Discrimination in the courts? Waggott v Waggott by Phoebe Turner

In the so-called “meal ticket for life” appeal case of Waggott v Waggott [2018] EWCA Civ 727, Kim Waggott, the former wife of William Waggott, lost her joint lives maintenance award and the court rejected the argument that earning capacity is a resource subject to the sharing principle upon the breakdown of marriage. William Waggott is an executive in the travel industry.

The background

The parties commenced their 21 year relationship in Manchester, where they were both accountants working at the same firm, with neither party having any significant capital assets.  The parties married and had one child together.

In 2001 Mr Waggott was offered a job in London, and Mrs Waggott gave up her career as a finance controller in order to enable Mr Waggott to accept the new job that he’d been offered.  From this point in time the parties made a joint decision to prioritise Mr Waggott’s lucrative career.  Over the years, significant capital was built up and Mr Waggott acquired a very significant earning capacity.

Original decision

After a 21 year relationship, the parties divorced.  At the time of their separation they had been living in a home worth £4.3 million, and had enjoyed an expensive standard of living.  Mr Waggott, aged 53, had an estimated income of approximately £3.7 million net per annum for the year 2014 (parts of which were paid as a discretionary bonus and under options arrangements).

In 2016 (two years after proceedings commenced), Mrs Waggott (then 47) received capital (including a pension share) valued at £9.76 million, and her income needs were assessed to be £175,000 per annum.  Her needs were to be met using her “free” capital to produce an investment income, with the shortfall to be met by spousal maintenance payments made by Mr Waggott.

These top-up maintenance payments had been ordered to be met by Mr Waggott on a joint lives basis, meaning that Mr Waggott would be obliged to pay these sums until one or other of the parties died, or Mrs Waggott remarried, or until the Court made a further order.  The amount payable would be subject to review once Mrs Waggott’s share of the couple’s pension funds became available.

The judge did not make any reduction for Mrs Waggott’s assumed future earnings because, although he expected the her to have obtained paid employment after four/ five years, he did not consider it fair to make such a reduction, largely because of the level of Mr Waggott’s income, but also because of the uncertainty as to whether and what Mrs Waggott might be earning (considering her age and the time spent out of the employment market).

The appeal

Both parties appealed the court’s original decision.

Mrs Waggott, represented by James Turner QC, asked the appeal court to increase her maintenance payments, or, alternatively, to award her an additional sum of capital, arguing that:

1. The first court had failed to make an award reflecting Mr Waggott’s post-separation income. His earning capacity was a marital asset, which Mrs Waggott had helped build over their 21 year relationship.  To not make an award which took account of that asset was contrary to the sharing principle, and also contrary to compensation principles, on the basis that Mr Waggott’s earning capacity represented an advantage which had accrued to him during the marriage and required “compensation” in one of the senses which that concept was intended to have by Lord Nicholls in the precedent-setting case of White v White;
2. Further, the award at first instance was unfair and discriminatory in that it left the parties in positions of gross financial inequality from which to begin their separate lives. In that regard, Mr Waggott was able to commence his separate life from a much stronger financial position than Mrs Waggott because of his earning capacity, which resulted from his role as the “breadwinner” during the marriage.  Thus, the outcome discriminated in favour of the “breadwinner”.  To say that Mrs Waggott could live on the award that she had received (which she could) would be to miss the point of principle;
3. Mrs Waggott should be awarded open-ended maintenance as she would not be able to adjust without “undue hardship” should her maintenance payments cease; and
4. Mrs Waggott should not have to use her share of the capital to provide her with any part of her income needs, because Mr Waggott would not have to use his share of the capital in that way, so to require Mrs Waggott to do so would compound the positions of inequality in which they were left.

Nigel Dyer QC, on behalf of Mr Waggott, submitted that:

1. Mr Waggott’s earning capacity was not an asset to which the sharing principle Any entitlement to share financial resources should cease at the end of the marriage if each party was left with sufficient resources to meet their respective financial needs; and
2. Continuation of maintenance would fundamentally contravene the clean break principle. Further, the continuing maintenance payments meant that Mrs Waggott had no incentive to return to work, and Mr Waggott should not be burdened with the pressures of his demanding employment to meet Mrs Waggott’s needs when Mrs Waggott herself was not realising her own earning potential.

