06 FEB 2017

Fairness, needs and stockpiling: AB v FC [2016] EWHC 3285 (Fam)

Kathryn Mason

Trainee solicitor

@Vardags

Fairness, needs and stockpiling: AB v FC [2016] EWHC 3285 (Fam)
At a final hearing, the court considered the appropriate needs for the wife of a professional footballer in circumstances where there was limited capital, the marriage had been short and there was no marital acquest.

Background facts


H and W began a relationship in 2011, and married in France in October 2013. In January 2015, H and W welcomed a child (‘A’) but separated when the child was just four months old. H was a professional footballer, earning circa £1m net per annum, plus discretionary bonuses. His contract expired in 2019. W had previously worked as a beautician, but had not worked since 2010 having made the decision to be a homemaker. H and W never owned a property together but lived together in a substantial home in north east England, which they rented at a cost of £52,000 per annum.

The marriage was short, lasting just 19 months. W petitioned for divorce in May 2015 and decree nisi was pronounced in January 2016.

The parties attempted a reconciliation in May 2016, during which time W fell pregnant. Unfortunately, W miscarried the child and although the parties attempted to spend time together again in August 2016, when W took A to Europe to spend time with his father, their attempts at reconciliation ultimately failed, with W alleging that H had thrown her out of his rented home such that she had had no other option but to spend the night in a hotel.

The case was very litigious. W made an application to the court for maintenance pending suit payments and a Legal Services Provision Order. H was ordered to pay £30,000 per month apportioned as to £15,000 per month for her general maintenance (including rent of £5,500 per month) and £15,000 per month in respect of W’s outstanding previous legal fees and fees each month. W was therefore left with £9,500 disposable income, per month. Attempts to resolve the finances at a private FDR before Sir Philip Coleridge failed.

Assets 


The assets in the case were extremely limited. W did not own any assets of significance; H owned three separate properties, which had all been purchased prior to the marriage:
  1. a property in France with equity of £86,000 (after costs of sale). This was a pre-marital property and had been purchased for H’s mother; 
  2. a flat and two parking spaces in Gex, in which there was no equity. The flat provided a very modest rental income and was also pre-marital; 
  3. a condominium in Miami, which had been bought ‘off-plan’ prior to the marriage, and had equity of some £374,000 (although there were funding arrangements in place, such that an additional sum was due to be paid on completion of the property in 2017). 

In addition, H had £95,000 cash (held by H’s solicitors) following the sale of an investment property in Hale, Manchester (‘the Hale property’). H also had a modest life assurance policy, assigned as collateral in respect of the mortgage on the property in France, which his mother resided in.

In comparison, W’s cash resources were virtually nil with her current account being entirely dependent upon the interim maintenance which H was paying. W was not making any savings out of those payments and she appeared to spend all that she received from those sums.

Both H and W had substantial liabilities, particularly so far as legal costs were concerned. H’s liabilities totalled some £215,000 comprising £60,000 owed to Withers in respect of legal fees, a bank loan of €76,000 and the sum of £80,000 owed to his father (his agent). W had amassed significant legal fees: she owed her current solicitors £30,000 and her previous solicitors (Vardags) £144,000.

In all, the realizable assets between the parties were less than £500,000.

Income


As a professional footballer, H commanded a substantial income of circa £1m per annum net, with bonuses on top. As is often the way with footballers, the income, while substantial, was potentially time limited. H was approaching 28 years of age and his current contract expired in 2019. W accepted that H’s present scale of income was finite and that it would be unlikely that H would command a six or seven figure income when his playing career came to an end. W had a limited earning capacity, having previously been a beautician. W had not been employed since 2010, and had been the homemaker since the marriage.

The final hearing


The issue: It was accepted by the parties that this was not a sharing case. The issue at the heart of the case was therefore the basis upon which W’s housing and income needs should be met. The options, as Mrs Justice Roberts (‘the Judge’) saw them, were whether W should be able to live in an owner-occupied accommodation, purchased with a repayment mortgage, or whether her accommodation needs should be met through the provision of rented accommodation.

