August Legal Alert
Case law: Ruling clarifies when and for how long annual leave can be carried forward by employees on sick leave
Employers will welcome clarification on whether and for how long employees on sick leave can carry forward untaken statutory annual leave under EU law.
An employee was off sick from April 2010 until his employment terminated in February 2014. He did not ask to take the statutory 20 days’ annual leave he was entitled to under EU law in any of the employer’s 2010, 2011 or 2012 annual leave periods (which ran from 1 February to 31 January). In July 2013, for the first time, he put in a request to take all his statutory annual leave accrued since 2010.
His employer paid him for leave untaken in the annual leave period 2013-14 (the year he made the request) but refused to pay him for the 60 days’ untaken leave from 2010, 2011 and 2012. When his employment terminated in February 2014 he claimed pay for those 60 days’ untaken annual leave from 2010 to 2012.
An employee is not entitled to carry their statutory 20 days’ annual leave forward unless they are on sick leave. If they are on sick leave they do not have to take their 20 days’ annual leave during the relevant leave period if they are unwilling or unable to do so (unless their terms of employment say otherwise). Instead, they can carry it forward and take it at a later date.
The Employment Appeal Tribunal (EAT) had to consider:
- Whether the employee on sick leave had to show that he was unable to take his statutory 20 days’ annual leave because of his medical condition, or whether it was sufficient that he was absent on sick leave and chose not to take that annual leave when on sick leave.
- Whether there is any limitation on the period for which an employee on sick leave may carry forward annual leave accrued in one year to subsequent years.
As to the first issue, the employer argued that the employee had continued to work 12-hour weekend shifts at B&Q despite his medical condition and, in 2012, had taken a week’s holiday. This showed the employee was able to take his statutory annual leave during each annual leave period, and could not therefore carry it forward.
The EAT said that an employee on sick leave does not have to be physically unable to take annual leave because of their medical condition in order to carry their leave forward. And if an employee on sick leave does not ask to take annual leave during a particular annual leave period the employer should assume the employee is unwilling to take it, the employee can therefore carry it forward on that basis.
As to the second issue, the EAT ruled that the right for an employee on sick leave to carry forward the statutory 20 days’ annual leave under the Working Time Directive and EU case law is not unlimited. At most, an employee can only carry annual leave forward within a period of 18 months after the end of the annual leave period in respect of which the annual leave accrued.
Workers unable or unwilling to take annual leave because they are on sick leave are therefore only permitted to take their 20 days’ statutory annual leave within 18 months of the end of the leave year in which it accrued.
The employee in this case was therefore entitled to be paid for untaken annual leave in 2012, but not untaken leave from 2010 or 2011.
The right to carry forward any holiday entitlement over and above the 20 days’ statutory holiday under EU law will depend on what the employee’s terms of employment say.
- Employers must pay employees who are on sick leave for untaken 20 days’ statutory annual leave under EU law, even if the employee did not ask to take that annual leave in the relevant annual leave period
- However, they only need to pay the employee if the request is made within 18 months of the end of the relevant annual leave period. If an employee fails to put in their request for accrued but untaken holiday within 18 months of the end of the holiday year in which they were off sick, the request can be refused
Case law: Plumb v Duncan Print Group Ltd  UKEAT 0071_15_0807
Case law: Employers may have to take purely voluntary overtime into account when calculating holiday pay
Employers should consider whether to include wholly voluntary overtime when calculating employees’ annual holiday pay, following a Northern Irish legal ruling.
An engineer worked for a Northern Irish local authority. The local authority was not obliged to offer him overtime and, if it did, he was not obliged to accept it – it was purely voluntary. He claimed that purely voluntary overtime should be taken into account when calculating his annual holiday pay.
The law in England & Wales says that regular, but non-guaranteed, overtime should be taken into account if employees are required to undertake it when asked, but there has been no legal ruling on whether wholly voluntary overtime should be taken into account.
However, the Northern Ireland Court of Appeal found that there is ‘nothing in principle’ to stop wholly voluntary overtime from being included in holiday pay – it will depend on factors such as the regularity and permanence of the overtime arrangements. The dispute has been sent back to the Tribunal to decide if the overtime should be taken into account in the circumstances.
