In C v C  EWHC 3186 (Fam) Mrs Justice Roberts applied the principle confirmed in Waggott v Waggott  EWCA Civ 727 to the product of income acquired post-separation, but prior to a financial settlement.
In Waggott the Court of Appeal posed the following question:
“Is an earning capacity capable of being a matrimonial asset to which the sharing principle applies and in the product of which, as a result, an applicant spouse has a continuing entitlement to share?”
“The clear answer is that it is not.”
To permit the sharing principle to apply to the products of a spouse’s future earning capacity “would fundamentally undermine the court’s ability to affect clean break” and would be contrary to Lady Hale’s observations in Miller (Miller v Miller: MacFarlane v MacFarlane  UKHL 24) that “the marital partnership does not stay alive for the purpose of sharing future resources unless this can be justified by need or compensation.”
In C v C the Husband, relying on Waggott, successfully preserved his post-separation earnings as falling outside of the definition of “matrimonial property” capable of being shared.
The parties met in 2003 and started cohabiting in 2006. They married in May 2008 and have two children. They separated between April and June 2016 (nothing turned of this aspect). The Husband, who held a senior position in an investment bank, received significant annual remuneration upward of £3m per annum net paid as cash salary, bonuses and various forms of deferred compensation.
At the close of the trial the Husband argued that £6.5m from the total assets of £26.3m was non-matrimonial, being income awarded following the parties’ separation.
Roberts J acceded to the Husband’s request and removed £6.5m from the matrimonial pot for sharing. The Judge acknowledged the Wife’s contributions to the welfare of the family post-separation but, as with the Husband’s earnings, deemed those to also be outside of the marital partnership. The remining pot of assets of c£20m were divided equally, the Judge having checked that outcome against the overall requirement to achieving fairness and to meet needs.
In so doing, Roberts J confirmed that the financial products of endeavours undertaken post-separation (and before settlement) can be ring-fenced from the sharing principle, so long as this is checked against needs. Those products are not ignored entirely and will still be relevant to achieving fairness, meeting needs etc.
This was not a case where there had been an especially long period post-separation. The parties separated in mid-2016. The Wife petitioned for divorce in May 2016 and brought her financial claims expediently. The final hearing took place in July 2018 with judgment earlier in November. The Husband continued in the same employment as during the course of the marriage, his earning capacity having developed over the course of the last 16 years.
The judgment leaves open the opportunity to argue that even over a short period of time a spouse can ring fence the products of their post-separation earnings from equal division, so long as needs are otherwise met. This may include cash bonuses, share grants etc. but will arguably also extend to pension contributions, investments made with those earnings.
In advising either spouse, care should be taken to identify what may or may not now constitute the marital acquest with the definition seemingly narrowing on this interpretation of the principles in Waggott. Although this may again change with it being announced this week that the Wife in Waggott is taking her appeal to the Supreme Court.
Stuart Clark is a Partner at iFLG. He has a wide breadth of experience in all issues arising form the breakdown of a realtionship but particularly specialises in financial and forum matters. His work involves high net worth individuals with international assets and complicated trust and partnership issues. He is often required to obtain quick advice from a specialist lawyer in another jurisdiction to run concurrently to his cases. Stuart has excellent advocacy skills and he has represented a number of clients in the Family Courts and in the High Court. Stuart is thorough in his approach and has excellent drafting and negotiating skills.
The International Family Law Group LLP
© 29 November 2018