Should a high earning capacity be shared upon divorce?

The Court of Appeal has released judgment in the case of Waggott v Waggott saying no it shouldn’t and dismissing the wife’s appeal.    

The case involved a 53 year old husband and a 47 year old wife, they lived together from 1991 until 2012, and they have one child who is 14.  When they met they both worked as accountants at the same firm.  In 2001 the family moved to Manchester for husband’s new job and the wife basically did not work again. 

The parties had agreed a 50/50 split of their capital assets which were worth over 16 million.  Husband’s net annual income was estimated to be 3.7 million although it was not guaranteed as a large proportion related to bonus and deferred share plans.  The wife argued that husband’s salary and earning capacity was built up during the marriage and should be shared; she sought 35% of her husband’s future net bonuses payable until 2022 and maintenance at the rate of £190,000 each year for life.  Husband offered a share of income for 2014 and 2015 and maintenance for 5 years at £80,000 for three years and £50,000 for two years.  Husband argued that wife could meet her own needs in due course. 

The first judge in September 2014 decided the wife needed housing at a cost of 3.24 million to include a holiday home at £750,000.  Her income needs were £175,000 per annum plus £24,000 per year in child maintenance.  He also ordered the wife should receive 25% of bonus paid in 2014 and 12.5% of the bonus paid in 2015.  This would provide her with 8.3 million.

The judge calculated that the capital not used for housing or pension would generate approximately £60,000 net per annum.  The judge ordered maintenance to bridge the gap between £175,000 and £60,000 that being £115,000, there was no reduction for any earnings she may herself make.

Both partied appealed, the wife’s appeal was dismissed. 

The husband appealed on the basis that maintenance for life was incorrect and it should only be paid until February 2021 when the wife turned 52.  He also disagreed with how the court applied the wife’s free capital arguing that it would generate about £100,000 per year and that once her pension kicked in at 60 she would in addition receive £76,000 per year, this would provide £150,000 net per year and on top of that she would receive her state pension.  The shortfall until her pension was therefore £75,000 per year. 

The appeal judge allowed the husband’s appeal and ordered maintenance should stop on 1 March 2021 and further ordered that she could not apply to extend that period.

I suspect most lawyers would have been surprised if the wife in this case was successful on this appeal, it is however arguable that whilst husband obtained a benefit from this marriage wife obtained a disadvantage and she will never be able to catch up.