Waggott v Waggott I Is earning capacity an asset that should be shared on divorce

Waggott v Waggott – Is earning capacity an asset that should be shared on divorce?

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This was the question that was before the court in the case of Waggott v Waggott earlier this year. It has been in the press again as the Supreme Court has just refused the wife in the case permission to appeal the earlier decision of the Court of Appeal.

The case involved a husband and wife who were married in 2000 having lived together since 1991. They had a child together in 2004 and separated in 2012. From 2001 Mrs Waggott, a former accountant, had not worked while her husband continued to have a very successful career which provided him with a salary in excess £3m net per year.

At the time of separation, the couple had assets valued in excess of £16m and, to their credit, they were able to reach agreement that these assets would be shared equally between them.

What they were unable to agree on was Mrs Waggott’s entitlement to her husband’s future income (both his salary and his bonus). Originally, the Judge ordered that Mrs Waggott should receive £9.76m and after allowing for her housing needs and pension provision her ‘free capital’ was approximately £3.5m which, the Judge determined, would produce an income of c£60,000 per year. Her income needs were assessed to be £175,000 which left a shortfall of c£115,000 per year. The shortfall was made up by way of a ‘joint lives’ spousal maintenance order. This meant Mr Waggott would have to pay the sum until one or other of them died, Mrs Waggott remarried or until the court made a further order.

Both parties appealed the decision.

Mrs Waggott asked the court to increase her spousal maintenance payments or to award her an additional sum of capital. Amongst other things, she argued that the court had failed to take into account Mr Waggott’s post separation income and that his earning capacity was, in fact, a marital asset which she had helped him increase during their relationship. She argued that by not taking into account the earning capacity ‘asset’ was contrary to the sharing principle.

Mr Waggott argued his earning capacity was not an asset to which the sharing principle applied. His position was that any entitlement to share financial assets and resources should end at the same time as the marriage especially if each party was left with sufficient money to meet their respective needs.

Lord Justice Moylan concluded that the sharing principle did not apply to earning capacity and that sharing stops ‘at or within a short time of the end of the relationship’. Furthermore, the court determined that Mrs Waggott should be expected to use part of her ‘free capital’ towards her income needs and that Mr Waggott should only pay spousal maintenance until 2021. At that stage Mrs Waggott would be expected to rely on her invested capital to produce an income.

The case made national headlines and ruffled many feathers in the legal world. Many family lawyers questioned whether the days of the unfortunate tag of a ‘meal ticket for life’ were numbered.

Mrs Waggott went on to challenge the appeal court’s decision that her spousal maintenance would end in 2021.

The Supreme Court confirmed this month that it had refused her permission to appeal because the application did not raise an arguable point of law.

This is another example of the complexities and confusion surrounding the thorny issue of spousal maintenance. What should be paid and for how long is still within the discretion of the court and will be fact specific. What it has demonstrated is the trend towards joint lives orders spousal maintenance orders are increasingly rare (but still within the court’s powers where the circumstances of the case require).

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