Rulings of the NI Court of Appeal are not directly binding on courts in England & Wales but may be taken into account if similar case arises here.
- Employers should consider whether to include purely voluntary overtime when calculating employees’ annual holiday pay, depending on the regularity or permanence of their overtime arrangements
Case ref: Patterson v Castlereagh Borough Council NIIT/1793/13
Case law: Employee time travelling to and from home to jobs can be working time
Employers should check whether any employees have no fixed place of work and travel from home to their first job of the day, and back home after their last job of the day: time spent travelling may amount to working time for the purposes of the working time rules.
Employees of a Spanish business were employed to install alarm systems. They were provided with a company vehicle and a work schedule, and travelled to different customers’ premises every day. They would pick up parts from a logistics centre at least once a week, but had no fixed place of work.
Their employer argued that for working time purposes, the time they spent going from their homes to their first job, and from their last job back to their homes, was not working time. However, time spent travelling from one customer to another was treated as working time.
The Spanish courts referred the issue to the Court of Justice of the European Union (CJEU). The Advocate General of the CJEU has given a preliminary opinion, saying that their time spent travelling to the first job, and to their homes from the last job, was working time for the purposes of the working time rules. He said that the test is whether, at a particular time, the employees were:
- at the workplace
- at the disposal of the employer
- carrying out activities or duties of their job
He found that the fact they had no fixed place of work meant they were at work while travelling to and from home to a job in their vehicles. They were also under their employer’s instruction during that time.
The CJEU does not have to follow the Advocate General’s opinion, but in the majority of cases it does.
- Employers should check whether mobile employees who have no fixed place of work, who travel from home to their first job of the day, and back home after their last job of the day, are working during such travel time - so that it amounts to working time for the purposes of the working time rules
Case ref: Federacion de Servicios Privados del sindicato Comisiones Obreras –v – Tyco, Case C‑266/14
Case law: Supreme Court changes approach to interpreting commercial contracts
Businesses disputing the meaning of clauses in commercial contracts may find the courts uphold the terms, even if they are commercially disastrous, following a Supreme Court decision.
Under leases entered into by tenants of chalets in a caravan park, the tenants had to pay a fixed service charge of £90 for the first year of the term, increasing by 10% every year on a compound basis. This meant that service charges for 2015 for a lease granted in 1980 were over £2,500, and would rise to around £550,000 by the end of the lease.
The tenants argued that this was such an uncommercial outcome it could not have been intended by the parties when they entered into the lease. There have been recent legal rulings in which the courts have interpreted the intentions of parties to a contract on the basis of whether the contract terms are commercially sensible, irrespective of the clear words used.
In this case, the Supreme Court resurrected the previous approach taken by the courts. It ruled that clear, unambiguous words in a contract should not be overturned merely because they are not commercially sensible – even if the outcome is commercially disastrous. It confirmed the following principles to be applied:
- The aim of the court in construing a commercial contract is to ascertain objectively the aim of the parties.
- For this purpose, the court must put itself in the position of a reasonable person in possession of all background information reasonably available to the parties at the time the contract was entered into.
- When unambiguous, ordinary language has been used in a contract, the court will normally give effect to that language. It will not rewrite a bad bargain, or change what was agreed just because it was imprudent – or even if the outcome is disastrous
- When there are two possible interpretations, the court will prefer that which made the most commercial sense at the time. However, commercial common sense and surrounding circumstances should not be used to reduce the importance of the words used.
These principles clarify that the courts will give words in a commercial contract their natural meaning, whether commercially sensible or not. Only if the words are ambiguous will they then look to commercial common sense to determine what the parties intended them to mean.
In this case, the court said the meaning of the service charge clauses had to be assessed in the light of:
- the natural, ordinary meaning of the words used
- other relevant provisions of the lease
- the overall purpose of the clause, and the rest of the lease
- the facts and circumstances known or assumed by both of the parties at the time
- commercial common sense
Subjective evidence of either party’s intentions should be disregarded.
