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Future Earning Capacity Is Not a Matrimonial Asset – Test Case Ruling

Is a spouse’s future earning capacity capable of being a matrimonial asset to which the sharing principle should be applied in divorce? In a landmark decision, the Court of Appeal has answered that question with a resounding no.

The case concerned a middle-aged couple, both accountants, whose overall assets were valued at £16.4 million. As the finance director of a public company, the husband was the principal breadwinner. They had one child together and were married for over 20 years before the relationship ended in divorce.

A family judge awarded the wife capital resources of £8.4 million and the husband £7.8 million. She received an additional sum of just under £1.4 million comprising a share of deferred remuneration that the husband had received post separation. Her total award came to £9.76 million and the husband was also directed to pay her maintenance of £175,000 a year throughout their joint lives.

On appeal, the wife’s lawyers argued that she should also receive a percentage of bonuses earned by the husband over a period of several years after divorce. She also sought an increase in the maintenance payments to £190,000 a year on the basis that she was entitled to a fair share of the husband’s post-separation earned income. It was submitted that his earning capacity was a product of marital endeavour and should be shared in the same way as any other asset.

In dismissing her appeal, however, the Court found that the husband’s earning capacity was not capable of being a matrimonial asset. A decision to the contrary would create a lack of clarity in the law and undermine the fundamental ability of family judges to implement clean break divorces. If the wife’s arguments were correct, the husband’s obligation to pay her part of his earned income would continue throughout his working life, regardless of her financial needs.

In upholding the husband’s cross-appeal, the Court found that it was fair to expect the wife to invest her free capital in order to provide herself with an income. If that income fell short of her requirements, she could find employment in the future. In the circumstances, the Court ordered that the wife’s maintenance payments should cease after a further three years.



 
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