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E&W: Equal sharing principle does not apply to ex-spouse's earning capacity

Thursday, 12 April, 2018

A woman who won a GBP9.7 million divorce order along with an annual maintenance award of GBP175,000 has lost her appeal for the sums to be increased. At the same time, the England and Wales Court of Appeal has ordered her maintenance, originally set to last indefinitely, to end in three years' time.

The original financial remedy order was granted to Kim Waggott in September 2016, by Recorder Tidbury in the England and Wales Family Court. The Waggotts' marital assets were assessed at GBP16.2 million and allocated by Tidbury on the equal sharing principle, though Mrs Waggott's award was augmented because she had not yet bought a new home, and she also received an extra GBP1.4 million of deferred remuneration received by William Waggott after the separation. Unusually, there were no significant non-matrimonial assets, the couple having earned all their assets through highly-paid employment.

Kim Waggott was dissatisfied with this award and went to the Court of Appeal, arguing that her ex-husband's earning capacity and post-separation earnings were marital property, to which she was entitled a half-share under the equal sharing principle. She asserted that Mr Waggott's earning capacity was 'the product of marital endeavour', having been 'built up' during the marriage. She also argued that she should not have to use any of the assets allocated to her in order to cover her income needs.

As against this, Mr Waggott argued that an earning capacity is not an asset to which the sharing principle applies; and that the amount received by the wife in her settlement must give her sufficient resources for the court 'to be able fairly to effect a clean break', as the legislation recommends. The extension of the sharing principle would, he said, contravene the clean break principle, and introduce complexity and confusion into the determination of financial claims.

The original judge was, he said, clearly wrong to make a joint lives maintenance order and was also wrong not to determine that the wife could adjust without undue hardship to the termination of maintenance. He cross-appealed to have Mrs Waggott's lifetime maintenance limited to a five-year term, ending in February 2021.

The Court of Appeal has now found against Mrs Waggott on both counts, refusing to increase her capital sum.

'Any extension of the sharing principle to post-separation earnings would fundamentally undermine the court's ability to effect a clean break', said the Court, which also rejected Mrs Waggott's argument that her capital should be preserved and should not be used in any way to meet her income needs.:'This again would conflict with the clean break principle to such a significant extent as to undermine the statutory steer.'

The Court allowed the husband's appeal and imposed a term order on the maintenance award, expiring on 1 March 2021, with a s.28(1A) bar (Waggott v Waggott, 2018 EWCA Civ 727).