On this basis, given the clear words in the leases, the Supreme Court ruled in favour of the landlord.
- Businesses entering into commercial contracts should be aware of how the courts will interpret them in the event of a dispute and draft them carefully to avoid uncertainty.
Case ref: Arnold v Britton & Ors  UKSC 36
Case law: Failure to buy out shares of sacked director in quasi-partnership company was unfair
Company directors and shareholders proposing to remove a director should consider whether the company is a ‘quasi-partnership’, and are therefore required to make a fair offer to buy out the director’s shares, following a recent decision.
A partnership business was incorporated into a limited company after eight years’ trading. The three partners became directors and equal shareholders but not enter into a shareholders’ agreement.
Ten years later, one of the director-shareholders was dismissed as a director and employee of the company following allegations of misconduct. No offer was made to buy his shares. He claimed that his treatment was ‘unfairly prejudicial’ under company law.
In private companies, ‘unfair prejudice’ actions often arise where:
- A limited company actually operates as if, whatever their respective shareholdings actually are, the owners were in partnership with each other on an equal or other agreed basis (known as a ‘quasi-partnership’), and
- There has been a failure to fulfil the ‘legitimate expectations’ of an aggrieved shareholder about what the company was set up to do, and how it would be run
An unfair prejudice claim can have significant consequences for the parties involved because if successful, the court can grant any remedy it thinks is fair. For example, it can order those remaining in the company to buy out the aggrieved shareholders’ shares at a fair price - or even order the remaining shareholders to sell their shares to the aggrieved shareholder.
The issue in this case was whether the failure to offer to buy the sacked director’s shares was proportionate and justifiable, given the misconduct allegations against him.
The court decided that the company operated as a quasi-partnership and the lack of an offer to buy his shares, as well as sacking him as a director, was ‘clearly prejudicial’ to his position as a shareholder because his removal as a director and employee meant he was unable to monitor or influence the business, and protect his investment in the company.
It also meant the underlying expectation that he would remain as a director had been breached. Even if the allegations of misconduct against him were true, this was also unfair because none of those allegations warranted ‘his exclusion while leaving him locked into the company’.
The court ordered the other shareholders to buy him out, at a price to be determined using accepted methods of valuing shares in a quasi-partnership.
- Company directors and shareholders proposing to remove one of their number as a director should consider whether the company in fact operates as a quasi-partnership, and whether this means they should also make a fair offer to buy out the departing director’s shares
Case ref: Re BC&G Care Homes Ltd; subnom Crowley v Bessell and others  EWHC 1518
Case law: Employers must make employees aware of changes to policies
Employers who fail to alert an employee to changes to Health & Safety or other policies, or the disciplinary consequences of breaching them, may be inadvertently condoning such breaches and will be unable to dismiss the employee, a Court of Appeal ruling has confirmed.
An employee of 34 years’ standing had an unblemished disciplinary record and was properly trained in health and safety matters. While under the supervision of a less experienced co-worker, he breached newly-introduced provisions in his employer’s health and safety policy by going into a sewer without the required breathing equipment. This was a practice that the employer had allowed for many years, effectively condoning it. When the employer was dismissed he claimed unfair dismissal.
The Court of Appeal agreed that the dismissal was unfair and found:
- the policy was comparatively recent
- the employee had not been trained in its significance
- it had not been made clear to him that his actions could result in dismissal
- the employer had previously relied on the employee’s knowledge and experience in such situations, and had therefore condoned his exercise of his discretion whether to use breathing apparatus or not by not disciplining him previously
Finally, his employer had not attached enough importance to his clean disciplinary record. No reasonable employer would therefore have dismissed the employee in the circumstances.
- Employers should ensure they monitor employees’ actions to ensure that practices do not develop which breach health and safety (or other) policies - or risk being treated as condoning them
- Employers should ensure employees are aware of changes to policies and the disciplinary consequences of breaching them
Case law: Newbound v Thames Water Utilities Ltd  EWCA Civ 677
New guidance: Acas publishes new guide on staff pay
Employers will welcome a new Acas guide covering the basics of the law on staff pay.
