When the court considers a financial settlement on divorce it will take into account all of the circumstances of the case, including the income, property and other financial resources of the parties, the duration of the marriage, and the contributions which each of the parties has made to the welfare of the family.
But the two most important matters in many cases will be the financial needs of the parties, and the principle that an equal division of assets between husband and wife should only be departed from if there is good reason for doing so.
Thus, for example, a case may be considered to be a ‘needs case’, in which the assets are distributed in such a way as to meet the needs of the parties, or it may be a case decided by reference to the sharing principle, in which the matrimonial assets will more often than not be divided equally between the parties.
The interplay between needs and sharing was demonstrated in the recent High Court case TW v GC, in which a wife sought to argue that she was entitled to a pension share, when the other assets had already been divided so as to meet her needs.
A needs case
The case concerned an appeal by the husband against a financial remedies order. There were three grounds of appeal, but we will concentrate here upon just one, in relation to the pension issue.
The appeal was heard by Mr Justice Cusworth.
The background to the case was, very briefly, that the parties had had a 19-year relationship, before they separated in 2020. There were three children of the family, two of whom were grown up and the youngest aged 7.
The husband was aged 56 and worked as a company director. His net income was some £165,000 per annum, but there was a possibility that this could be increased substantially.
The wife was aged 40 and did not work. It was found that she could earn £20,000 per annum gross, subject to child-care costs.
The net non-pension assets were found to be some £10 million, of which only £3,575,000 were found to be matrimonial (i.e. assets acquired during the marriage, through the joint efforts of the parties).
The matrimonial pension assets were £284,816, including the wife’s pension.
The judge at the first hearing found that the wife’s housing needs were £1,022,600 and that her income needs would be met by a lump sum of £2.36 million.
Accordingly, this was a needs case, as the wife’s needs would clearly not be met by her sharing entitlement in respect of the non-pension assets.
The judge also awarded the wife a 26% share of the husband’s matrimonial pension.
The husband appealed.
The appeal
The primary ground of appeal related to the amount of the wife’s award in respect of her income needs. However, Mr Justice Cusworth dismissed the appeal on this ground, finding that the judge’s decision was within the bounds of his discretion.
But another ground of appeal related to the pension award. The husband argued that, having made one award overall based on the wife’s needs, it was wrong that he should then deal with the pensions on a sharing basis, as if they were separate from the assessment of the wife’s needs.
Both the judge at the original hearing and the wife argued that the amount concerned was sufficiently small that it made no real difference to the overall financial package for the wife.
However, Mr Justice Cusworth found that this argument overlooked the principled basis upon which a sharing claim is computed. Such a claim, he said, “is never reflective of need, but rather it is a computation of entitlement to share in assets generated during the marriage, or in the part of the value of those assets that reflects their ‘matrimoniality’. And that computation should not be conflated with any needs assessment, but rather be contrasted with it.”
He went on:
“Thus, the 2 bases of assessment [needs and sharing] are separate and distinct, and cannot be applied to different classes of asset within the same outcome to an application for a financial remedy. Once an award has been calculated so that it meets the applicant’s needs, there can be no principled basis for adding to it with additional sharing, if the applicant’s sharing claim has already been determined to be of lesser value. The award then is likely to become unfair to the respondent, who is left making provision greater than the assessment on either individual basis. Once an applicant’s sharing claim has been subsumed by their needs, small bits of the former claim cannot thereafter be resurrected to supplement the needs award.”
Accordingly, the husband’s appeal succeeded on this ground, and the pension sharing order was set aside.