High Court considers compensation in rare ruling

For saleHigh Court judge Mr Justice Mostyn considered the legal principle of compensation in a recent ruling.

SA v PA concerned a wealthy Dutch husband and English wife who were married for 18 years. They were both lawyers, with four teenage children. The couple were unable to reach a financial settlement during their divorce, with the husband setting great stock by a premarital agreement the couple had signed before their wedding in Amsterdam, and the wife claiming that her ‘periodical payments’ (maintenance) should be increased in line with the principles set out in the 2006 case of McFarlane v McFarlane.

In the latter complex case, the wife was awarded a significantly larger financial settlement than she required to meet her needs by the House of Lords because she had given up her career as a solicitor to look after the couple’s children.

In SA v PA, the wife, who had also given up her career, wanted, amongst other requests, the matrimonial home outright, alongside child support, a lump sum payment totalling £110,000 to cover her debts, and a ‘joint lives’ periodical payments order totalling £200,000. Joint lives orders continue until the person receiving the money remarries or dies, the payer dies or the court makes a further order. She offered to forego a share of her husband’s pension in recognition of the fact that some of the assets she was seeking were not marital property.

The husband, meanwhile, relied on the pre-marital agreement to argue that their former matrimonial home should be made subject to a Mesher order, in which the wife could continue living the property for five years, after which it would be sold and the proceeds divided equally. He offered a higher lump sum and but lower periodical payments.

“Neither of these proposals is reasonable,” said Mr Justice Mostyn.

One the subject of compensation, the judge referred to the principles set out in McFarlane v McFarlane, noting:

“Obviously I am bound by the decision of the House of Lords. However, in the light of the later authorities, I think that the principles concerning a compensation claim can properly be expressed as follows:-

i) It will only be in a very rare and exceptional case where the principle will be capable of being successfully invoked.

ii) Such a case will be one where the court can say without any speculation, i.e. with almost near certainty, that the claimant gave up a very high earning career which had it not been foregone would have led to earnings at least equivalent to that presently enjoyed by the respondent.

iii) Such a high earning career will have been practised by the claimant over an appreciable period during the marriage. Proof of this track-record is key.”

He added:

“…it will be apparent that it is my firm belief that save in highly exceptional cases an award for periodical payments should be assessed by reference to the principle of need alone.”

The judge concluded:

“The wife had no appreciable track record by the time she gave up work. It is not even known what she was earning when she quit, let alone whether they were high earnings. It is impossible to speculate where she would be now had she made different decisions at that time. She now says that she would prefer not to return to legal practice but would like to be a novelist. Why should I assume that she would not have made that decision in a completely different counterfactual scenario back in 1995? The way this case is put shows just how impossible it is both in terms of logic and concept to apply the principle of compensation.”

Turning to the premarital agreement, he said:

“Although it is true that the agreement was entered into on the very eve of the marriage, at a time when the wife was pregnant, and where she had only the impartial but not strictly independent advice of the notary I am satisfied that the wife freely entered into it with a sufficiency of advice to enable her to appreciate its implications. In my judgment…it would be fair to implement the capital division specified by the agreement, as it was understood by the wife.”

Following a detailed consideration of the husband’s financial situation, Mr Justice Mostyn ordered a settlement which included the transfer of the family home to the wife, but subject to its large mortgage, on the understanding that she “will use her best endeavours to procure the release of the husband from the mortgage covenants and will in any event indemnify him in respect of all liability.”

He, meanwhile, was to pay her a lump sum of £120,000 and £10,620 per month in maintenance until 1 February 2019, as well as assuming liability for the joint debts, amongst other provisions.

Compensation cases are rare and occur where someone has given up the real chance of a high earring career and at the end of the marriage cannot get it back. There have not been many since McFarlane v McFarlane.

Photo by  Diana Parkhouse via Flickr under a Creative Commons licence 

Marilyn Stowe

The senior partner at Stowe Family Law, Marilyn Stowe is one of Britain’s best known divorce lawyers with clients throughout the country, in Europe, the Far East and the USA.

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2 comments

Laura | Dutch Law Firm AMS - February 25, 2014 at 12:30pm

Always a sad case when it comes to divorcement cases. But giving up a career is also a hard decision. Difficult for the court to determine the compensation.

Anon - February 26, 2014 at 10:52pm

If you come into a marriage under a written agreement, then that should be a binding contract. Even though this court deals in probabilities it is difficult to say how much someone would be earning given all of the variables involved.

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