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Source: The Times

Today the Court of Appeal begins hearing John Charman’s challenge to the order that he should pay £48 million to his former wife. This is the first opportunity the Court of Appeal has had to make sense of the conflicting way in which family law cases are now being decided by the courts and to explain how future “big money” divorce cases should be decided.

Until October 2000, when the House of Lords in White v White told divorce lawyers that they had been getting the law wrong for the past 30 years, clients could be advised with some certainty as to their entitlements. So lawyers were able to recommend amicable settlements based on agreements within these guidelines.

However, since October 2000 all that has changed. Divorcing spouses, anxious to avoid an equal division of assets, inevitably encourage their lawyers to find new and creative avenues to justify a departure from the yardstick of an equal split. The result has been uncertainty and alien concepts being pursued by divorce lawyers like fashions.

Before October 2002, one of those avenues was “exceptional contribution”: that is where one spouse had contributed more than the other, materially or in some other way, to the joint family wealth. That approach was encouraged by the Court of Appeal in May 2001 in Cowan v Cowan. But, to the disappointment of Harry Lambert, in October 2002 the court said that, in effect, the earlier decision in Cowan was wrong: Mr Lambert was not entitled to more than half the £20 million assets that he had created during the marriage — in spite of having made what he believed to be an “exceptional contribution” to its acquisition.

So the concept of special or exceptional contribution appeared to be dead — until the decision involving Sir Martin Sorrell. He was awarded 60 per cent of assets of £75 million in July 2005 in an apparent departure from the 50:50 split because of the seemingly exceptional contribution he made in creating and growing WPP, his company, and his personal wealth.

In the meantime, in a case called Parlour, the Court of Appeal in July 2004 made fashionable the idea of claims for an ongoing percentage share of future income, over and above what the receiving spouse needed for living — providing lifelong financial support as a reward for supporting the high earner in his or her early career.

Then came the House of Lords’ decision in Miller and McFarlane in May 2006. This gave rise to a new fashionable concept — called “compensation”. The idea appears nowhere in the legislation and, with one minor exception, had never been referred to before in 36 years of case law on splitting assets on divorce. The law lords gave five separate judgments and that absence of a single consistent judgment will lead to years of litigation over what the law is — a nightmare for the clients, if a field day for the lawyers.

Most people would agree that the poorer spouse should receive a fairer share of the assets than they did before October 2000. But all this is judge-made law, far beyond what should be permitted. The uncertainty creates litigation, discredits the law and the family justice system.

One result is a a dramatic increase in the number of contested financial cases on divorce since October 2000. It can now take more than a year to obtain a hearing date for a case of any significant length before a High Court judge. It may also be some time before we see the full social impact in terms of reduced marriages and pressure for prenuptial agreements to be drawn up and upheld by the courts.

The judges have perhaps been doing their best in the circumstances. But this is a matter for government: the judiciary has repeatedly urged it to review the law, to no avail. The Lord Chancellor has made clear that there are no plans for reform in this area of law; although Harriet Harman, his junior minister, is researching how other European countries operate. She will find that England lags far behind.

The fact is that greater wealth is being created in this country, and in particular in the City, than ever before. Properties are owned all round the world and trusts and tax matters cross jurisdictions in complex ways. Forensic accountants argue about what constitutes the “marital pot” to be divided. The law, unreformed for decades, was not designed for such situations. Ministers talk up the value of the family, children’s interests, mediation, streamlined courts and amicable settlements. But they allow an arcane divorce system to militate against all these. When will the Government act?