The judgement

Having considered the parties’ competing arguments, Lord Justice Moylan decided that the sharing principle does not apply to earning capacity, and that sharing stops “at or within a short time of the end of the relationship”.  He ruled that Mrs Waggott could only establish a claim to a continuing share of Mr Waggott’s earnings if “necessary to meet her reasonable needs”, but this was not a “needs” case.  Further, the bonuses received by Mr Waggott were “entirely dependent on the husband’s post-separation performance”.  His Lordship also rejected Mrs Waggott’s case as to the scope of the “compensation” principle.

As to Mrs Waggott’s argument that it was not fair for her to be required to use her capital to meet her income needs, the Court of Appeal rejected her argument she should be entitled to preserve her share of the capital built up during the marriage just because Mr Waggott could.  Further, the court ruled that Mrs Waggott should be expected to use part of her “surplus” capital (by way of amortization), to meet any shortfall in her income needs upon the termination of her maintenance, so as to enable a clean break to take place without “undue hardship”.

Lord Justice Moylan stated that:

“… it is plain to me that the wife would be able “to adjust without undue hardship” to the termination of maintenance” and that “any extension of the sharing principle to post separation earning would fundamentally undermine the court’s ability to effect a clean break”.

Accordingly, the court ordered the termination of the maintenance payments after a further three years (in March 2021, when Mrs Waggott would be 52 years old), effecting a clean break between the parties at that time. Thereafter, Mrs Waggott would have to rely on her invested capital to produce an income.  Mrs Waggott would also have her pension income from 2028, but this would leave a seven year gap between the date when her maintenance payments from Mr Waggott cease and the date when she is able to begin drawing income from her share of the pension funds.  In order to cover this shortfall, she will need to utilise part of her invested capital itself, rather than simply the income from her invested capital.  Mr Waggott will be left with his entire share of the capital and investment income or capital growth derived from that, as well as his substantial income.

The other two judges presiding over the case agreed.

Conclusion and thoughts

This judgment is a significant step towards the English courts making less generous financial awards.

James Turner QC, in his arguments on behalf of Mrs Waggott, was concerned about the widespread (and often unfair), use of the term “meal ticket for life”, being bandied about without consideration of whether that party requires a joint lives maintenance order to produce a fair outcome.

Lord Justice Moylan dedicated the final paragraphs of his judgment to address this issue saying:

“I, of course, acknowledge that long-term maintenance can be required as part of a fair outcome and also that I understand why he [Mr Turner] suggests that the expression “meal ticket for life” can be used as an unfair trope.”

Of course, had the appeal been heard by another panel of judges there might have been a different outcome.  This is the risk of any litigation.  Indeed, if Mrs Waggott seeks to appeal this decision she may have a more sympathetic panel in the form of the Supreme Court (especially with Lady Hale and/or Lady Black, the two female Supreme Court Justices, on the bench).  Interestingly, it was a female judge (Lady Justice Gloster), who had granted permission to Mrs Waggott to appeal to the Court of Appeal.  It is also to be noted that many of the arguments put forward on behalf of Mrs Waggott there were based on aspects of the judgment of Lady Hale in the Miller v Miller; McFarlane v McFarlane case.

The case has attracted widespread media coverage.  Certain factions of the public believe this is a sensible judgment, preventing a financially weaker spouse (usually the wife), from having life-long claims against their ex-partner for years after a divorce.

Other groups argue that stopping maintenance like this disadvantages the financially weaker party unfairly, especially where that party has given up their own chances of a high-flying career to support their partner and raise their children.  Also, they believe that the failure to take account of an earning capacity built up during a marriage (whether by way of increased capital or by continuing maintenance) is unprincipled and discriminatory.

These points add to the issues faced by many women today in regard to gender inequality, and sex (or role) discrimination. The Waggott case involves questions of discrimination and prejudice because it arises from the husband having been the breadwinner, and the wife the homemaker, during the marriage.

In his judgment, Lord Justice Moylan reminded us that in White v White Lord Nicholls said: “In seeking to achieve a fair outcome, there is no place for discrimination between husband and wife and their respective roles”.  This was repeated in Miller/McFarlane, where Lord Nicholls described discrimination as “the antithesis of fairness”.

However, the stark reality here is that Mrs Waggott left a 21 year long relationship with a limited earning capacity and a requirement for her to not only use the income from her “surplus” capital in a way that Mr Waggott is not required to do, but also to deplete that capital to support her income needs, while Mr Waggott hangs on to his substantial income of approximately £3.7 million net per annum.  If this isn’t financial discrimination in favour of the “breadwinner”, one might ask what is?