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Miller v Miller; McFarlane v McFarlane [2006] UKHL 24

Husband’s appeal against wife’s post-divorce award following short marriage dismissed (Miller); wife’s appeal against time-limit imposed on periodical payments order allowed (McFarlane).

House of Lords: Lord Nicholls of Birkenhead, Lord Hoffmann, Lord Hope of Craighead, Baroness Hale of Richmond and Lord Mance (24 May 2006)

Husband's appeal against wife's post-divorce award following short marriage dismissed (Miller); wife's appeal against time-limit imposed on periodical payments order allowed (McFarlane).

This case considered appeals from the decisions reported at [2005] EWCA Civ 984 (Miller) and [2004] EWCA Civ 872 (McFarlane).

Miller concerned a childless marriage lasting less than three years, where the husband was a very high earner and brought the marriage to an end by starting a relationship with another woman. The judge at first instance awarded the wife £5 million – in the context of the husband's assets valued in the region of £17 million at the time of separation – and the Court of Appeal upheld that award. The husband appealed.

McFarlane concerned a marriage lasting more than 16 years, with three children aged sixteen, fifteen and nine at the date of the hearing of the appeal to the House of Lords. Both the husband and wife had very successful careers in the City. Both were professionally qualified - the wife as a solicitor and the husband as a chartered accountant. Prior to the birth of their second child it was agreed that the wife would look after the home and the children while the husband concentrated on his career. On divorce, they agreed an equal division of the capital assets; however, there was not sufficient capital to achieve a clean break, so the district judge made a periodical payments order of £250,000 a year to the wife (a joint lives order). The award was reduced to £180,000 by the High Court, and the amount of £250,000 was restored by the Court of Appeal, but the duration of the order was limited to five years (an extendable term order). The wife appealed.

Their Lordships considered at length the general principles applicable to achieving fairness in the division of property following divorce, before applying those principles to the facts in these cases, both of which were acknowledged as being unusual. While celebrating the flexibility that exists in the ancillary relief law of England and Wales, they also recognised the need for a degree of consistency and predictability, not only to ensure that like cases are treated alike but also to enable and encourage parties to negotiate their own solutions as quickly and cheaply as possible.

Their Lordships agreed that the objective of fairness would be achieved, beyond consideration for the welfare of the children of the marriage, by reference to the following elements: (1) consideration for the present and foreseeable financial needs of the parties; (2) compensation aimed at redressing any significant prospective economic disparity between the parties arising from the way they conducted their marriage; and (3) the principle of 'equal sharing', although it was emphasised that the 'yardstick of equality' was to be applied as an aid and not a rule.

In addressing the matter of whether a periodical payments order could be made for the purpose of compensation as distinct from maintenance, the question was answered in the affirmative: despite the desirability of achieving a clean break, that should not be at the expense of a fair result and, more specifically, should not deprive the claimant of compensation where insufficient capital assets were available to achieve that aim.

As regards any 'special' contribution brought by one party to the marriage (eg exceptional business acumen), Lord Nicholls considered that it would be a factor pointing away from equality of division only where it was inequitable to proceed otherwise; Baroness Hale was of the opinion that only a special contribution to the welfare, not wealth, of the family should be taken into account.

On the issue of whether all of a couple's assets, whenever and however acquired, should be considered as 'matrimonial property' for the purposes of equality of division, it was conceded that the circumstances of each individual case would dictate whether a particular asset should be included; it was also proposed that, where an asset did not constitute one of the 'family assets', a short marriage would justify departure from the equality of division.

Held, dismissing the husband's appeal (Miller) and allowing the wife's appeal (McFarlane), that:

(1) the award in Miller was within the discretion of the judge and should stand. However, both the judge and the Court of Appeal had been wrong to take account of the husband's conduct in bringing the marriage to an end, as it fell far short of the threshold required by section 25(2)(g) of the Matrimonial Causes Act 1973 (i.e. that the court should have regard to conduct if it would be inequitable to disregard it). Also, the judge should not have over-emphasised – by describing it as a 'key feature' of the case – the legitimate expectation given by the husband to his wife that in future she would be living on a higher economic plane; this was presumably a reference to the high standard of living enjoyed by the couple during their short marriage, and should not be read as re-introducing the original 'tailpiece' of section 25, since repealed, which required the court to place the parties, so far as practical, in the same financial position as they would have been had the marriage not broken down; and

(2) the Court of Appeal in McFarlane had wrongly regarded the surplus of income over expenditure, represented by the higher periodical payments amount, as enabling the wife to accumulate a capital reserve, whereas that difference in amount constituted compensation payable to the wife in respect of the couple's decision concerning their respective careers. Furthermore, the Court of Appeal had been wrong to require the wife to justify continuing payments by imposing an extendable five year term order for periodical payments. The burden should rather be on the husband to justify a reduction in such payments, in the event of a change in circumstances.

Read the full text of the judgment here