Acas says that the free guide, Help for small firms: Handling pay and wages, is aimed at small employers, and line or team managers in larger organisations. It aims to help them stop pay problems arising, and covers issues such as choosing a system, paying new staff, wage slips, deductions, pay during absences and ending employment - using a series of practical steps in each case. It also contains a useful question and answer section.
Case law: Landowners breaching restrictive covenants under ‘building scheme’ should beware of neighbours’ rights to object
Landowners wishing to develop their land in breach of restrictions in their legal title should ensure their land is not part of a ‘building scheme’, or risk their neighbours being able to stop development.
A landowner obtained planning permission to build two additional houses on his land. Neighbours objected, claiming they were entitled to the benefit of a restrictive covenant which stopped the landowner from building more than ‘one or two detached residences’ on his land - because there was a ‘building scheme’. A restrictive covenant imposes a legally binding restriction on the use of land, to preserve the value and enjoyment of neighbouring land.
Under existing law, if plots of land sold off by an original owner are part of a building scheme, and the original owner imposes restrictive covenants on sale of the plots, the restrictions can be enforced by and against the future owners of each plot. Key requirements of a building scheme are:
- the plots were once all owned by an original seller
- the seller laid out the land in plots before selling it
- each sale is subject to restrictive covenants, with the intention that every sale is subject to substantially the same covenants
- the seller intended the restrictions to be for the benefit of all plots
- subsequent owners of the plots bought them on the basis that the covenants benefited the other plots in the building scheme
Both the landowner’s and the neighbouring land had originally formed part of a much larger piece of land belonging to the original seller, who had then sold off plots of that land. At the time of the sales a road had been laid out but no houses had been built on any of the plots. The covenant against building more than one or two detached residences had been included in the sale of 18 of the plots.
The covenants said they were binding on the ‘heirs and assigns’ of both buyers and sellers, but the original seller reserved the right to vary them ‘in so far as regards the other parts of their Estate’. The ‘Estate’ was not defined in the paperwork, but was marked on two plans dating from 1908 and 1914 respectively. However, there were significant differences between the plans.
The landowner applied to modify or discharge the covenant so he could continue with his development. He argued that there was no building scheme because the ‘Estate’ was not sufficiently defined. He also contended that the covenant was only intended to benefit the original seller – there was no proof that the benefit of the covenant was to pass to the current neighbours.
The neighbours argued that the restrictive covenants were consistent with a building scheme, and classic examples of the type of covenant intended to provide mutual benefits between plot owners on the scheme.
The High Court ruled that the ‘Estate’ was sufficiently defined when the original seller first sold plots of land in 1906, despite the differences in the relevant plans. The evidence also showed:
- The estate was initially laid out in plots. This clearly showed the intention that the covenants should be for the common benefit of buyers of all the plots (despite the fact some of the plots were only created a significant time after the initial plotting)
- The covenants imposed on each plot were substantially the same, with no material variations, indicating that they derived from a standard form of contract.
- They had been upheld in previous legal disputes.
- The fact that the original seller had reserved power to vary the covenants was not conclusive evidence that there was no building scheme, it was just one factor to take into account.
The Court therefore ruled that the covenant was intended to be for the common benefit of all future purchasers of the plots previously forming part of the Estate, and the landowner was bound by it. He could not therefore build the two additional homes on his land.
- Landowners wishing to build additional properties on their land should ensure there are no covenants preventing them from doing so under a building scheme, as these may be enforceable by owners of adjoining properties
Case ref: Birdlip –v- Hunter and Another  EWHC 808 (Ch)
Case law: Rights of way implied following ‘continuous and apparent’ use
Prospective property buyers should thoroughly investigate which rights of way others may have over the property (even if none appear in the legal title), and the impact on their enjoyment of their property if they ‘intensify’ their use of any rights of way.
An original owner of land sold it off in two plots. There were various farm tracks and two public bridleways over the land.
One of the buyers started a livery stable. He claimed he had two rights of way across the other buyer’s land – one to access a track leading to a public road, and the other to cross another track on foot or on horseback to access a bridleway. One of his arguments was that such rights should be implied because there was a common intention between the seller and the two buyers that such rights be created.
