O'Dwyer v O'Dwyer

An earning capacity or future income stream is not matrimonial property capable of being shared. Subject to rare compensation cases, periodical payments must be based on properly analysed needs. The assessment must address the recipient’s needs, the income generated by available capital, and whether, and from when, capital should be amortised. A judge must explain the arithmetic supporting the award rather than selecting an unexplained round figure. Amortisation is fact-sensitive. In a long marriage involving substantial resources, the court may defer amortisation where the economically stronger spouse continues to enjoy a substantial income, provided that the sharing principle is not applied to future income.

The husband appealed against a periodical payments order made by His Honour Judge O’Dwyer in the Central Family Court. The parties had been married for many years and had agreed an equal division of their capital, including the value of the husband’s McDonald’s franchise business. The lower court ordered the husband to pay the wife £150,000 per annum for a fixed term, treating the business income stream as matrimonial property and also referring to the wife’s needs.

The appeal concerned whether future business income could be shared and, if not, how the wife’s needs, capital income and amortisation should be assessed.

1. Appeal allowed in part. The judge below was plainly wrong to identify the business income stream as matrimonial property. Applying Waggott v Waggott [2018] 2FLR 406, an earning capacity is not property and future income cannot be shared merely because it derives from a matrimonial business.
2. Absent a rare compensation case, periodical payments must be based on needs. The court must assess the recipient’s reasonable needs and then determine whether the capital received is sufficient to meet them. If income needs remain, the judge must exercise the statutory discretion by reference to properly analysed arithmetic.
3. A judge must consider:
   • the recipient’s needs;
   • the income generated by the recipient’s capital;
   • whether the capital should be amortised; and
   • the date from which amortisation should begin.
   A round figure without that analysis risks disorder and uncertainty.
4. Amortisation is case-specific. In a substantial-assets case following a long marriage, where contributions were full and the economically stronger spouse continued to receive a substantial business income, it was fair not to require the wife to amortise her capital during the remaining years of the husband’s employment. That approach respected the clean-break principle while allowing a generous needs assessment.
5. The wife’s needs were assessed at £120,000 net per annum. Her capital was treated as producing £52,000 net per annum, and the periodical payments figure was therefore reduced to £68,000 per annum. The fixed term was left undisturbed.

• High Court (Family Division): the appeal from the Central Family Court was allowed in part. The periodical payments award was reduced from £150,000 to £68,000 per annum, while the term remained unchanged.