London: the divorce capital of the world. ‘Big money’ divorce cases (1 Nov 2011)
>> Thank you all for coming. This is really quite
exciting, actually. I'm please to hear that you
want to hear what I have to say this afternoon. Well, these are the
headlines that most of us are familiar with. England is the divorce
haven of Europe; some say the world;
some say Europe. Now, this may or may not be
true, but indeed, even if it is, I wonder whether it's
such a bad thing, because the way these headlines
are displayed makes it seem as though this is an
evil road that London or England is treading upon. What I'm interested
in, therefore, is not so much whether or
not this is objectively true, but what I am interested
in is if it is true, why? What are the reasons for it? Now, before I talk about the
so-called big money cases and believe it or not, that
is the actual legal term; we call them the
"big money cases" — before I talk about
these big money cases, I just want to put this talk into a little bit
of perspective.
Research in the UK and
internationally is consistent that men's household income
increases by about 23 percent on divorce, once we
control for household size; whereas women's household income
falls by about 31 percent. There's a partial
recovery for women but that recovery is
driven by repartnering. And the average effect
of repartnering is to restore income to
its predivorced levels after about nine years. Those who don't repartner
tend to be older women or women who have children. And for the, the long-term
economic consequences of divorce are serious. In the longer term,
given the need of carers who are usually wives on divorce
and the children in their care for housing, for some
security in income in the years immediately
following the divorce, there's a trend toward
some offsetting any claim for future pension entitlement against having the home
now, and some income now.
And indeed, lack of pension
provision is indeed one of the main causes of poverty
for women in later life. Divorced women are
hit particularly hard. Forty-three percent of older
divorced women live in poverty, and this is directly
related to the breadwinner, part-time worker norm, which means poor pension
accumulation during marriage because women tend to rely
on the breadwinner's pension. On divorce, they have too
little time to catch up. So women suffer poverty in later
life disproportionately to men. Why? What's going
on, apart from this? Pension sharing, pension
attachment orders, which the court does have
the jurisdiction to order, are made in only 7.9
percent of divorce cases, and these are usually only in
cases involving wealthy parties.
What else is going on? According to the Equality
and Human Rights Commission, most people now do hold
so-called modern, contemporary, egalitarian attitudes
towards their family and their work responsibilities. But the arrangements they
tend to put in place for work and childcare are
often constrained along traditional lines. Over three-quarters
of mothers state that in day-to-day life they
have the primary responsibility for children, and there are
significant differences, not only in the actual
care and time put in, but also in the perceptions
of men and women about whether they
share responsibility for childcare equally.
A third of men believe
they do share it equally, but only 14 percent
of women agree. Responsibility for
housework separate from childcare also hasn't
changed in accordance with new, modern egalitarian
ideas of family living. Full-time working mothers
do twice the number of hours of housework per week as their
full-time working partners. Where women do earn,
they're faced with a continued gender pay gap. The gender pay gap is
lowest for the under 30s; it rises as people get older. It's influenced by these
factors; low pay in sectors where women tend to work
or to choose careers, and that whole ideology
of choice, the subject of a
whole nother lecture. It's also caused by the
effect of career breaks, limited opportunities
and part-time work. And it's there even for
the most highly qualified and well-educated women.
So in the context,
then, of what our family and work lives actually
turn out to be, these norms by which many
still live, and in the context of what many have also called
the feminization of poverty, particularly but not solely
as a result of divorce, it probably won't be
surprising to learn that in about 70 percent of all
divorce cases, the claimants for financial relief are wives. But in most divorce cases
in England and Wales, we're not talking
about big money. In most cases the courts are
struggling to deal with how to share the income
derived from usually a one and one-half earner model
across two households.
The big money cases that
I'm going to be talking about are truly, truly
the tip of the iceberg. This is that one
percent that the people over at St. Paul's Cathedral
very often are talking about. Not only are they the tip
of the iceberg in terms of the vast amounts of wealth
we're also talking about, they're the tip of the iceberg
of those divorce cases in the UK because very few of these
divorces get to court. Those that do get to court,
of those very few are appealed to the Court of Appeal, and of
those, very few, even fewer, get to the Supreme Court. So the cases that are developing
the principles that I'm going to be talking about are
a tiny minority of cases. Yet, these are the ones
that make the headlines, for obvious reasons, I
suppose, because they're talking about amounts of money that most of us probably can
only fantasize about.
