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How much do you 'need' on divorce?

Date:11 SEP 2017
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Family Justice Reformed (second edition: June 2017) contains detailed commentary on the Single Family Court and the Children and Families Act 2014, Pts 1 and 2 (which deal with family justice), including clear and comprehensive guidance on the underlying procedural regime and the rationale for the reforms.

Nicola Hogg reviews the recent case of FF v KF [2017] EWHC 1093 (Fam), in which the High Court restated the principles to be adopted when assessing capital and income needs after a short marriage.

The parties were married for less than two years before they separated, albeit the relationship had stretched over nine years with an intervening separation lasting three years. The parties had no children. By the time of the appeal the husband (H) was 65-years-old and the wife (W) was 38.

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Decision at first instance

H’s assets were valued at £37m and both parties’ positions at trial were predicated on W’s ‘needs’, given the length of the marriage and the fact that H had accumulated the majority of the assets outside of the parties’ marriage. Only £2m was found to have been generated during the marriage.

W’s opening position was that she should be awarded a lump sum of £6m on a clean break basis (ie with no ongoing maintenance from H), which meant that after clearing her debts she would be left with £5.7m. Of this, she wished to spend c £2.6m on a property, leaving £3.1m for an investment fund (ie a Duxbury fund) from which she could meet her income requirements moving forwards. H’s open position was that W should be awarded a total lump sum of £1.75m to achieve a clean break. After payment of her debts, this would leave W with £1.45m for housing and to meet her income needs.

It was undisputed that W had suffered serious psychological harm as a result of the breakdown of the marriage, leaving her earning capacity uncertain.

The judge at first instance, His Honour Judge Wallwork (HHJW), assessed W’s needs and ordered H to pay a lump sum of £4.25m on a clean break basis, comprising:

  • £2.3m for a housing fund plus £190,000 to cover stamp duty;
  • £291,000 to discharge W’s debts;
  • £127,500 to meet other capital needs; and
  • a Duxbury fund of £1.34m to provide for W’s income needs over a 10 year term.

HHJW gave two judgments, the second following requests for amplification from both parties.

H’s appeal

H appealed the decision on the basis that the judge went beyond assessing W’s needs when making his award. The case was heard on appeal by Mr Justice Mostyn, who was referred to several parts of the judgments of HHJW, including passages where the judge stated:

  • ‘I do accept that the assessment of an appropriate award is not confined to an evaluation of need’;
  • ‘the case had to be considered holistically’; and
  • ‘the award was based to a great extent, but not wholly on the wife’s needs’.

Mr Justice Mostyn dismissed H’s appeal noting that, so far as the needs principle is concerned, there is ‘almost unbounded discretion’.

He observed that:

  • in cases where the marriage was short, the discretion when assessing needs is particularly broad and fact sensitive; and
  • although, the award may have been generous and other judges may have awarded less, the assessment of both W’s immediate capital needs, as well as her income requirements (both as to the amount and their duration), fell within the legitimate bracket.

Mr Justice Mostyn also commented as follows:

  • Ownership of W’s home – At trial H had not made any arguments for W’s home to be held on trust with reversion to H’s estate (and he was not permitted to do so now on appeal). Both parties’ positions were on the basis of W owning her home outright and the award at first instance had, therefore, been made with this in mind.
  • 10-year term – Whilst this was a generous term for maintenance (given W’s age and the length of the marriage), it was entirely legitimate having regard to W’s medical condition, the standard of living enjoyed during the marriage and the scale of H’s fortune. Had the marriage been longer, it is certain that the calculation would have been on a lifetime Duxbury basis.

Lessons to be learnt

Stewarts’ partner Matthew Humphries says of the judgment:

‘This case reinforces the very broad discretion that the family court has to make financial awards based on the facts of a particular case. In short marriages, where there had been a growing body of opinion that relatively modest awards were likely in the majority of cases, Mr Justice Mostyn has confirmed that the court’s discretion when assessing needs is particularly broad and fact sensitive. There is no rule that income needs are to be determined by a term order in short marriage cases. The outcome of this case would likely have been very different had the couple entered into a pre-nuptial agreement.’

This article was originally published by Stewarts.