Fair Divorce Settlement Examples in the UK

A fair divorce settlement involves the dividing of marital assets (and sometimes non-marital assets) in a way that is fair and reasonable for both parties, taking into account factors such as contribution, lifestyle, and financial needs. While a 50/50 split is usually the starting point in England and Wales, an equal split does not always equate to a fair financial settlement. To achieve fairness, one party may be awarded a greater share of the property and assets.

Assets that may be split in a divorce include jointly owned and solely owned assets acquired during the marriage, such as property, pension, savings, and investments. Non-matrimonial assets may be considered in the financial divorce settlement if the Family Court deems it necessary to meet both parties’ needs.

In this article, to better explain what a fair divorce settlement means, we will provide four examples. It is essential to bear in mind that what is considered a fair settlement will depend on your individual circumstances and those of your ex-partner. To find out more about how to achieve the best possible divorce settlement for you and your children, please contact our divorce lawyers to discuss your case.

A fair divorce settlement example on equality

The case of White v White ¹ swept away four decades of family law thinking and paved the way for London to be considered the divorce capital of the world. The case involved a husband and wife who had run a lucrative farming business together for over three decades.

The Court of Appeal had awarded the wife a 40 per cent share of the matrimonial assets. On appeal, the wife said the assets should be split equally. The husband contended that the award exceeded his wife’s reasonable requirements and he should keep the residue as he was the primary earner.

In dismissing the appeal, the House of Lords stated that whilst there should be no presumption of equal sharing of assets, equal sharing should not be departed from unless there was a good reason.

The revolutionary aspect of Lord Nichols’s judgment in White was that he declared non-financial contributions, such as looking after a home and children, carried equal weight to financial contributions. Therefore, if a husband and wife had built wealth together during their marriage, the wife could expect to get half of it. White ended the practice of allowing the spouse who ‘earned’ more money to keep whatever property and assets were left over after the basic financial needs of both spouses had been met.

A fair divorce settlement example on compensation and sharing

In the joint appeals of Miller v Miller; McFarlane v McFarlane ²  the House of Lords identified three principles (or strands) which justified the making of orders under section 25 of the Matrimonial Causes Act 1973:

• Needs (‘generously interpreted’).
• Compensation for relationship-generated disadvantage.
• Sharing of the fruits of the marital partnership.

The McFarlanes had been married for 16 years and had three children. The wife had agreed with her husband that she would give up her successful career as a solicitor to look after their children whilst he focused on his business. The district judge awarded the wife £250,000 a year plus £60,000 for the annual maintenance of their children.

On appeal, the husband had the annual spousal maintenance payment reduced from £250,000 to £180,000 on the basis that the wife did not need £250,000 but would be able to save and accumulate capital from that sum. The Court of Appeal restored the amount, stating that in rare cases, the receiving spouse could accumulate capital from spousal maintenance payments. The Court of Appeal did; however, reduce the order to a five-year order on the ground that a joint lives order did not give due effect to the clean break principle.

The House of Lords ruled that the compensation strand was aimed at addressing any economic disadvantage to one party resulting from how the couple jointly agreed to arrange their lives. For example, suppose one spouse gave up a lucrative career to support the other. In that case, they should be compensated for their double loss, namely, that of the other party’s income and the reduction in their own earning capability due to being out of the workforce for so long.

Regarding reducing the joint lives order to a five year order, the House of Lords ruled that this would be unjust. Instead, in the future, when the husband had reduced his outgoings and the wife had revived her career, the £250,000 could be reassessed.

A fair divorce settlement example with pre-nuptial agreements

Pre and Post-Nuptial Agreements are not legally binding. However, the Supreme Court decision in Radmacher v Granatino ³ provided guidance on how much weight should be given to a nuptial agreement in financial remedy proceedings following a divorce. 

It is important to note that the facts in Radmacher are not typical. H, a French national and W, a German national, had married in the United Kingdom. They had two children and separated after eight years. W came from a wealthy family. H and W had signed an ante-nuptial agreement in Germany. Under the agreement, neither party was to benefit from the property of the other either during the marriage or upon divorce.