But because of the doctrine
of precedent; that is, the idea that lower courts and solicitors' negotiations
are bound by the principles that come from the higher
courts, these are the cases that make those principles. These are the cases in which
the statute is interpreted and the principles developed. Okay. So given that context,
what I want to do is look at a few of the big money cases, think about what the principles
were, how they've changed, and where we may be now. So what are the principles? Well, the statute that governs
is called the Matrimonial Causes Act, and I won't bore you with
the details of the sections of the Act except to tell you that it contains no overriding
objective for the court to consider when it's
deciding whether or not to divide the property, how to
divide the property, whether or not to order that one
partner, usually the husband, pays support to the
other partner, usually but not always the wife.
So the court has jurisdiction to
make all these kinds of orders, but the statute doesn't give the
court any particular objective to strive for. It doesn't give the court
any guidelines to follow. All it does is say that
the court has discretion to make whatever order
it wants to make, taking into account
a number of factors. With the exception of the
welfare of any children of the marriage, the list of
factors that follows is not in any order of priority. It's just, hear the factors
the court should think about. Now, I'll just run through them
quickly, but as you can see, they're sensible factors:
the income, the property, what the people have, their
needs, their obligations, their standard of
living, their age, whether they have any physical
or mental disabilities, the contributions which each
of them has made to the welfare of the family, conduct, if
it's inequitable to not, or to disregard the conduct.
So this is the context: broad
discretion of the courts, taking into account
this list of factors, no one factor given priority
over any other factor. So how is this discretion
exercised in the big money cases? I'll talk about a
particular big money case, which I think is a
good illustration of the principles in the 1990s. It's a case called
Dart and Dart. The parties of Dart and Dart
had been married for 15 years. They'd lived in England
for two years, having moved from the U.S. as tax exiles. Mr. Dart, or the family thought
Mr. Dart was worth at the time of the divorce anywhere
between 400 million, which was his estimate, and 800
million, which was her estimate. I have to tell you
that we never did find out exactly how much
Mr. Dart was worth. The trial judge awarded
Mrs. Dart, the claimant, among other things, a lump sum
in the amount of 9 million, based upon the principles
that were in play at the time.
Now, I grant you, it's hard
to feel sorry for Mrs. Dart. She got nine million, and I think I could
probably live very nicely on nine million. But in the context of his
wealth, which was either 400 or 800 million, this meant Mrs.
Dart got anywhere between what, one and two percent
of the family wealth. The principle on which she
got that was the principle that said there should
be a ceiling on the award to the wife based upon
her spending needs. So what the court would do, what it would give her a capital
amount using actuarial type calculations to determine how
long she was likely to live and give her a capital
amount to meet her needs, which would reduce the amount so that it would be gone
by the time she died. Based on this, court
figured she needed 9 million. She appealed, and she appealed, saying that in these cases the
courts are giving undue weight to the consideration of needs
over all the other factors that the court's supposed
to take into account. Now, just as a small aside,
in the Dart and Dart case, Mrs. Dart had brought an
application before the actual trial decision was rendered
that the matter be heard in the Michigan courts, because
there was a less discretionary property regime in
the Michigan courts.
Mr. Dart strenuously
opposed that application and in fact he won, and that's
why the application was heard in England. As Lord Justice Thorpe said
in the Court of Appeal, "It's plain that Mrs. Dart
thought she'd do better in Michigan while Mr. Dart
thought he'd do better in London." Let's think about this when
we think about divorce capital of the world, for whom and when. I'll come back to
that in a moment. Okay, let's go back to the
Court of Appeal judgment now, because the Court of Appeal
upheld the trial judge's award of 9 million. And Lord Justice
Thorpe said, no, no, no, we're not really interpreting
needs or giving too much weight to needs; what we're doing is
we're not considering her needs, we're considering her
reasonable requirements. And reasonable requirements
means something different from needs. In fact, reasonable
requirements do take into account all
of these factors.
