Millions affected by the divorce battles of the super wealthy
Two legal judgments that have changed the rules will not only have implications for the rich, says David Prosser
Saturday 27 May 2006
he number of marriages ending in divorce may now be as high as one in two - good news for family law solicitors, particularly after two legal rulings this week that could pave the way for more bitter court battles between husbands and wives.
The two cases were separate - they just happened to produce rulings on Wednesday - but both could have implications for millions of divorcing couples.
In the Miller case, the House of Lords upheld a previous judgment that Melissa Miller should receive a £5m divorce settlement from her husband, Alan Miller, who is thought to be worth more than £17m.
The case is significant because the couple had been married for less than three years. Previously, the divorce courts had ruled that with shorter marriages, spouses such as Ms Miller should be left no worse off than they would have been if the marriage had not taken place - but that they should not be entitled to a larger share of their partner's wealth.
In the McFarlane case, the House of Lords accepted Julia McFarlane's argument that she should be compensated for the loss of earnings potential she had suffered when giving up her job to look after the children. It said the maintenance her husband, Kenneth McFarlane, should pay her should not be based only on her financial needs, as courts have previously assumed. He will now have to pay her £250,000 of his £750,000 annual income
Though the sums of money at stake in these two cases are large, the judgments will act as precedents for divorcing couples with much more modest wealth. "This will cover a lot of ordinary people, not just the super-rich," says Julia Whittle, of Punter Southall Financial Management. "It may affect many professional couples, as well as divorces concerning older people, or cases where businesses are involved."
The courts will first consider the finances needed to put couples in the positions entrenched in law before these cases - so that a spouse in a short marriage is no worse off, say, or that a maintenance settlement covers needs. But if there is money left once these arrangements have been made, the Miller and McFarlane cases will be relevant.
Victoria Brandon, a matrimonial lawyer at Turner Parkinson, says a "significant number" of couples will be affected. "In the majority of divorces, there are not sufficient assets for these judgments to be relevant, but there are in many cases."
The courts remain reluctant to apportion blame when considering settlements. Previously, Ms Miller had argued that one reason she was entitled to a larger share of her husband's assets was that he had committed adultery. "As a result, many recent cases have cited bad conduct of one party as a reason for increasing the award," says Marc Saunderson, a partner in the family team at the solicitor Mills & Reeve. "The courts have wisely decided it is not their role to apportion blame."
Instead, Ms Miller won her case because the courts decided Mr Miller had earned large sums during the marriage and that she was entitled to think her financial position would last for life. "To be relevant, conduct would have to very serious indeed," says Barbara Simpson, a deputy district judge in the family courts. "The Lords gave Ms Miller £5m because £15m was earned by Mr Miller during the marriage and they had enjoyed a high standard of living."
In other words, the courts have now decided that even in the case of short marriages, the less well-off partner should not suffer a greater loss of standard of living.
Similarly, in the McFarlane case, the courts have decided there should be no distinction made between the partner staying at home and the partner going to work. By choosing to stay at home and look after children, Ms McFarlane's individual finances suffered - once her marriage broke down and she no longer shared a family income with her husband, she was entitled to compensation.
The rulings may seem unfair to spouses who have not done so well from divorce settlements in the past. But there is little prospect of reopening such cases. "These judgments are not retrospective," Brandon says. That means it is not possible to ask the courts to look again at divorces on which they have already ruled.
Should you sign a pre-nup?
* Pre-nuptial agreements are not legally binding contracts under English law. However, the courts can consider any agreement signed before the wedding and they can be an effective way to ring-fence any assets that spouses have accumulated before the marriage.
* More couples may consider pre-nuptial contracts following this week's judgments. Victoria Brandon, of Turner Parkinson, says: "For people with money, a pre-nup will protect both partners - not just the spouse with the larger wealth."
* Pre-nuptial agreements carry most legal weight with shorter-lived marriages, where couples' circumstances are less likely to have changed. Once couples have children, the courts put the children's needs first, irrespective of any agreement before the marriage.
* Couples can update a pre-nuptial agreement if the context in which the contract was signed becomes less relevant.
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