Compensation for a sacrificed career: Will divorce ruling open the floodgates?
Making a decision to give up your career, particularly after the birth of children, can often be both a choice and a sacrifice.
So, what is the consequence on divorce where one spouse has put family ahead of promotions, ambition and earnings?
A recent decision in the High Court to award an additional £400,000 to a wife on divorce because she chose to stop working has brought this question to the fore. The parties had been married for 10 years. Both were London solicitors in their 40s and the wife, a Cambridge graduate, claimed that she had forsaken her prospects of becoming a Partner to enable her husband’s career to take precedence. In addition to receiving an equal share of the marital pot (nearly £10 million), the wife was awarded this additional sum by the Judge because there had been ‘relationship generated disadvantage’. Mr Justice Moor ruled that she had sacrificed a potentially lucrative career to take primary responsibility for their children whilst the husband was able to continue to enjoy a ‘stellar’ career. The Judge commented on the difficulty in calculating the appropriate amount to compensate the wife. He did so on the basis that the husband’s future working life was four years (after which he would be encouraged to retire from the firm having been there 20 years) and awarded £400,000; the wife had earned around £100,000 a year before she stopped working.
There is inevitably compromise between spouses in many areas of life during a marriage and even more so when children come along. Can both parents still manage to pursue their careers as they need or wish to in the same way as they did before? In most cases, the answer is probably no and a decision has be made as to who sacrifices what. The question is what should happen (if anything) to ‘compensate’ the spouse who has given up a potentially lucrative career? And should it make a difference if that spouse actively chose not to work rather than trying to find a potential work/life balance?
Given the discretionary nature of our judicial system in this country, this case questions the extent to which our family law judges should be evaluating choices made by spouses during the course of their marriage once the relationship has broken down. In this case, the wife went so far as to produce copies of her annual appraisals to evidence her career prospects.
In theory, this decision would apply to whichever partner has stepped back in their career to put family first. The general consensus is that it will certainly increase the number of attempts made by spouses to claim compensation given that the concept in the Family Courts had all but been extinguished in recent years. Whilst it was established as one of the three core principles of financial provision in a House of Lords (as it then was) decision in 2014, in recent years Judges have focused almost exclusively on the other two strands, ‘needs’ and ‘sharing’ when determining financial remedy cases.
So will this open the floodgates? As always, each case depends on its individual facts. Perhaps the Judge anticipated the possibility of a raft of relationship generated disadvantage claims given that he expressly noted in his judgment that it is ‘unusual’ to find significant relationship generated disadvantage that may lead to a claim for compensation. He emphasised that this should not be seen as a ‘green light’ to launch such claims and that litigants should think ‘long and hard’ before doing so. In reality, many cases that come before the Courts do not have a sufficient level of assets to justify even attempting such a claim and will be determined based on ‘need’ alone. In those cases where ‘sharing’ is appropriate, the Court may well say that any loss is already covered by the applicant’s sharing claim. Time will tell. What is certain is this case has reignited the concept of compensation back into family lawyers’ minds after an absence over the last 5 years or so.
This article first appeared in eprivateclient on 14 April 2020.