Vaughan, which involved an elderly divorced couple and made the news while I was away on holiday last week, has led me to wonder. How should a husband divvy up the spoils of a lifetime between his former wife and his current wife? When he has continued to maintain them both during his working life, which one of them -if either – should be his priority?

The first wife

The first wife cannot manage on her own, modest earned income following her divorce, and therefore she needs to have her income supplemented by maintenance from her former husband. He agrees and despite her being child-free and able to work, he does not insist on a cut-off point for maintenance even if she is still quite young. Perhaps he reasons that she will be self-sufficient at some point in the future. Perhaps he reasons she will remarry. Perhaps he feels guilty. Perhaps he wants it all over and done with without a fuss.

However the first wife will never get to taste the real fruits of their joint hard work begun and built up during the marriage. The rewards of status and financial success will be privileges reserved for the fortuitous second wife. By the time the second wife marries the husband and has his children, he has become financially prosperous. Together, they have a long and successful marriage.

The husband can always apply to terminate maintenance payments to his first wife, on the basis that at some point she should or has become self-sufficient. But there are a number of cases in which the divorce occurred at a time before wives were expected to become self-sufficient and maintain themselves. The only way these wives could realistically maintain themselves, hampered as they were by lack of training and by advancing age, is by the receipt of maintenance. In these cases, maintenance has been paid for a very long time. Although these wives are sometimes perceived by the media as greedy individuals, receiving hand-outs long after their sell by date was reached, realistically they have no option. They are the products of different times.

The law

In the absence of the first wife’s remarriage, or a court order terminating her maintenance obligations, the law states that payment is to be made until she dies.

However if maintenance payments are to be terminated by the court, causing undue hardship to the payee, the court may order a capital sum to be paid instead on a ‘Duxbury’ basis, under section 31 of the Matrimonial Causes Act 1973. So when the divorced wife reaches at the age at which she is actuarially expected to die, having applied the lump sum on a part investment, part expenditure basis to produce her annual net income as assessed by the court, the lump sum will have been used up. This is called amortisation of the lump sum. (For more on this, see the leading case of Pearce v Pearce EWCA Civ 1054.)

Vaughan v Vaughan

The case of Vaughan (2010) EWCA Civ. 349, centred upon a 13-year marriage that ended in divorce in 1985. The wife was working part-time as an art expert; the husband, who had qualified as a barrister at the age of 24, had just become a QC. He was 42 and the wife was 37. There were no children.

At that time, relatively few wives in their 40s went to work full-time to support themselves. Nearly 30 years later, times have changed.

Mr Vaughan married the second Mrs Vaughan; she was 15 years younger than him and they had two children. He went on to become one of this country’s leading experts in EU law. (He became so well known, in fact, that the Court of Appeal had difficulty convening an impartial bench that could hear this appeal.)

In 1989, the first Mrs Vaughan’s attempts at building a career for herself had floundered and she applied to the court. It must have been a hotly contested application. In 1991 when judgment was ultimately given, the court found that the wife’s earning prospects were only £5,000 per annum and she clearly could not manage. Conversely, the husband by then had a gross annual income of £243,000. Mr Justice Booth found that the first Mrs Vaughan had income needs of £27,000 per annum. He set maintenance payments at that level, backdating the order to 1989 with no cut-off point. He declined to give Mrs Vaughan maintenance in excess of her comparatively modest needs, notwithstanding her former husband’s vast income, setting a substantial differential between living standards of first and second wife for the rest of their lives. The outcome was not generous to Mrs Vaughan.

Mr Vaughan is now 71, and the second Mrs Vaughan is 56. His health has deteriorated in the last three years, and his income is no longer what it was. However he has a pension pot worth more than £2.3 million, from which he intended to take a considerable deduction on the income, in order to benefit his second wife substantially in the event of his death. He also gave his second wife a share portfolio worth £330,000.  He and his second wife agreed that their jointly owned London home, worth some £4.3 million, should be sold and that they would move to a smaller property worth some £2 million or thereabouts. This would also give his second wife another £900,000 of liquid capital, after costs.

Back in court

Last year, in view of the loss of his earned income, Mr Vaughan applied to the court to terminate the maintenance payments that he was making to the first Mrs Vaughan.

The first Mrs Vaughan had never applied for an increase in her maintenance. She lived on her maintenance and also had pension income of £5,000 per annum. In terms of capital, she did come into an inheritance from her parents in 1988 and 2005. After spending an incredible £200,000 in legal fees fighting this case, she was left with liquid capital of £380,000 liquid: the balance of her inheritance. She also lived in a house now valued at £1 million which, it was agreed, needed repairs and redecoration. Mrs Vaughan also had a valuable Indian desk worth £300,000 from her original divorce settlement.

Mrs Vaughan cross-applied for capitalisation of her maintenance claims under section 31 of the Matrimonial Causes Act 1973. She requested a Duxbury lump sum of £560k, based on an increased maintenance need in excess of £50,000 per annum. She was asking for a lump sum to cover almost double the present maintenance and perhaps that was too high.

Although the parties agreed that Mrs Vaughan’s income needs had increased from £27,000 per annum, they could not agree upon a new amount. Mr Vaughan argued, in an 80-paragraph opening statement, that even if her needs had increased, because of the down turn in the husband’s income and her own inherited capital, he should not have to pay her any compensatory Duxbury settlement at all. She should be expected to manage on what she had.

In the lower court, with his formidable advocate Nicholas Mostyn QC, Mr Vaughan succeeded. The judge found that Mrs Vaughan could manage by amortising all her own liquid capital to provide for her future lifetime income needs, without the need for any capital payment by Mr Vaughan.

In the Court of Appeal

Should the first wife have been expected to use her parental inheritance to pay for her maintenance needs? In the Court of Appeal, Lord Justice Wilson delivered the judgement.

Applying Pearce, he attributed a net income need of £48,000 per annum to Mrs Vaughan. He found she could not adjust to the ending of her maintenance without undue hardship. The lump sum she required under the Duxbury tables, to give her £48,000 per annum for life, was about £500,000. It was wrong for her to be expected to “amortise” her inheritance (Lauder –v-Lauder 2007 EWHC 1227). He did take into account the £300,000 value of her Indian desk: the net proceeds of the desk would be “amortised”. This left a shortfall under the Duxbury tables of £215,000, which he ordered Mr Vaughan to pay.

Question: so if you are a first or second wife, which wife takes priority?

Answer: neither of them.

Lord Justice Wilson followed the case of Roberts  v Roberts (decided forty years ago in 1970 and still good law). While the court does not give priority to the claims of the first wife, the second wife took the husband “subject to all existing encumbrances” and so priority is not given to the claims of the second wife either.

As with much so much of our law, it is a balancing exercise. It is about fairness and, ultimately, the discretion of our judges if the parties can’t agree a sensible compromise between themselves, about figures which – with all due respect – do not seem to be rocket science.

There are still quite a few of these cases around. To people who have grown up in the ‘Noughties’ such decisions may, on the face of it, seem unjust. Certainly the comments I have read on newspaper websites seem to knock Mrs Vaughan very hard.

However it is worth remembering that in the 1980s, times were different for women. Today, young childless recipients of open-ended maintenance with no reasonable prospect of self-sufficiency are rarer. I suspect that the awards to the “Mrs Vaughans” of this world will, ultimately, become far fewer in number.

Image credit: Nanagyei.