Christian Kenny

Christian KennyChristian Kenny is a barrister practising in Family Law at 1 Hare Court, a leading set of Chambers based in Temple.

Christian’s practice encompasses all areas of Family Law, with a particular emphasis on financial provision on divorce. His cases often involve substantial assets and company, trust or cross-jurisdictional issues. He advises on and drafts Nuptial Agreements. He acts in private law Children Act matters, including financial claims under Schedule 1 and applications for leave to remove from the jurisdiction. He also advises on cohabitants’ disputes under the Trusts of Land and Appointment of Trustees Act 1996.

Christian has been identified as “one of the most promising juniors at the set” by Chambers & Partners 2012:Kenny draws praise for his ancillary relief practice, which often involves offshore trusts, and is seen as “a good listener who puts cases well and can deal nicely with difficult judges”. Chambers & Partners 2013 says that he “continues to impress the market with his expertise in ancillary relief cases and private law children matters”.

Quantification of periodical payments: are we returning to assessment on the basis of needs alone?

For a generation before the landmark decision in White v White [2000] 2 FLR 981, in assessing periodical payments the family courts would have regard to the applicant’s “reasonable needs” alone.

The House of Lords held that this approach was discriminatory and unfair. However the old approach at least had the benefit of a certain level of predictability which practitioners have struggled to find since.

In Miller; McFarlane the House of Lords held that the ultimate objective of a fair outcome required the courts to have regard to three principles of distribution: the parties’ needs (generously interpreted), compensation for relationship-generated disadvantage and sharing of the financial fruits of the relationship.

These three strands of principle, in conjunction, have not lent themselves to a predictable assessment of awards for periodical payments. Rather, they have provided rich ground for argument.

Needs

Due to limited financial resources, the vast majority of cases will not have the luxury of arguing for ‘compensation’ or ‘sharing’ and the award of periodical payments will be based upon the parties’ needs alone. In the words of Mr Justice Bennett in McCartney v Mills McCartney[1], needs will generally be the ‘factor of magnetic importance’3. Per Baroness Hale in Miller; McFarlane: “…In the great majority of cases, the court is trying to ensure that each party and their children have enough to supply their needs, set at a level as close as possible to the standard of living which they enjoyed during the marriage[2].

Compensation

Mrs McPharlane was considered to be a paradigm case of relationship-generated disadvantage, having given up her role as a City solicitor in order to be the homemaker and primary carer of the children. The House of Lords held that an award of maintenance could be made which would provide compensation to a party whose needs were already met, but warned that there was scope for overlap between ‘needs’ and ‘compensation’ and that care should be taken to avoid double counting[3].

Subsequent to Miller; McFarlane, there have been few reported cases in which the principle of compensation has been successfully contended for. In Lauder v Lauder [2007] 2 FLR 802 the principle lead to an increased award, Baron J holding that the wife’s “caring role within the family inevitably affected her ability to generate income or assets as she grew older. When this marriage came to an end, she was past the age of being able to start a career anew[4]. Whilst the wife could not “claim to be a Mrs McFarlane” there was “little doubt that the length of the marriage and her age at separation put her at severe disadvantage in the labour market[5].

Helpful guidance was provided by Sir Mark Potter P in the case of VB v JP [2008] 1 FLR 742, in which he proposed that a compensation claim could be met simply by making a more ‘generous’ award than might otherwise be made:

“…on the exit from the marriage, the partnership ends and in ordinary circumstances a wife has no right or expectation of continuing economic parity (‘sharing’) unless and to the extent that consideration of her needs, or compensation for relationship-generated disadvantage so require. A clean break is to be encouraged wherever possible.”

“…in big money cases, where the matrimonial assets are sufficient for a clean break to be achieved, a wife with ordinary career prospects is likely to be have been compensated by an equal division of the assets and consideration of how the wife’s career might have progressed is unnecessary and should be avoided…”

“in cases other than big money cases, where a continuing award of periodic payments is necessary and the wife has plainly sacrificed her own earning capacity, compensation will rarely be amenable to consideration as a separate element in the sense of a premium susceptible of calculation with any precision. Where it is necessary to provide ongoing periodical payments for the wife after the division of capital assets insufficient to cover her future maintenance needs, any element of compensation is best dealt with by a generous assessment of her continuing needs unrestricted by purely budgetary considerations[6] [emphasis added]

Sharing

Sir Mark Potter P’s judgment in VB v JP refers back to a critical passage in the judgment by Baroness Hale in Miller; McFarlane: “In general, it can be assumed that the marital partnership does not stay alive for the purpose of sharing future resources unless this is justified by need or compensation. The ultimate objective is to give each party an equal start on the road to independent living[7]

It would therefore appear that, while a maintenance order should address needs and perhaps compensation, there is no separate cross-check of equality.

