Spousal maintenance and the so-called “meal ticket for life”

The term ‘meal ticket for life’ is the controversial expression used by the media to describe open-ended spousal maintenance in divorce cases, which is intended to be paid for the duration of the lives of the payee and recipient.

This somewhat distasteful phrase has again been the subject of much interest and public debate, thanks to a recent court case.

The case of Waggott v Waggott [2018] EWCA Civ 727 was recently heard in the Court of Appeal. The case centred around the opposing opinions of the public factions in relation to long-term maintenance, namely:

  • On the one hand, that the financially weaker party (most typically the wife) should be prevented from having lifetime claims against their ex-spouse after divorce and that the law should reflect this and limit any maintenance to a specified (and often short) period, thereby discouraging ongoing financial dependency;
  • On the other hand, that limiting maintenance is unfair to the financially weaker spouse, who may have given up their own successful and potentially lucrative career to act as homemaker and support their spouse’s career, and is not and will not be in a position to obtain the same financial position they had previously enjoyed.

Consideration was also given to whether the earning capacity of one spouse, accumulated during the marriage, can be considered a matrimonial asset for the purposes of the sharing principle (sharing the fruits and/or assets of the marital partnership equally).

In this case, Lord Justice (LJ) Moylan, on appeal, decided to amend the joint lives spousal maintenance order awarded by the court at first instance and impose a term order expiring in five years’ time.

This decision suggests that the English courts could look to make less generous financial awards going forward, with more significance being placed on the clean break principle (terminating the parties’ financial obligations towards one another as soon after the divorce as is just and reasonable).

Background

The couple had been married for around 12 years and had one child together before they separated in 2012. When they first met, both parties were accountants and neither had any significant capital resources. Following the family move from Manchester to London in 2001 for the husband’s employment, the wife stopped working and did not work in paid employment again, save for a short period in 2002/2003. From this point on, the husband’s career was prioritised and he obtained a very significant earning capacity.

Upon divorce, Mrs Waggott was awarded capital valued at £9.6 million and her income needs were assessed to be £175,000 per annum. The shortfall between her income needs and capital were to be met by spousal maintenance payments on a joint lives basis by Mr Waggott until one of the parties died, Mrs Waggott remarried or the court made a further order. In addition, the maintenance was due to be reviewed at a later date once further information regarding the parties’ shared pension fund was available.

It is important to note that the husband received a large proportion of his income by way of a discretionary bonus, performance share plan and a matching share plan. Payment of these was deferred by three years, dependent on performance over that period. Consequently, Mrs Waggott was awarded 25% of the bonuses paid in 2014 and 12.5% of those paid in 2015.

Appeal

Both parties appealed the court’s initial decision. The wife appealed on the grounds that the judge had failed to award her a fair share of the husband’s post-separation earned income. The husband appealed on the grounds that maintenance should be for a set term only. The three central issues raised at appeal were as follows:

1. Does the sharing principle apply to earning capacity and if so, does the non-earning spouse have a continuing entitlement to a share?

LJ Moylan considered that the extension of the sharing principle (i.e. an equal or otherwise division) to post-separation earnings could impact the court’s fairness and consistency and “fundamentally undermine the court’s ability to effect a clean break” and was also an impractical suggestion.

In addition, the sharing principle only applies to marital assets and LJ Moylan did not consider that earning capacity can be considered property for these purposes.

2. To what extent is it fair for a wife to be required to meet her income needs through her sharing award when the husband will meet his needs from earned income?

The Court of Appeal did not consider that Mrs Waggott was entitled to preserve her share of the capital because Mr Waggott could preserve his share.

Instead, LJ Moylan considered it clear that the needs principle should be applied when determining whether the sharing award is sufficient to meet the party’s future needs. To avoid any “undue hardship” Mrs Waggott was expected to meet her income needs upon termination of the maintenance award by using her “surplus” capital.

It was also suggested that if a wife can be expected to meet her income needs out of inherited capital, then it would be difficult to see why the same should not apply to a wife’s share of marital wealth.

3. Should the compensation principle also be applicable not only when the applicant spouse has sustained a financial disadvantage, but also when the respondent has sustained a financial advantage during the marriage?

The Court of Appeal rejected the suggestion that Mrs Waggott should be compensated for any loss of career opportunity during the marriage.

Conclusion

The wife’s appeal was dismissed and the husband’s cross appeal was granted.

LJ Moylan considered that the wife would be able to adjust without undue hardship to the termination of maintenance and that it was not unfair for her to be expected to use her financial award to meet her income needs. There should therefore now be a clean break.

The consequences of the judgment have sparked more debate and scrutiny of the controversial term ‘meal ticket for life’ within the national media.

Lady Hale’s speech at Resolution’s thirtieth national conference in April noted that open-ended periodical payments are sometimes the best option in achieving equality following divorce. However, she suggests that “to refer to this as a ‘meal ticket for life’ is indeed patronising and demeaning, but making an award for those reasons is not.”

If you are in the process of separating and considering options for financial settlement or would like further information on the possible financial remedies available to you or your spouse, please get in touch to discuss your options.

With thanks to Sophie Hayward, trainee solicitor, for her help with this article. 

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