And therefore, we're not
necessarily giving undue weight to one over the other. So by the end of the 1990s, then
— this is a case in 1997, '96, '97, somewhere around
the end of the 1990s, we have the reasonable
requirements principle acting as a ceiling on any award
that a claimant could have in these big money cases. According to one
commentator at the time, in case legal advisors have
been advising their clients that if they actually
make contributions to the accumulation
of the family fortune, it might make a difference. No, have a look at another
case decided at that time, a case called Goykovich
against Goykovich.
In that case the court did find that the wife contributed
50 percent, but she was still awarded
27 percent of the assets. The commentator goes on to tell
us that at a recent meeting of the International Bar
Association Family Law Committee on multimillion dollar
divorces, the conclusion was that the award to the wife in nearly 30 different
jurisdictions around the world would
be from 10 to 50 percent but in the UK it
would be .6 percent. Okay, this is the law,
and this is the situation until October 2000 now. It's difficult to
overestimate the revolution that the case called White and
White had in English family law.
In this case, White and
White, White had farmed with her husband together
two farms over the course of their 22-year marriage. She was also primary homemaker and child carer during this
time, but that's to be expected and so it wasn't taken into
account in the decision. She claimed on their
divorce 50 percent of the value of these two farms. Despite her claim, the
lower court was bound by the reasonable
requirements principle. So on the basis of that
principle, the court determined that her desire to keep
farming was unreasonable. He didn't want to break up
the existing farming practice, and he awarded her
about 20 percent of the total value
of the assets. She appeals to the
Court of Appeal, still seeking 50 percent based
on the fact that certainly in part, this was a joint
partnership farming enterprise, not only because she's
entitled to more by way of divorce settlement.
The Court of Appeal increased
her award to 1.69 million, about 40 percent of the
total value of the assets. She appeals to the
House of Lords, which is what the Supreme
Court was called at the time, still seeking that 50 percent. He appealed as well,
saying no, no, no, the Court of Appeal is wrong; go back to the trial
court decision. And it's what the House
of Lords did in this case that was the seismic
shift in the law.
The House of Lords confirmed her
40 percent, her 1.69 million, but the result isn't
as important as the language they used,
the principles they developed, and the discourse through
which they developed them. They changed the
narrative of responsibility for financial dependence and interdependence during
marriage and divorce. First of all, Lord Nickels said
in the House of Lords, "well, there is an objective. We may not be able to
see it in the statute, but the underlying objective for
we courts, for us judges to find in these cases is fairness." It's lovely. Fairness, that's the
underlying objective. Fairness is to be
determined according to judicial discretion,
but fairness, he said, is like beauty; it lies in
the eye of the beholder. He said, generally accepted
standards of fairness change from time to time,
from place to place. What we have to do is determine
what it means at any given time and in any given context.
The law, he said, is a living
thing, moving with the times. It's not a creature of moribund
or dead ways of thought. So what's fair? In White and White, what's fair? The first thing he did
was he ended the reign of the reasonable
requirement ceiling. "I can see nothing," he says, either in the statutory
provisions or in the underlying objective
of fairness to lead me to suppose that the
available assets of the respondent become
immaterial once a wife's needs are satisfied." Why ever should they? If a husband and wife, by their
joint efforts over many years, his directly in the business,
hers indirectly at home, have built up a valuable
business from scratch, why should she be confined
to the court's assessment of her reasonable requirements and he left with
everything else? Or to put the question
differently, he said — I'll tell you what
he said in a minute: "Where the assets exceed the
financial needs of both parties, why should the surplus belong
solely to the husband?" Reasonable requirements is
gone, but what's to replace it? Some idea of fairness? It's in the eye of the beholder? He gave us some idea of what
we're going to replace it with.
These are the values of
nondiscrimination and equality. These are the ideas
that most seem to believe contemporary
marriage is all about. He says, in seeking to achieve
a fair outcome, there's no place for discrimination
between husband and wife and their respective roles. Whatever the division
of labor they've chosen or was forced upon
them, fairness requires that it should not prejudice
or advantage either of them. If in their different spheres
each contributed equally to the family, it doesn't
matter who contributed the money and who contributed childcare
and the homemaking work. There should be no bias in
favor of the money earner against the homemaker.
