In the recent cases of O’Dwyer and Vaughan the Courts have been considering whether or not wives should meet their income needs from capital.
Matrimonial assets
As part of this exercise the Courts considered whether an earning capacity is a “matrimonial asset” which can be shared in the same way as other matrimonial assets of a capital or property nature. The Courts have also gone on to consider whether it is fair to expect the wife to use her share of the capital to meet her income needs, leaving the husband to do this from his future income, and his capital untouched.
The decisions of the Court
The recent case of O’Dwyer settled the point that income is not a matrimonial asset to be shared. This means that there will be no presumptive starting point of an equal division of income after a long marriage of equal contribution, in the same way that there would be for matrimonial assets. Instead, the Court addresses income needs by way of an award of periodical payments (other than in compensation cases which are very rare), and based on carefully analysed arithmetical need.
The Courts have been less clear about the extent to which a wife would be expected to use up her capital to meet her income needs. This capital will usually have been “shared”. Whether the wife has to use her capital while her husband is free to use his income, depends upon the Court’s discretion. In the recent case of O’Dwyer, a specific example was given in which the wife would not be expected to use up her capital. In big money cases where the economically stronger party has a very substantial income, then the Court concluded that it would not be fair for the weaker party to use up their capital for a period of time. Things change upon reaching retirement age however, and the Court concluded that while it might be unfair for the wife to start living on her capital straight away, she might have to do so on reaching retirement and that this was an “inevitable and direct consequence of the fact that an earning capacity is not subject to the sharing principle”.
In an earlier case of Vaughan, the Court concluded that, by contrast, it would not normally expect a wife to apply inherited capital (as opposed to the income generated therefrom) to meet maintenance needs, but it refused to be categorical about the point.
What does this mean for income needs?
The conclusion is that the law holds there should not be discrimination on the basis of gender in a long marriage of equal contribution, but this is a principle applying only to capital and property, and not to income or earning capacity. Instead a Court analysis of what a wife needs, with a wide discretion as to how generously this should be interpreted, balanced against the husband’s ability to pay, is used to calculate how much by way of periodical payments (maintenance) is appropriate. There is no starting point of equal sharing.