It comes as a surprise to many of our clients going through divorce that there’s no set formula to apply when calculating financial settlements. Yes, in marriages of a reasonable length there is a principle of equal division of marital assets. But that’s only a starting point. Judges have a wide discretion to divide assets in a way that achieves a fair outcome. And the recent case of RC v JC shows that – in appropriate circumstances – the courts aren’t reluctant to exercise that discretion. The judge in the case increased the wife’s settlement because she had given up a potentially lucrative career as a solicitor to stay at home and raise a family.
Departing From The Equality Principle In Divorce Settlements
The courts in England and Wales have flexibility to decide on appropriate financial settlements in each case. They must take into account a wide range of factors, including:
- The income, earning capacity, property and other financial resources of each party including what each party is likely to have in the foreseeable future e.g. inheritance
- The financial needs, obligations and responsibilities of each party
- The standard of living enjoyed by the family before the marriage broke down
In applying these factors it is open to judges to depart significantly from the idea that marital assets should be divided equally when a couple divorces. And as it’s difficult to second-guess how a particular judge might interpret the facts of a specific case it is always advisable to try to find an agreed settlement before going to court.
RC v JC: What Is ‘Relationship-generated disadvantage’?
The case of RC v JC is a recent example of a divorce that went all the way to court and ended up in a settlement that many divorce lawyers and commentators found surprising. Briefly, the facts of the case were as follows:
The husband and wife had assets of around £10 million following a decade long marriage. The husband was a high-earning solicitor and the wife, a trainee solicitor when they met (and subsequently an in-house solicitor), had given up her career in order to stay at home and look after the children of the marriage.
While the judge noted that the husband and wife disputed the wife’s potential to earn significant sums if she had continued with her career, he ultimately decided that her earning capacity had been curtailed significantly by her decision to stay at home. Instead of splitting the marital pot 50/50 he awarded the wife an additional sum of £400,000 by way of compensation for her loss of career or, as he termed it, her ‘relationship-generated disadvantage’.
We don’t think the case of RC v JC will open the floodgates to claims for ‘relationship-generated disadvantage’. For one thing there would have to be sufficient assets in a marital pot to justify such a claim. In addition, as Moor J. was at pains to point out – on several occasions in his judgment – the principle of compensation does not generally apply when it comes to financial settlements on divorce. It will only be in ‘truly exceptional cases’ (such as this one where a gifted lawyer walks away form a hugely attractive career) that compensation may be used to achieve a fair result.