Although it was accepted that there were a number of unknowns in this matter, both parties wanted finality and an end to the litigation.

W’s position


W’s position was:
  1. Balance of the sale of the property amounting to £95,000 to be paid to W; 
  2. H will pay the balance due on the completion of the Miami condominium; W to receive 80% of the net proceeds, amounting to some £650,000. 
  3. Each will retain such assets as they have and each will be responsible for their own liabilities, including costs; 
  4. H will pay periodical payments to W in the sum of £23,500 per month (£282,000 per annum) unit death, W’s remarriage; child reaching age of 18/tertiary education, whichever is the later and a further order of the court. 
  5. H to pay £36k per annum by way of child support including nursery fees to full time tertiary education. 

In total, W was seeking £318,000 per annum in terms of global maintenance which, based on information provided to the court on her mortgage capacity, appeared to be structured on the basis of her living in a home worth £1.7m. It was clear that W sought to maintain the standard of living enjoyed during the relationship and the marriage.

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H’s position


H’s position remained unchanged from 3 February 2016, shortly after the private FDR. His proposals were predicated on the basis that there was no available capital from which to fund the purchase of an owner-occupied accommodation. His proposals were therefore:
  1. W to rent privately for the foreseeable future; 
  2. With effect from May 2016, a reduction in the level of maintenance from £15,000 per month to £12,000 per month, £2,000 of which will be earmarked for child support. 
  3. Child maintenance to cease upon A reaching the age of 18 or ceasing secondary education; 
  4. Maintenance payments to be on a joint lives basis, with the level of maintenance to be reviewed on the earlier of seven years or a material reduction of H’s total net annual income. 
  5. H to pay to W a lump sum of £150,000. 
  6. Each party to be responsible for their own debts. 

The judge considered that H’s proposals were framed on the basis that the marriage was short, there were no marital properties and the parties never owned a home, having rented throughout the 19 months of the marriage.

The law 


It was accepted by both parties that this was a needs case. H’s legal team brought the court’s attention to the cases of B v S (Financial Remedy: Marital Property Regime) [2012] EWHC 265 (Fam) and SS v NS (Spousal Maintenance) [2014] EWHC 4183, on the basis that both cases set out that periodical payments should be made only by reference to needs. In order to establish W’s needs, the court’s starting point was section 25 of the Matrimonial Causes Act 1973 including the welfare of A, the available resources in the case and the standard of living enjoyed by the parties.

W’s legal team ran an argument for stockpiling, which was resisted by H’s legal team on the basis that W should not be able to build up a pot of capital.


Application of the section 25 factors


Welfare of the child


In applying the section 25 factors, the court first considered the welfare of A throughout his minority. The Judge accepted that A’s need for stability throughout his childhood would be provided by W, albeit H’s desire to be involved in A’s life was genuine. The Judge considered that W would need to be in a position to provide a stable and secure home for herself and A and to have the ability to run the home to an appropriate standard.

Available resources


Turning to s 25(2)(a), the Judge considered the resources available to the parties both at present and in the future. The Judge was satisfied that W had virtually no earning capacity at present time and that even when she did return to employed work, she would not earn an income at a level which would enable her to make a significant contribution, particularly before A started school. In contrast, H would be able to develop his career as a professional footballer. H’s current contract with his club came to an end in 2019 and it was clear that H wanted to keep his options open. The Judge considered that it was appropriate to proceed on the basis that H was likely to maintain his current level of earnings until at least 2020, provided he did not sustain a career changing injury, in which case 'all bets were off'.


Standard of living


Pursuant to s 25(2)(c), the Judge considered the standard of living enjoyed by the parties throughout the marriage. It was clear to the Judge that the standard of living enjoyed by the parties was high, if only by virtue of the fact that in spite of H’s substantial income there was very little capital available. However, the standard of living had to be considered against the fact that the marriage was short.

