The aspect of the case that is perhaps of most interest to family lawyers, and no doubt the media, is the argument about how much detail should be made public. The judge, Mr Justice Bennett, and Sir Paul wanted to publish the full judgment. Heather Mills opposes this, citing the potential damage to their daughter. Ms Mills took the point to the Court of Appeal and lost, so we have now been able to see in full the judge’s findings of fact and the thinking behind his award of £24.3m.
The general rule is that financial proceedings in divorce cases are private in the County Courts (where the vast majority are heard) and in the High Court, which hears the more complex bigger money cases. It is only when a case goes to the Court of Appeal that this anonymity is lost.
A debate has been raging for some time about "secrecy" in family proceedings. In 2006, the Government issued a consultation paper to look at how best to strike the balance between on the one hand more openness (so that people could see how the system worked and as a result hopefully have more confidence in it) and on the other hand the need to protect people's privacy. This first consultation paper worked on the premise that the media would be allowed into family courts as of right. However, the concerns about how this would impact upon the families concerned, particularly children, led to a different proposal in a further Government paper in the summer of 2007, looking at how the quality of information released by the courts can be improved without breaching confidentiality.
There is no doubt that more openness would help to remove the speculation and misinformation that surrounds family proceedings and has been very evident in the McCartney case, but the case is exceptional and is unlikely to set a precedent for the majority of less sensational judgments that courts up and down the country are making every day.
What then of the financial award itself? The award fell into two distinct parts. First, Ms Mills was allowed to keep the assets that she already had in her own name, amounting to £7.8m. The balance of the award, £16.5m, comprised £2.5m for a London house and £14m to capitalise future income needs, which were obviously construed generously. The calculation of that sum is interesting. Her current income needs were put at £600,000 per year. However, the judge ruled that this could be reduced by 60% in the year that Beatrice became 21, on the basis that the years during which Ms Mills would have primary responsibility for her would be more expensive that when she was likely to have finished at University. It also reflected the fact that at the same time it would be reasonable for her to “trade down” on her London property to release capital and, finally, an earning capacity of £110,000 per year until she is 60 was attributed to her.She will not get any maintenance for herself (this is and was always going to be a "clean break, one of the very few things upon which the two sides appear to have agreed!") but she will get £35,000 per year for Beatrice with Sir Paul paying school and nanny's fees.
The judge made it absolutely clear that this was a case where the award to Ms Mills was going to be based on her needs rather than any percentage of the overall assets. This settlement approach was the accepted one in all big money cases until 2000 when the case of White v White in the House of Lords changed the family law landscape dramatically.
Before then it made no difference in effect if the paying party was worth £50m or £500m. The settlement was based on a capitalisation of the receiving party’s budget. The House of Lords in White ruled that this was discriminatory and introduced the principle of equal sharing of capital where there was an excess of assets over needs. However, that case involved a long marriage of over 30 years. One of the clear reasons for there not being an equal split in the high net worth arena is where the marriage is much shorter. Another is where the wealth already existed before the marriage and any increase in its value was attributable to factors other than the efforts of the spouses e.g. simple property value rises. That is what has happened here and that is why the argument about how much Sir Paul is actually worth was irrelevant in terms of the outcome.
In conclusion, intriguing though this case has been to follow, it does not appear at first sight to break any real new ground. There are still many issues in big money divorces that family lawyers, and of course their clients, have to grapple with and, along with the issue of transparency, perhaps the real question is whether the present discretionary system, which has been in place now for almost four decades, should be overhauled. Society has changed fundamentally over that period and we are out of step with the approach adopted in other countries. There is a strong argument for asking the Law Commission to investigate and recommend how greater certainty of outcome can be achieved without losing the flexibility to do justice in the wide range of situations that face families going through divorce.
Nigel Shepherd, Partner
This article first appeared on Wealthbriefing.com on 20 March 2008.