A return to needs-based assessment?

The uncertainty created by the three strands of principle may be clearing. In recent times, there appears to have emerged a desire amongst judges to return to the comparative simplicity of the needs-based assessment.

In B v S (Financial Remedy: Marital Property Regime) [2012] 2 FLR 502, Mr Justice Mostyn stated as follows:

“Save in the exceptional kind of case exemplified by McFarlane a periodical payments claim (whether determined originally or on variation) should in my opinion be adjudged (or settled), generally speaking, by reference to the principle of need alone[emphasis added][8].

Subsequently, B v S received express approval by Mr Justice Blair in G v B [2013] EWHC 3414 (Fam) where he stated as follows at paragraph 66:

“As regards income needs, I proceed on the basis that an award of maintenance should be based on the principle of need (B v S (Financial Remedy: Marital Property Regime) [2012] 2 FLR 502 at [79], which is not in dispute”.

In accordance with this indication he awarded the Wife maintenance of £65,000 pa which was ‘considerably less’ than what she had sought – £98,000 pa.

Subsequently, Mr Justice Mostyn reaffirmed his view in SA v PA [2014] EWHC 392 (Fam) stating as follows at paragraph 39:

“Having regard to what I said in B v S at paras 73-79 it will be apparent that it is my firm belief that save in highly exceptional cases an award for periodical payments should be assessed by reference to the principle of need alone” [emphasis added].

B v S has received further support in the judgment delivered on appeal in H v W [2013] EWHC 4105 (Fam) by Mrs Justice King. The Husband worked for a Russian bank. He had a significant income of £250,000 pa gross and had received bonuses of approximately £200,000 pa gross.

The Husband appealed the decision of District Judge White at first instance, the relevant parts of which were:

i) The Wife to have periodical payments on a joint lives basis at the rate of £3,750 pcm;

ii) The Wife to be paid a sum equal to 25% of all Husband’s annual bonuses (net of tax and National Insurance) also on a joint lives basis.

The Husband contended that the District Judges’ award was not solely based on need and that it was not an exceptional case which would justify a departure from need. The Judge found that, since periodical payments should be quantified in accordance with needs, there should be a cap on the Husband’s bonus, beyond which he would not have to pay any further maintenance to the Wife. It would appear from the judgment that when making an award for periodical payments an overall maintenance figure must be reached. This is based on needs, unless it is an exceptional case.

Most recently, on the 18 March 2014, Mr Justice Coleridge handed down judgment in H v H [2014] EWHC 760 (Fam). In this case the Husband had made an application to terminate the joint lives periodical payments order in favour of the Wife to the sum of £150,000 pa. In the final paragraph of his judgment he stated as follows:

“I should only finally say that I agree with recent pronouncements about the dangers inherent in attributing special weight to arguments about compensation. However, there remain a very small number of cases where it stares the court in the face and to ignore it and simply approach the case on the basis of the more simplistic “needs” arguments does not do full justice to a wife who has sacrificed the added security of generating her own substantial earning capacity, as this wife undoubtedly did. I doubt in the end she is any worse off financially because her investment in the family enabled the husband to generate these enormous returns which she has fully participated in. However, the building up of a secure earning capacity over a working life is a greater security to an individual spouse, whether husband or wife, than merely being dependent on the future income generating resources of one’s former partner however successful’ [emphasis added].

By acknowledging the danger of attributing special weight to arguments about compensation and recognising that there are a ‘very small’ number of cases where compensation would be applicable, Mr Justice Coleridge would appear to be directly supporting the views expressed by Mr Justice Mostyn in B v S and subsequently.

Conclusions

The assessment of periodical payments appears to be returning to the principal of “needs”. Although the door does not appear to have been closed to ‘compensation’ arguments, they will only apply in cases which are ‘exceptional’. Given that compensation claims have fared relatively badly since Miller; McFarlane in any event, it is difficult to see that they will prosper in light of B v S.

Mr Justice Mostyn’s views on this issue appear to have been seized upon by judges as providing a degree of clarity and predictability which had been lost in recent years.

 

 

Christian Kenny

Joshua Viney

1 Hare Court


[1] [2008] 1 FLR 1508, at para 311

[2] at para 138

[3] At para 15

[4] At para 67

[5] At para 69

[6] Para 59

[7] Para 144

[8] At para 79

 

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