The other buyer ran a shoot from his land, which would be damaged if rights of way were implied. He therefore claimed there were no such rights of way or, alternatively, they were limited to domestic purposes because the livery business had not started when he bought his land.
The Court of Appeal ruled that there was an implied grant of rights of way. The Court found there were sufficient signs on the ground to show a ‘continuous and apparent’ use of the first right of way - at least once a month in the period before the land was sold. Use of the second right of way was also continuous and apparent, including use by vehicles.
The Court also ruled that the second right of way was not limited to domestic use. There were stables on the first buyer’s land, so even though it had not been used as a livery business when the neighbour first bought his land, there had been horses there at the time. Running a livery business was merely an ‘intensification’ of the existing use, rather than a more radical change.
While more intense use can give an owner rights to object to a right of way, it did not do so in this case.
- Buyers of land should carry out thorough investigations to discover which rights of way others may have over the property, even if none appear in the legal title
- Sellers of land should consider which rights of way they wish to reserve over land once they have sold it
Case ref: Wood & Another v Waddington  EWCA Civ 538
Case law: Unclear adviser engagement letter reaches Court of Appeal but adviser loses success fee claim
Companies should ensure that engagement letters with advisers clearly and unambiguously specify the circumstances in which the adviser’s fees, including success fees, are payable – and do not use different words to mean the same thing – or risk ending up in an expensive court battle.
A company appointed a financial adviser to help it sell a subsidiary. The engagement letter between them said the adviser would receive a success fee if ‘any Sale is consummated’ within one year of the end of the adviser’s engagement.
The parties agreed there had been a ‘Sale’ within the period when the company entered into an agreement to sell the subsidiary to a third party. However, the sale was conditional on government and other approvals. These were given after the end of the year. The company argued that the sale had not been ‘consummated’ within one year, and was not liable to pay the success fee to the adviser.
The Court of Appeal agreed, and said ‘consummation’ was an ordinary word meaning ‘bring to completion’. Simply making an agreement to sell a subsidiary, where completion of the sale was conditional on third party approvals, was not a consummation. The adviser was not therefore entitled to a success fee.
The adviser’s argument that the sale agreement also used the term ‘completion’, so that the word ‘consummation’ must mean something different, was rejected.
- Companies and their advisers should ensure that engagement letters between them clearly and unambiguously specify the circumstances in which the adviser’s fees, including success fees, are payable, and avoid using different words that mean the same thing
Case ref: African Minerals Ltd v Renaissance Capital Ltd: Renaissance Capital v African Minerals CA  EWCA Civ 448
Case law: Employer faced with claim for pension loss was entitled to information about employee’s other pension entitlement
Employers faced with claims for pension loss when dismissing an employee should consider applying for disclosure of information about the employee’s other pensions that may reveal whether they intended to work until the age they claim.
An employee successfully claimed discrimination and unfair dismissal. She was awarded significant compensation for loss of pension after she said she enjoyed working and would have continued working until she was 70 if she hadn’t been dismissed.
Her employer applied for an order that she disclose information about her other pension entitlement from previous employment, with a view to finding out whether she would really have chosen to stay in work until 70.
The Employment Appeal Tribunal allowed the employer’s appeal, ruling that this information was relevant, and it was not disproportionate to order disclosure given that her claim was for more than £900,000. However, it was made clear that the information should not be regarded as critical in the sense of determining whether or not the she would have carried on working to 70, but is one of the factors to which the Tribunal will expect to pay regard to.
- Employers faced with age-related claims for compensation, such as for pension loss, when dismissing an employee should consider applying for disclosure of information about their pension entitlement from previous employment that reveals whether they really intended to work until the age they say
Case ref: Essex County Council v Jarrett UKEAT/0087/15/MC
Case law: Employees must show why indirect discrimination arose – statistical evidence is insufficient
Employers faced with an indirect discrimination claim should ensure the employee can show why the alleged discrimination arose, rather than relying on statistics that indicate possible discrimination. Failure to do so may mean the employee’s claim fails.
Home Office rules state that staff must pass an assessment before they can be promoted. