A realistic approach to lifestyle choices and ‘future needs’

The Court of Appeal has recently considered the impact of a ‘lifestyle’ decision by one partner to stop work on any financial settlement following separation.

In another recent family law case to hit the headlines, the Court of Appeal considered a claim by the ex-wife that she should have been compensated beyond the £140,000 that the judge who initially heard the case had awarded her as part of a ‘clean break’. Katriona MacFarlane argued that she should be compensated for her loss of earnings and pension that had arisen from the decision that she should stop working. She also argued that she should be entitled to a housing fund of £700,000, rather than the £450,000 she received as her share of the proceeds of sale of the matrimonial home.

The Court of Appeal refused her appeal.  It took the view that no pressure had been placed on Mrs MacFarlane to give up work, and her husband, a part time GP, had not received any obvious benefit from the decision. Mrs MacFarlane also argued that the settlement left her unable to purchase a house of a similar standard to the one she had been living in during the marriage. In response to this argument, the Court of Appeal confirmed the decision of the original judge who had heard the case in 2015, and upheld the view that previous standard of living is a guide only.

The question of ‘needs’

Although previous standard of living is a guide, it is not determinative of what should be awarded in order for a party’s ‘needs’ to be met. Admittedly on a different financial scale, the question of ‘needs’ was dealt with in the case of FF and KF, where a husband sought to appeal the decision to award his former wife £4.25 million. He argued that her needs would be met with a sum of £1.75 million notwithstanding his wealth stood at around 37 million. The facts are very different to those in the MacFarlane case. This was very much a ‘short marriage’ – of less than 2 years, although the relationship had lasted, on and off, for longer. In addition, it was not disputed by the husband that the wife had suffered psychological damage as a result of the marriage and its subsequent breakdown. It was held that the wife’s earning capacity was therefore impaired.

No-one actually needs £25 million…

Putting the factual differences aside, the Court of Appeal still had to look at the question of the wife’s ‘needs’. This included £2.6 million for a flat in Marylebone, London – but this would in no way offer a standard of accommodation equivalent to the 3 luxury homes the wife shared with her husband during the marriage. Indeed, in reviewing some of the headline grabbing financial settlements awarded in recent years, the Court in this case noted that

“Obviously, no-one actually needs £25m,[referring the Heather Mills-McCartney settlement, McCartney v McCartney [2008] EWHC 401 (Fam)] or £62m [awarded to Mrs Juffali in Juffali v Juffali [2016] EWHC 1684 (Fam)], or £224m [AAZ v BBZ [2016] EWHC 3234 (Fam)] for accommodation and sustenance. The main drivers in the discretionary exercise are the scale of the payer’s wealth, the length of the marriage, the applicant’s age and health, and the standard of living, although the latter factor cannot be allowed to dominate the exercise.”

Discretion under s. 25 Matrimonial Causes Act

Underlining the phrase here that is echoed in the case of Katriona MacFarlane, the Court again emphasised that the standard of living enjoyed during the marriage is not determinative of what the individual ‘needs’ following divorce. The sums of money involved may be different, but the principle is the same. Ultimately in the instant case, it was held that the wife’s immediate capital needs and her future financial needs could only be met by virtue of an award of £4.25m. This award was made on the basis of the wife’s principle needs only: the discretion afforded under s.25 of the Matrimonial Causes Act 1975 is wide.

Susi Gillespie, partner at Thomas Mansfield Family law, and divorce law expert comments “The MacFarlane case shows a realistic approach taken by the Court of Appeal to a future financial problem (only arising on any separation) that resulted from what appears to be a joint decision during the marriage. Dr MacFarlane received no obvious benefit from the decision of Mrs MacFarlane to stop work i.e. they didn’t have young children that she would be looking after enabling him to carry on working and growing his career – in fact he was only working part-time himself when Mrs MacFarlane stopped working – so the decision can only be seen as a joint one – a lifestyle choice so they could spend more time together presumably.

If you have any questions about divorce or the financial settlement you might be entitled to, please get in touch with a member of our team.

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