25 October 2004
31 May 2004
5 October 2004
7 January 2005
21 November 2008
31 May 2004
The divorce of Arsenal FC footballer Ray Parlour and his wife Karen broke new ground in terms awards. Liz Vernon sets the record straight
In July this year it was almost impossible to open a newspaper or turn on the television without seeing Karen Parlour’s face. Very often she was being pilloried by the Arsenal FC-supporting, misogynistic gentlemen of the press as a money-grabbing, bitter and vindictive ex-wife. The public was told that this was a “groundbreaking” case that had changed the fundamentals of divorce law in this country; that the decision was going to undermine completely the institution of marriage, as men would be reluctant to marry if in so doing they would run the risk of being on the wrong end of an enormous maintenance order.
All this was largely nonsense. In this country, the courts take the view that, in cases where the wife does not work because she is caring for young children, her former husband should support her until she can become self-sufficient, which will not be until the children are much older. This has been the case for many, many years. In such cases, the usual order is what is called an open-ended maintenance order – ie the order provides that the wife will have maintenance at a set sum for the rest of her life, unless she remarries. That is precisely the order which was made in Karen’s favour in the High Court in January this year. If the husband’s income increases, the wife can come back to court and ask for an increased amount. So, long before Parlour, wives in receipt of maintenance had an interest in their former husband’s future earnings. Nothing new there, gentlemen.
So what was in fact new about the decision in Parlour? In order to answer that question it is necessary to spend a few moments on one of the fundamental principles of our divorce law. Once a couple divorce, it is clearly in everyone’s best interests for the financial ties between them to be severed as soon as possible. Ongoing maintenance for a wife is often a constant source of friction between the parties for many years, particularly if the husband remarries and has a second family. So, in 1984, Parliament introduced an amendment to the Matrimonial Causes Act 1973, which obliged the courts dealing with financial claims on divorce to consider in every case whether a ‘clean break’ – ie a termination of maintenance payments – would be appropriate, either at the point of the divorce or as soon as was reasonably practical in the future.
In a case where a wife has no earning capacity and no real likelihood of obtaining one, such a clean break can be achieved only if there is sufficient capital to ‘buy out’ or capitalise the wife’s maintenance claims. Capitalisation figures are often calculated by use of actuarial tables known as Duxbury tables. The wife’s age and annual income requirement are factored in and the necessary lump sum is calculated. That lump sum is calculated on the basis that the wife would otherwise have received maintenance for the rest of her life. Therefore it is rare for women as young as Karen (she is in her early 30s) to have their maintenance claims capitalised. Husbands are reluctant to capitalise maintenance for a young wife as they assume that she will remarry. At that point her maintenance claims would automatically terminate. Therefore they are unwilling to pay a large lump sum to terminate a maintenance claim that would terminate in a few years in any event. They prefer to pay maintenance, hoping that she will remarry and their obligations will cease. It is a gamble, but one that often pays off.
Capitalisation is all well and good when there is sufficient capital in the family to meet both the wife’s capital claims and her capitalised maintenance claims. However, prior to the decision in Parlour, where there was not enough capital to pay the necessary lump sum, the court was not able to achieve a clean break, no matter how high the husband’s income. The reason for this is that over the years the courts had stated in a number of cases that maintenance was only to be used to meet the wife’s actual needs and could not be used to create capital.
In the Parlour case, the High Court calculated Karen’s annual income requirement at £150,000. However, it awarded her £250,000 to be divided between herself and the three children. “Foul,” cried Ray’s lawyers Alexiou Fisher Philipps. In the Court of Appeal, they relied on the earlier case law and said that the effect of that order would be to enable Karen to create capital, which was not the proper purpose of maintenance payments. Karen’s lawyers argued that it was fundamentally unfair to allow the husband the ability to save for the future but not to give the wife the same opportunity. The Court of Appeal agreed with Karen. Ray’s average income for the last three years was calculated at £1.2m net per annum. The Court of Appeal awarded Karen £444,000 this year, and 37.5 per cent of Ray’s net earnings going forward, but only for four years. During those four years Karen must save the surplus of her income over £150,000. At the end of the four-year period there will be a review. The court will look to see how much Karen has been able to save. If she has built up a sufficient lump sum the court will at that point order a clean break and Ray’s maintenance obligations to Karen will cease. Of course, if his income plummets during the period and she is not able to save sufficient money to achieve a clean break, then he will have to continue to pay her maintenance at whatever rate is appropriate. So Karen will share in the good times, but she could also share in the bad.
The Court of Appeal was keen to emphasise that Karen must be prudent with her excess income. It will not look kindly upon her if she comes before the court in four years seeking an extension of the period of her maintenance, saying that she has not been able to save enough for a clean break, if during that time she has been on a spending spree and failed to save as she was directed.
The Court of Appeal was also keen to stress that this decision will be applicable in only very limited circumstances. In big-money cases, there will often be enough capital for the wife’s maintenance claims to be capitalised at the point of the divorce. In many other cases the family’s income will barely be sufficient to meet the needs of two households and there will be no possibility of either party saving for the future. Only in very high income cases will there be sufficient income for both of the parties’ needs to be met fully and yet leave a surplus for saving for either of them.
Looked at properly, the Parlour case is in fact not such terrible news for high-earning husbands. If the Court of Appeal had not made the order it did, Ray would have been faced with paying Karen maintenance for many, many years to come. Their youngest child is only five years old. It would have been a long time before the court would have felt it appropriate to insist that Karen should go back to work. She would have been given time to retrain and get established in her new career before any court would even consider terminating her maintenance. So this order provides Ray with short-term pain for long-term gain. The alternative is a monthly payment for an indefinite period, which could increase each time the husband’s income increases.
All of this is interesting for family law practitioners, but I doubt very much that this case would have had the kind of publicity it did had the husband not played football for Arsenal and England. It is worth noting that in the companion case to Parlour, McFarlane, in which the same principles were applied, leave is being sought to appeal to the House of Lords.
Liz Vernon is a partner at Clintons and represented Karen Parlour in the case