The Judge considered the Law Commission report Matrimonial Property, Needs and Agreements (Law Com No 343) [2014], as cited by Moylan J in the recent case of BD v FD [2016] EWHC (Fam) 594. Moylan J referred to the fact that the Law Commission report clearly set out that the standard of living provided a benchmark or starting point against which to assess needs but Moylan J also acknowledged (in the same case) that the use of the standard of living emphatically did not mean that in every case needs are to be met at that same level.

Indeed, Mostyn J in SS v NS (Spousal Maintenance) [2014] said that it was a 'mistake to regard the marital standard as the lodestar. As time passes how the parties lived in the marriage becomes increasingly irrelevant. And too much emphasis on it imperils the prospects of eventual independence'.

Fairness


The Judge considered the standard of living against the fairness to both parties, noting that although H and W had been able to indulge in huge discretionary spending during their marriage, W would be expected to take some steps towards financial independence. That said, the Judge said that 'Fairness to both parties remains the overarching objective even in a case based upon future needs'.

Stockpiling


The Judge said that 'in appropriate circumstances, the principle of allowing a former spouse to stockpile for the future is a well-recognised device for achieving fairness as between the parties'. The Judge referred to the case of Field v Field [2015] EWHC 1670 (Fam), in which Holman J dealt with a case where the H’s income was expected to diminish significantly, while the children were still financially dependent. Although Field v Field turned on its own facts (and these facts were capable of stark distinction from the case), a 'stockpile' element of maintenance payments allowed the W in Field v Field to accumulate an additional £1m over 10 years, such that she would have a sufficient fund to meet her needs should H stop working. The case of Field v Field had to be balanced against the unavoidable fact that this was a short marriage. In addition, stockpiling would only be applied in cases in which the facts warranted it.

Judgment


In considering W’s housing needs, the Judge held that the base of a secure home was a reasonable aspiration in the circumstances. W’s starting position of periodical payments of £318,000 per annum and a property close to £1.7m failed to take sufficient account of either the length of the marriage or the proper basis for an assessment of her future needs, particularly in circumstances where there would be a material reduction in H’s current income. Rather than putting W’s housing needs in the region of £1m, the Judge attributed a housing need of £700,000 finding that W did not need a property akin to the former matrimonial home.

In achieving the funds to meet W’s housing needs, the Judge held that this was a case where it was 'not unreasonable to allow W to 'stockpile' a portion of the sums she receives in order to divert those sums towards the discharge of a mortgage liability. Notwithstanding the length of the marriage, she has many years of intensive child-rearing in front of her and she his entitled to find that contribution reflected in the award which the court makes for her.'

This was all the more the case in circumstances where W would otherwise spend the funds on rent. In order to make traction on the housing market, the Judge held that W would require a cash deposit of £270,000 which was to be paid from the net sale proceeds of the Miami property.

Global maintenance was awarded at £200,000 per annum, with £80,000 per annum being earmarked for mortgage repayments over an 8 or 10 year period (the ‘stockpiling fund’) and £36,000 per annum intended for A by way of child maintenance. Maintenance was awarded on a joint lives basis, to be reviewed after seven years or in the event of a material reduction in H’s income. Owing to the short marriage, the Judge did not consider it appropriate to factor in a sharing of H’s bonuses.

In turning to how W could discharge her outstanding liabilities, it was ordered that the proceeds of sale from the Hale property (£95,000) should be discharged to W upon decree absolute and that H should pay to W an additional sum of £32,500.

Conclusion


This case serves as an important reminder that fairness remains the overarching objective even in cases dealing with future needs and in circumstances where the marriage has been short. In cases where there is limited capital available but sufficient income, the court may make an order permitting stockpiling particularly where it is fair for future contributions to be reflected in the security of a home. 
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