Now, taking together,
these two changes have significant implications. First of all, they mean
that it's no longer fair for an earning spouse merely to meet his non-earning spouse's
needs out of his capital or salary and then keep
everything else that's left over. Wives are no longer,
in other words, to be financially
disadvantaged on divorce for doing what was expected
of them in the marriage. Lord Nickels' words
are also a challenge to the traditional idea that
only work done or money earned in the public sphere; that is, by means of traditionally
husband-type conduct, is valuable, either to
the welfare of the family or to the welfare of
society, and that work done in the private sphere; that is, that sphere of usually wifely
conduct, is not valuable. Lord Nickels challenges the
idea here that only the person who earns or buys is
the rightful owner of family property, and that
the other spouse is seeking something to which she's
not morally entitled. Finally, the House of Lords
introduced what can now be called an additional factor
in fairness, and that is, the yardstick of equality.
Now, they were clear. They didn't want to establish
a presumption of 50/50 split. There's no presumption of 50/50
of equality in English law. There's a yardstick of equality. A judge would always be
well-advised to check his views against the yardstick
of equality. As a general guide, we
should only depart from it if there's good reason, and if
you do, he says to other judges, tell us why you want to depart
from it; what are the reasons. Okay. This has changed the game
completely; changed the rules of the game completely. At the same time as
it broke new ground, we can see that the White and
White broke established norms. It upset them. Many people commented
after this case that it increased
uncertainty in the law, it encouraged litigation. Reasonable requirements, they
said, was at least certain. How were we going to measure
the value of homemaking against the value of an asset? So White opened up new
areas for argument. It actually raised as many
questions as it answered, and in 2006 the House of Lords
heard another ancillary relief case, a couple of cases called
Miller and Miller and McFarland and McFarland where they
clarified what fairness might mean in these cases.
Now, I'm going to skip
over Miller-McFarland, because I don't have time and
because it's rather complicated, but what I want to do now
is go straight to the last of the three leading cases
to interpret fairness, and it's the one which
generated the most headlines. At the time the Charman
and Charman case, or the Charman award
represented the largest payout, as they call it, division of marital assets
perhaps we might call it, in English legal history. Charman's was a 28-year
marriage. There were two children
of the marriage. Both were adults at the
time of the divorce.
When the parties married, neither of them had
significant assets. Both of them were working. The wife quit her employment
with local government when the first child
was born in 1982. The husband's career
prospered enormously. By the time of the divorce,
the parties' wealth amounted to 131 million, of which
8 million was in her name and 123 million in his name. She had no income. At the time of the divorce
she sat as a magistrate. The husband's income was
two million a year, roughly. The trial judge awarded the
wife an additional 40 million in addition to the eight
that she had, given her 48 out of the 131 million. I calculate that to
be about 37 percent of the total marital assets. He appealed to the Court
of Appeal, and the Court of Appeal turned
down his appeal based on these new White
and White principles. But you know, it seemed to be
unhappy about having to do this. In the rarely used form of a
postscript to its judgment, the Court of Appeal called for
a review of the law in the light of this revolution caused by
White, partly on the basis that London had now
become the Divorce Capital of the World for aspiring wives.
So those headlines
that I showed you at the beginning weren't
just newspapers selling copy. This call was made by the
Court of Appeal itself. The Court of Appeal seemed to like the old reasonable
requirements principle that said that the reasonable requirements
principle had brought about predictability
and clarity. It satisfied the anxiety
of judges and others; then we shouldn't be drawn into
the extravagance of the awards that were made in
places like California. The judicial preference for
moderation ruled essentially for a generation, from the
mid 1970s to the year 2000.
It suited, the Court of Appeal
said, the society of its day. However, the Court of Appeal
also said things may have changed now. So while reasonable requirements
suited the society of its day, yeah, perhaps things
did need to change. But did White and White make
the kind of change we needed? That's where it wasn't so sure. White and White, it said,
deprived practitioners and judges of the old measured
reasonable requirements. It offered us the cross-check
of equality, but it didn't take into account the extent
to which both the volume of these big money
cases was increasing. Very large fortunes are now
being made very quickly by a lot of people, and in
this new context, White and White has more
than doubled the awards that most claimant
wives were able to get.
