Surprisingly, in the current economic climate, it was Julia McFarlane who first returned to Court, initially making an application for upward variation of maintenance for the children.That application was later amended to include an application for upward variation of maintenance to herself.
Over a three day hearing, Kenneth McFarlane acted in person with the assistance of a McKenzie friend although he had previously received legal advice. Julia McFarlane was legally represented. At the time of the hearing, Kenneth had remarried, had a three year old son with his second wife and planned to retire at 55. His income had increased from £750,000 in 2003 to just over £1.1m in 2008. His former wife’s position had also changed – two of their three children were attending (or were shortly to attend) University and she had secured employment generating an income of around £30,000 per annum gross for a four day working week.
In examining Julia McFarlane’s case for an upward variation of maintenance, the Court was asked to consider:
- the amount and period of maintenance payments for the benefit of the wife;
- the amount and period of maintenance payments for the benefit of the children; and
- whether a ‘clean break’ order was appropriate.
After assessing Kenneth McFarlane’s income and making deductions for:
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maintenance for the children;
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day to day living expenses of both parties;
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school and University tuition fees;
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provision for the child of his second marriage; and
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miscellaneous items, the surplus fund was then considered.
In assessing the surplus fund the Court looked at providing Julia McFarlane with life-long security and referred to the decision of the parties for her to give up work and look after the children. The Court again made reference to the House of Lord’s original suggestion that this was “a paradigm case for an award of compensation”. Mr McFarlane advanced a number of arguments, which included for example the role of his second wife over the 8 year period and his own talents and ambition.
On balance Julia McFarlane’s award was increased from £250,000 per annum to £350,000 per annum. However it was awarded for a 5 year period, until Mr McFarlane’s planned retirement at age 55. The Court therefore reverted to the previous approach of the Court of Appeal in limiting Julia McFarlane’s maintenance to a 5 year period, as opposed to during the joint lives of the parties. In anticipating future litigation, the Court broadly assessed any future application to extend the 5 year maintenance term as follows:
- if Julia is able to meet her needs (assessed at £150,000 per annum) before May 2015 from her own income/investments and release of capital, the decision strongly suggests the end of Mr McFarlane’s maintenance payments for his wife;
- if Julia is able to produce an income from those resources of £120-£150,000 per annum by May 2015 the decision suggests an extension of the term (of 5 years) should not be awarded; and
- if Julia is unable to produce an income of £120,000 the reason for this would have to be considered and in particular whether the level of Mr McFarlane’s income was a factor.
The overall approach of the Court means that Julia McFarlane will have a lower level of capital on retirement than her former husband. As the years pass, it is anticipated that a greater disparity in income and capital will result. The Court was not concerned with that approach and recognised that a wife’s contribution to the high earning of her husband post-marriage will decrease over time.
One point to note was that Julia McFarlane’s maintenance payments following the original order were not index-linked. Had they increased with RPI, she would automatically have received an uplift in maintenance over the 6 year period of around 19%. Would that have prevented the initial variation application? Certainly in respect of child maintenance (which was Julia McFarlane’s initial application for upward variation) the increased award of £25,000 per child is very close to the original sum of £20,000 plus RPI uplifts over the relevant period. This variation was not back-dated, unlike the payments to Julia McFarlane herself.
Tricia Rooney