ANCILLARY RELIEF: McFarlane v McFarlane [2009] EWHC 891 (Fam)

18 JUN 2009

(Family Division; Charles J; 18 June 2009)

The husband and wife, married effectively for 16 years, with three children, were both qualified professionals, and until shortly before the birth of their second child had earned similar sums of money. Thereafter, the wife remained at home to care for the children, while the husband continued his professional career, with a salary increasing considerably year on year and at £750,000 by the time of the hearing. The family had insufficient capital to achieve a clean break, but the husband's salary was far in excess of the family's financial needs after separation. The district judge made a periodical payment order of £250,000 a year to the wife, against an estimated income requirement of £128,000, on the basis that fairness required that the wife should have a share of future earnings which had been made possible by her past contribution to the husband's career. The periodical payment was reduced on appeal to the Family Division to £180,000, but the Court of Appeal allowed the wife's appeal in part, restoring the award to £250,000 a year but limiting the term to 5 years. The House of Lords removed the 5-year term, holding that this was paradigm case for an award of compensation in respect of the significant future economic disparity sustained by the wife, arising from the way in which the parties had conducted their marriage. As equal division of the capital was not enough to provide for the wife's needs or to compensate her for the disadvantage she had suffered, the wife, having given up her own highly-paid career for the family, was not only entitled to generous income provision, including sums which would enable her to provide for her own old age and insure the husband's life, she was also entitled to a share in the very large income surplus. Some years on, the husband's net earnings had now risen to over £1 million pa. The wife had obtained employment, but was still in training, and was unlikely ever to be a high earner. The wife sought a substantial increase in the periodical payments both for herself and the three children.

The wife was entitled to apply for a substantial increase and/or clean break, even though such applications had not been foreshadowed by the House of Lords' judgment. The test or approach described and applied in Fleming had not survived; the reasoning behind the original order that a party was seeking to vary was a relevant circumstance, and therefore on an application to vary the court could assess whether the purpose of the earlier order had been fulfilled and, if it had, this would be a relevant (and perhaps a decisive) factor in favour of refusing an extension or variation. The reasoning underlying the earlier order was also likely to inform the resolution of the tension between (a) the limitations on the jurisdiction to vary a lump sum order, and (b) the ability to include within a varied periodical payments order some provision based on the sharing and compensation principles and the jurisdiction (expressed in quite general terms after the trigger in s. 31(1) was satisfied) to make a lump sum order under s. 31(7B)(a). It was not appropriate to treat a compensation claim as though it were a damages claim, in isolation from the rest of the case; the court was assessing the loss of a chance, and there was no need for quantification or valuation of the 'lost earnings'. It was not appropriate to consider each principle separately, and then adopt as the final result the highest of the three results. In cases in which there was a good reason for a departure from equality within the application of the sharing principle an application of the need principle (generously interpreted) and/or an overview would inform the application of both principles and thus, for example, the amount and fairness of any departure from equality. In this case the amount and structure of the award was guided by: an application primarily of the need principle, to identify the surplus income over and above need by reference to the standard of living during the marriage and the expectations of the parties concerning it, and an application of all three principles (having regard to the potential for overlap between them) to determine how that surplus should be applied as between the parties. The court arrived at an award expressed in percentages of the husband's annual salary, varying depending on the amount earned.

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