H did not see a solicitor before signing the agreement. He was a banker when the couple married, but at the time of the divorce, he was a student. He applied for ancillary relief and was awarded a substantial sum, the judge attaching limited weight to the agreement because of the circumstances in which it had been signed. The Court of Appeal, however, held that the agreement should have been given substantial weight.

The Supreme Court said:

“The court should give effect to a nuptial agreement that is freely entered into by each party with a full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold the parties to the agreement.”

Regarding what is fair, the Supreme Court provided a three-stage test:

• The Nuptial Agreement must be freely entered into,
• Each party must fully understand the implications of the agreement, and
• In the current circumstances (i.e. at the time of the divorce), it must be fair to hold both parties to the terms of the agreement.

If there is evidence of coercion, fraud, misrepresentation, or immoral conduct it is unlikely that the Courts will uphold a Nuptial Agreement. A Court will also consider the emotional state of the parties, their ages and maturity, and how much experience they have had of long-term relationships.

A fair divorce settlement example on matrimonial and non-matrimonial property

A fair financial settlement does not always mean an equal split of assets, especially when some of those assets were accumulated before the marriage. In Jones v Jones ⁴, the Court of Appeal provided a formulaic, two-stage process dealing with settlements involving matrimonial and non-matrimonial property:

• Divide the total assets into two parts: one part reflecting the non-matrimonial assets and the other reflecting the matrimonial assets.
• Divide the matrimonial property equally (unless needs or compensation dictate some other proportion is appropriate).

Jones v Jones concerned a divorcing couple with assets of around £25 million. This included funds from the sale of the husband’s business, which he acquired ten years before the marriage and sold shortly before the final hearing for £32 million.

The couple agreed that when they married, the company was worth £2 million. The marriage lasted 10 years. The wife sought a settlement of £10 million (40 per cent of the assets).

At first instance, the wife was awarded £5.4 million on the basis that this represented 60 per cent of the value the husband brought into the marriage.

Using the above formula, the wife’s settlement was increased to £8 million.

The Court applied the formula as follows:

The agreed £2 million value of the husband’s company was increased to £4 million to:

• reflect the latent potential of the business or the ‘spring-board’ and
• allow for ‘passive economic growth’ between the date of the marriage and the date of sale.

The Court ruled that passive economic growth contrasts with growth as a result of the parties’ contributions made during the marriage.

With the passive income considered, the value of the company was set at £8.7 million.

Of total assets of £25 million:

• The non-matrimonial property was (about) £9 million.
• The matrimonial assets were £16 million.

The wife’s award (50%) was £8 million or 32% of the total assets.

Court Considerations for a Fair Divorce Settlement

The starting point in divorce financial settlement proceedings is that matrimonial assets should be divided equally unless specific circumstances mean that this would result in an unfair settlement. To establish a fair financial settlement, the Court will apply the factors⁵ such as:

• The resources available to the parties, both capital and income and extant or reasonably foreseeable.
• The financial needs of each party, considering the needs of dependent children and any disabilities.
• The duration of the marriage and the age of the parties.
• The conduct of the parties (but only in exceptional circumstances).
• The standard of living enjoyed by the parties.
• Any benefit either party will lose because of the divorce.
• The contributions of each party to the marriage (both financial and non-financial).

If you have questions about negotiating a divorce financial settlement, we would encourage you to speak to our family law team. We will review the details of your case and recommend the best course of action whilst ensuring your interests are protected and the welfare considerations of any children involved remain paramount.

References:

¹ UK Parliament: Judgments – White White v. White (Conjoined Appeals)

² UK Parliament: Judgments – Miller (Appellant) v. Miller (Respondent) and McFarlane (Appellant) v. McFarlane (Respondent)

³ The Supreme Court: Radmacher (formerly Granatino) (Respondent) v Granatino (Appellant)

⁴ vLex: Jones v Jones

⁵ Legislation.gov.uk: Section 25 of the Matrimonial Causes Act 1973