HEAD TO HEAD: the impact of Ray Parlours divorce case
5 October 2004
James Stewart, partner and head of the family department at Reynolds Porter Chamberlain
Opinions are divided as to the effect of Parlour. Some see the cases as charters for greedy wives and many lawyers look forward to an increase in work as a result of the uncertainties to which these cases have given rise.
Some believe that the principles set out in Parlour can be applied to any family that can save from their income well-off salaried people as well as the extremely wealthy. Others think that wives may attempt to uplift their capital requirements to make an immediate clean break less achievable. Some expect a flood of cases from aggrieved international wives able to establish jurisdiction here and keen to take advantage of our apparently generous system. Many will be sorely disappointed. While Parlour may have generated a great deal of hysteria, the reality of the situation is that the cases applicability is limited.
The Court of Appeal was at pains to emphasise that the Parlour case was exceptional. In Parlour, there was a very large income, with a surplus of approximately 900,000 per annum over the parties needs. This surplus had in the past been converted into capital, which had been divided by agreement. Karen Parlour had agreed to accept around 37 per cent of a 3m capital pool, conceding that she should receive less than 50 per cent due to Ray Parlours special contributions and the length of their marriage (they married in 1998, with cohabitation since 1995). Also of crucial significance was the fact that there was insufficient capital to provide a clean break, which is the dismissal of both parties income and capital claims. Further, Karen Parlour had no immediate chance of increasing her earning capacity due to her responsibilities towards the parties three young children. The court held that it was under a duty to consider a clean break in the future, and so the main issue became how best to prepare for this.
The judgment does not assist in deciding what proportion of the payers income should be paid as maintenance. While Lord Justice Wall felt that, in trying to achieve overall fairness, the court should not restrict a wife to her budgetary needs, he was unsure as to what principle, if any, should replace the emphasis on needs, stressing that there is a wide discretion to deal with each case on its own facts.
Parlour is likely to stimulate the ever-increasing demand for pre-nuptial agreements, which are now being given far greater consideration by the courts. It could also result in a decrease in the number of people who choose to marry. A cohabitants financial claims are limited, so why should a wealthy man expose himself to all sorts of risks by marrying?
However, husbands may be unduly concerned. Had Karen Parlour been awarded the higher maintenance on an open-ended basis, the case would have changed the whole way in which the courts treat income. However, the courts upheld the principle of clean break and held that, in any case, a five-year term of maintenance should be towards the upper limit. For this reason, the case may not be as significant as it first seemed.
Liz Vernon, partner, Clintons
You have to get away from the figures and try to look at the principle, because the figures distort everything. Karen Parlour has not sat down and said: I want 444,000. The Court of Appeal, the second-highest court in the land, has looked at the paperwork and said this is the appropriate order.
It is a question of what value you put on staying at home and bringing up children.
Since the ruling there has been a great deal of misinformation written and broadcast about the win.
The belief that Karen Parlour received the award because she saved Ray Parlour from gambling and drinking is wrong.
It is true that in the High Court the judge made a finding that she was responsible for getting her husband to turn his back on the laddish culture which was prevalent at Arsenal at the time.
However, this was not the justification on which the judge made the order and has nothing to do with
the Court of Appeal order.
The other misunderstood part of the case is the basis on which the award was made. Clintons sought to extend the 50-50 principle on capital built up during a marriage, which was established by the landmark case White v White. However, the court rejected this and made the award on the grounds of working to make a clean break.
It is an exceptional case. You have a phenomenally high income but at the same time there was not an enormous pot of capital. In normal cases where you have got a huge amount of capital you can buy a clean break on both capital and maintenance at the point of divorce. In this case there was not enough to buy out Karen Parlours maintenance needs.
The court ruled, then, that income could be used to create capital; so of the 444,000 award, Karen Parlour is required to save 294,000. This action is the one landmark element to the case. Before, only the husband could save for the future whereas the wife was supposed to spend every penny she got because it was supposed to meet her needs. This way the wife has the opportunity to save so that she has some security for the future.
If he carries on earning big money, hopefully at the end of the four-year term she will have built up a significant lump sum and the court will say, if you invest that it will produce an annual income of X, so we are going to terminate your maintenance claim. If this were to happen then the only payments Ray Parlour would have to make would be child maintenance.
There always would have been maintenance for life. This is another fact that has been overlooked. Maintenance for life is standard and she would have got this irrespective of whether this was a landmark judgment or not.
This ruling is unlikely to affect divorces for a couple earning an average salary. In the vast majority of cases there will not be enough money to meet other reasonable needs. But in the Parlour case the surplus is so high that it is about working out the fairest way to divide it.