Divorce and maintenance orders: Waggott v Waggott signals the end of ‘a meal ticket for life’

The Court of Appeal’s latest family judgment of Waggott v Waggott [2018] EWCA Civ 727 (Waggott) provides another indication that the ‘meal ticket for life’ (via the joint lives maintenance order) is no longer something that wives can expect from the English courts.

The case involved Karen Waggott, ex-wife of successful businessman William Waggot, FD of TUI Travel, attempting to  increase her annual maintenance payment.  She had been awarded a settlement of £9.76m (including pension on their divorce plus £175,000 per year in maintenance for the rest her life and some deferred remuneration). However, she  appealed, asking for  an increased share of the husband’s bonuses and a variation of the  maintenance order seeking an extra £23,000 pa. Unfortunately her bid backfired as, perhaps inevitably, her former husband cross-appealed on the term and level of maintenance and the Court of Appeal agreed with him, ordering a three year non-extendable term instead.

Undoubtedly, Mrs Waggott has not done other wives any favours since Waggott will now be used by family lawyers around the country as a tool to obtain clean breaks for husband clients, or whoever is the main breadwinner.

With so much capital to invest (Mrs Waggott’s housing claims were held to be £2.75 million) many other judges might have ordered a clean break straightaway. However, clearly the husband’s very high income (over £3 million netper annum) set this case apart from other cases where the Court’s overriding principle is to consider whether a clean break will enable the  applicant “to adjust without undue hardship’’. Mr Waggott’s ability to earn a substantial income supported the initial judge’s conclusions that the wife should not be obliged to draw down on her capital (known as ‘amortisation’), which she was awarded as a matter of entitlement – her share of the matrimonial property. The wife was therefore only expected to use the income from her free non-housing capital, while the husband would not have to touch his free capital or any income produced from it at all. To the contrary, with his substantial earnings, the husband could carry on and build up an even greater retirement pot.

In allowing the husband’s cross-appeal, the Court of Appeal addressed a number of issues:

• Is a spouse’s earning capacity an asset/matrimonial property capable of being shared?
  
  The Court made the clear conclusion that it is not.

• How should a court decide whether an award, which is determined by reference to the sharing principle, will meet the applicant’s needs and to what extent is it right that the wife should have to use her sharing award (i.e. the £9.76 million) to meet her ongoing income needs when the husband will be able to meet his needs from his substantial earned income?
  
  The Court concluded that the last point will be relevant to the Court’s decision to the first part, in effect leaving the argument open on this in the future - although on the facts of this case, the Court thought it entirely fair for Mrs Waggott to draw down on her capital.
   
• To what extent is the compensation principle invoked when one party has sustained a financial disadvantage during the marriage and the other an advantage?
  
  Lord Justice Moylan like so many judges before him, put a kibosh on the suggestion of compensation as doing so would involve the impossible task of working out whether the applicant’s aborted career would have resulted in the couple having higher resources than they did.

What this case might mean for future clean breaks and joint lives orders

So how will this decision affect other cases where there is a question of whether there should be a clean break?

Well, like many other reported cases, the kind of assets that Mr and Mrs Waggott built up during their marriage are way in excess of what most couples around the country can dream of. For many, it is impossible to achieve an immediate clean break and on-going maintenance is required. However, for wealthy couples, this case will undoubtedly only support the move away from joint lives orders (something that outside London are less common anyway).

But for those couples where over a long partnership they have managed to build up a good level of capital, and where a 50/50 division meets each of the couple’s needs but no more, is it right that the wife immediately has to draw down on her capital whereas the husband is able to avoid doing so and rely on his substantial earned income going forward?

I have had several recent cases where the assets are between £8 to £12 million (so substantial but less than the Waggotts’) but where only one spouse, usually the husband, had a substantial earning capacity and where the argument has been whether the wife should have any maintenance, even if for a short period. In those cases, and taking into account the Court’s overriding principle of fairness, and following indications by judges that maintenance is not appropriate, the couples have ended up agreeing that the wife should have an increased share of the capital to take into account the husband’s earnings. However, there are many judges who would consider an immediate clean break based on a 50/50 division more appropriate, even taking into account the substantial costs of living in London with high property prices.

In my view, Waggott will provide further armoury for husbands or the main breadwinner to achieve a clean break straightaway, but the case will not stop arguments on this thorny issue until there is further clarity from the courts on maintenance and reform of divorce laws generally. In the meantime, it is important for wives (or husbands who are not the main earners) not to underestimate their capital and income needs as this will only assist in achieving more than 50/50 capital or maintenance even for a short period.

First published in WealthBriefing, April 2018.

Further information

Please contact Charlotte Bradley or a member of our family team if you have any questions about or are affected by the issues covered in this blog.

You may also be interested in reading our previous blogs on:

• English Court of Appeal follows US case example in deciding earning capacity is not a matrimonial asset to be shared - on Waggott v Waggott 
• Practical tips on varying spousal maintenance – does life mean life
• Maintenance pending suit and interim maintenance - where divorce meets poker
• Doughnut or double - bankers’ bonuses and spousal maintenance

Additionally, you can find out more about financial arrangements on divorce.