Supreme Court: Divorce should not mean an automatic redistribution of wealth.

The Supreme Court handed down a Judgment of great significance on 19th October. The Judgment was given by the Chief Justice in the case of G v G and addresses the important question of what constitutes proper provision on the granting of a divorce in circumstances where a Separation Agreement has previously been entered into by the parties.

Until this case the law was unclear as regards the weight that a Deed of Separation should have in the context of providing proper provision on divorce at a later date. Parties were using the forum provided by a divorce application to seek a “second bit of the cherry” and there have been conflicted Judgments from the High Court on the issue of how much a weight a previous Deed of Separation should carry. The clarity provided by the Supreme Court in this case on the issue is therefore to be welcomed.

In the case of G v G the parties were married in 1977 and separated in 1995. A Deed of Separation was entered into by the parties in 1996, pursuant to which the husband agreed to pay the wife maintenance of £100 per week for two years, decreasing to £50 per week thereafter. He also agreed to provide a house for her, pay her VHI and gave an additional lump sum of £70,000. The Deed contained a “full and final settlement” clause which stated that the Agreement constituted a full and final settlement of all present and future financial claims by either party including a divorce at a later date.

After the Deed of Separation was entered into the husband became wealthy. Having inherited property, sold it and bought other lands which he later sold for €19 million. The wife still lived in the house provided for her at the time of separation. She had spent her lump sum of £70,000 and did not invest it in any wealth producing activity. The wife then instituted divorce proceedings, primarily with a view to improving her financial situation.

The divorce came before the High Court in May 2009 by which time the husband’s assets were worth €21 million. The High Court made the following Orders in favour of the wife:

  • €600,000 for the purchase of an annuity.
  • €300,000 for the purchase of a pension.
  • Maintenance of €54,000 per annum increasing annually in line with inflation.
  • €1,000,000 for the purchase of a second house for the wife.
  • A further lump sum of €600,000.

The husband appealed the Order to the Supreme Court on the basis, inter alia, that the amounts awarded to the wife by the High Court were excessive having regard to the law applicable to the making of proper provision for her. The husband argued that the High Court had failed to give any real weight to the parties’ prior Deed of Separation and had embarked upon a redistribution of wealth. He further argued that the Court should only make further provision if there is some material change in a party’s personal non-financial circumstances or if there was some deficiency in the initial provision.

The Supreme Court laid down some general principles to be applied where there is a prior Deed of Separation, including the following:

  • A Deed of Separation should be given significant weight by a Court when determining what is proper provision on divorce, particularly if it contains a “full and final settlement” clause.
  • If the circumstances of the spouses have changed significantly since separation the Court is required to make proper provision but there is no requirement on the Court to redistribute wealth between the parties. Such changed circumstances may include, for example, changed needs of a spouse due to illness or the bursting of a property bubble which has altered the value of assets so as to render an earlier provision unjust.
  • If a spouse acquires wealth after a separation that is unconnected to any joint project during their married life, there is no automatic right of the other spouse to further monies or assets.
  • The greater the length of time that has passed since separation, the less likely a Court will be to alter arrangements entered into at separation.
  • Assets which are inherited by one spouse will not be treated as assets of the marriage.
  • A spouse should not be compensated for their own incompetence or indiscretions to the detriment of the other party.

In applying the above principles to the present case the Supreme Court made a number of findings. The Court found that the initial level of maintenance was too low and also that the Deed of Separation did not provide a sufficient level of security into the future.

However, the Court found that the overall level of financial provision made by the High Court for the wife was excessive. In particular the Court allowed the Appeal of the husband in certain respects and held the following:

  • The husband should not have to pay €1,000,000 for the purchase of a second house for the wife.
  • The lump sum of €600,000 awarded to the wife should not have to be paid.
  • The Court found that where one party fails to maximise resources acquired under a Deed of Separation this in itself is not a basis for further provision to be made. In this case the wife did not maximise her capital resources, however her subsequent ill health and the low level of initial maintenance under the Deed of Separation meant that the High Court was entitled to make further provision for her.
  • Where there is a great improvement in one party’s finances following a “full and final” settlement the concept of “proper provision” should not be dominated by that change. However, if there is a new or different need then that may be met from the resources that now exist. The Court stated that the general standard of living of a spouse should be commensurate with that enjoyed when the marriage ended. Importantly, the Court stated that the standard of living of a spouse, when the other party has achieved further wealth, is not entitled to be elevated on that basis.

In the present case the Court found that the husband had acquired his wealth after separation and as such his wealth should not be relevant to making proper provision for his wife except if there is a requirement for a special consideration such as ill health. The Court therefore found that the wife’s increased maintenance and pension met her needs.

This case provides some much needed clarity on the weight to be given to a Deed of Separation when parties come to divorce at a later date. In the last number of years the practice of using divorce as a forum to have a “second bit of the cherry” appears to have been very significantly reduced by this Judgment.