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TM v KM [2022] EWFC 155 – compensation ordered

Posted on 28 February 2023

The parties started cohabiting in the USA in 2004 and moved to London in 2006. In January 2010 they moved to the Middle East. The wife returned to England in 2016 and the husband followed in 2017. The parties had two children, one aged 14 and one aged 11. The wife had a highly successful career in investment finance prior to 2008, when the parties' eldest child was born. The husband still worked in investment finance and had a gross annual income in the region of $2M.

Upon an equal division of capital and pension, HHJ Hess noted that, after purchasing suitable housing, the wife would, on a Duxbury basis, have an income for life of about £175,000 p.a. He did not consider that, on the facts of the case, it could sensibly be argued that she had income needs above that figure He also considered it appropriate for the wife to amortise her capital in order to meet her needs.

In terms of compensation, he was satisfied that in the years leading up to 2007, the wife was a high earner in a not dissimilar bracket to the husband. The wife's move to the UK in 2007 and devotion to her child-care role were both relationship-generated sacrifices by the wife. Her ability to be a high earner was further inhibited by two further relationship-generated developments – the arrival of their second child in 2011 and the move to the Middle East. Upon the move to the Middle East in 2011, the husband had, in negotiations about his remuneration, argued that the wife had agreed to give up her very successful career and would rather be working in the US.

HHJ Hess returned to the core guidance set out by the House of Lords in Miller v Miller; McFarlane v McFarlane [2006] UKHL 24 and noted the authorities at High Court level following that decision that had discouraged the use of compensation arguments. While he agreed that compensation claims were likely to be very rare and almost always delivered in the context of need at the most generous level, there could be exceptions to this. In the present case, the wife had made a relationship-generated sacrifice of her high earning career to devote herself to supporting the husband's career choices and providing child-care for their children.

When determining how to quantify the compensation, he noted that the wife had already benefited through the sharing exercise from the additional capital created by the husband's high earnings. He was careful not to fix an award that would amount to sharing of the husband's income. He added five tranches of £100,000, a total of £500,000 to the wife's award on a clean break basis.

Kate Clark says: The judge described this case as being "rare and truly exceptional", in finding that a discrete compensation award was appropriate. There were very high value assets, the wife had a high-income potential and she was able to demonstrate that she had given up a career which would have led to earnings at least equivalent to that enjoyed by the husband. The judge therefore found that the wife's relationship-generated sacrifice should be reflected in the overall settlement, in order to achieve fairness. The outcome of this case demonstrates that although there will be cases in which a compensation claim can be justified, it will still be highly fact-dependant.

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