And it has been said by many that London has now
become the divorce capital of the world for aspiring wives. Now, this postscript
is interesting. First, seems to me
that before White, London was arguably the
divorce capital of the world for wealthy divorcing
husbands, but there didn't seem to be a whole lot of
outcry about that. We weren't going to be
drawn into the extravagance of other jurisdictions
like California in this old state of affairs. Well, this is where we are then. Now, there have been a large
number of cases decided since Charman and Charman. The principles are all
sort of being sorted out, and if there are any lawyers
seated in the audience, you'll know that those
principles are still being worked out. But basically this
is where we are now.
And while I think I may agree
with the Court of Appeal that some reform might be
necessary, I'm not sure it's because awards now in my
mind are fairer to wives. As my colleague, Jonathan
Herring wonders, why, London being perceived as the
divorce capital of the world, for its increased recognition
of the value of childcare and the need to combat
gender discrimination, is necessarily a bad thing? If our law is more
progressive on these matters than other jurisdictions, it seems to me we should
celebrate and not complain. I have more, but I think that might be an
appropriate place to stop. Thank you very much
for your attention.
[Applause] >> Thank you, Allison. I think we've got time
for a few questions. We have one here. >> There's a mike coming down. >> Thank you. You say London, divorce
capital of the world, but you didn't say anything about how it would
take jurisdiction on particular cases. >> Well, I didn't, because it's
complicated issues of domicile and residence law,
conflict of laws. Suffice it to say that you
can't just pop into London if you happen to be a national
or resident in another country and ask the English courts
to hear your divorce.
You need to have some connection
with this jurisdiction, and that connection
is by way of domicile or residence requirements. So the parties, for example, the
Darts, had sufficient connection in both Michigan and London
and England, England and Wales. And so that's why they were
able to have the dispute about which jurisdiction
was more appropriate. >> Does it make any difference under what law the
marriage was originated? >> No, not necessarily,
not necessarily. >> Would it harm anybody if
it was 50/50 to start with? >> Well, actually I think not.
In my view I think not. To start with a presumption
of 50/50, a presumption that might be able
to be departed from, should somebody require more. The argument that's usually used
against 50/50 has very little to do with the big money cases. The argument against 50/50 is when you've got your basic
middle class working people, 50/50 would be unfair to the
career who still has children, still has the financial
responsibility and the caring responsibility
perhaps can't work full-time because she, usually it's
she, has care of the children. So that's why they say 50/50
would be unfair to her. She needs more than 50 percent.
And that's true, she
does, but it seems to me that a presumption of 50/50 with
ability of the court to depart from that, where need to show
it might be the appropriate way to go. That may be where we're heading, even for the big
money cases now. The more recent cases say
we should perhaps think about starting from that
and then see where needs go. >> The point is the uncertainty. If you know that it's
50/50 and you're a big boy and you're a big woman, you know
exactly what it's going to be, end of the day, all you do
it both employ private agents to be quite sure that you
know what the other parties are involved. I was a divorce lawyer
for quite some time. >> Absolutely. So you know how this
is shaking up. >> But not this [inaudible].
>> No. I think there's probably
what, ten divorce lawyers in the entire jurisdiction that
deal with all these cases or so. >> We have another
question here. >> I was just wondering in
the examples that you gave, was there any disagreement
over custody? >> No. >> It seems the same logic
could be applied in reverse to preference the mother
in terms of custody. >> In most of these
cases, well, in McFarland and McFarland there were still
children who were under the age of majority, but in Charman the
children were grown up and White and White the children were
grown up, so it wasn't a matter of anybody having
financial responsibility for the children post-divorce. In McFarland and McFarland,
which is an interesting case because they met in university. Neither one had much. She became a solicitor
I think at Fairfields, one of the solicitor firms;
he became an accountant.
They had three children,
she quit her job in order to raise the children. He went on to earn lots
and lots and lots of money. The issue with respect to
who was going to continue to be primary care of the children post-divorce
wasn't a dispute at all. It was agreed that she would,
and the youngest at the time of their divorce was only nine
years old, so she had a number of years of full-time
childcare to look forward to. But in most of these cases
we're talking about parties who are older and the
children are grown up..
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London: the divorce capital of the world. ‘Big money’ divorce cases (1 Nov 2011) — No Comments
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