Cooper-Hohn divorce ruling leaves divorce capital undimmed

23 December 2014


There are two surprising things about the decision handed down last Friday (12 December 2014) in relation to the divorce of super-wealthy couple Chris Hohn, the London financier, and his American wife Mrs Cooper-Hohn. The first is that it took so long to see a large contested award that ran to over £100 million – indeed only two settlements in the past ten years have even come close to half that amount. Mrs Cooper-Hohn was given just over one third of their US$1.5 billion fortune five months after the divorce case was heard in the High Court this summer.

The glass ceiling was lifted off High Court awards by the decision 15 years ago of White. In that case there was, the Court said, to be no discrimination between the home-carer’s role and the role of the breadwinner. There would be a starting point of 50:50 for splitting assets. Mrs Cooper-Hohn’s award is a deviation from that now well-established norm.

The second surprising thing is that the court has allowed exceptional contribution to survive as an argument. Mr Hohn argued he had made a special contribution to the couple’s wealth throughout their marriage. Although not granting him the 75% asset split he was hoping for, Mrs Justice Roberts accepted Hohn was the "generating force" behind their financial success and that his "financial genius" justified not splitting his assets equally.

Properly called, Mr Hohn really mounted a defence of “business genius”. Many in the profession think this defence is ripe for challenge in the Supreme Court, since it attacks the heart of the idea of equality of roles set out 15 years ago in White – they say 50:50 should apply all the way up the scale of wealth. It will be interesting to see what happens next in this case.

It is in fact rare to have such cases in the Supreme Court on points of law.
Contrary to popular perception there is huge pressure to settle large divorce cases to avoid publicity, and to reach a commercial settlement.

The divorce settlement involving the late Boris Berezovsky’s divorce in 2001 was notable as an example of the largest settlement recorded publicly (£220 million) but was a consent agreement and involved no contested law points.

Other big money cases attract headlines but frequently don’t involve new or interesting points of law. The McCartney case 2008 was a good example. His admitted wealth was £400 million.

Why then has London gained the reputation of divorce capital of the world and how might this reputation be at risk now from the Cooper-Hohn decision?

London often hears “big money” divorce cases which are generally thought to start at around £10 million of assets because of the high earner and high value asset owners who dwell here. For instance a family used to very high levels of London housing may struggle with a combined housing budget of £5million. The remaining assets may not be enough to capitalise maintenance for life – England is a generous maintenance jurisdiction as well.

The other reason why London has become attractive as a divorce destination lies in the generosity of English awards coupled with EU forum shopping rules that allow choice of jurisdiction for an optimum result. England and Wales is a generous divorce jurisdiction for wives compared with our neighbours Scotland and France. But beauty is in the eye of the beholder, and many husbands therefore see London as one of the least attractive place on earth to get divorced. The European nationals that I act for regularly see awards of three times the amount that they would have received or paid out had they secured jurisdiction in their EU home nation. These cases involve divorce races where each spouse, under EU-law rules is frequently entitled to choose their jurisdiction of origin or England and Wales.

The last important factor in London’s popularity stems from the cultural, financial and legal context which make England and Wales, and London in particular a big draw for global wealth.  London attracts many of the internationally wealthy to live and raise families here. Hence we see Russians, Far Eastern couples, Middle Eastern couples and so forth, if they can prove residency here, wanting to use our divorce courts too.

Will London’s divorce capital reputation be affected by Cooper-Hohn? In my view not.

It will be rare cases in future where financial genius can be argued and Mrs Cooper-Hohn or a wife in a similar situation may soon appeal to try and overturn the financial genius defence in the Supreme Court. Such an appeal is all but inevitable eventually.

Until the Supreme Court hears the question, we will see a handful of couples arguing for more bespoke asset split solutions to the 50:50 starting point established in White. But even before the Supreme Court steps in, let us not forget English case-law remains at its heart a discretionary awards system – and perceived as a very generous or protective system at that, when compared with almost all other juirsdictions. It is not just generous over capital, but also over maintenance. Particularly in the London courts, judges are still just not willing to terminate maintenance awards for spouses who have reached their mid-forties and who do not work in the employment market. There has long been evidence of a tougher approach outside London (even outside the M25!)

There are however other threats to London’s position as a divorce capital, one of which is the threat which High Court judges make regularly – that wealthy couples take up too much time and resources and that court time needs to be rationed. 

The other is already a reality – that increasing numbers of middle and lower income families cannot afford lawyers and represent themselves.

In addition lawyers are increasingly advising clients to look for out of court private judging and alternative dispute resolution methods. These can bring faster and cheaper solutions which also avoid the glare of court publicity.

So in conclusion there is always going to be reason to litigate where cases involve complexity, new points of law, dishonesty and above all significant assets. The discretionary English system means that, on big money cases there continues to be much at stake from a financial perspective in securing a result one way or another on capital or maintenance.

The Cooper-Hohn decision is an interesting one, but it poses no significant threat to London as divorce capital of the world.

First published in Wealthbriefing on 22 December 2014.

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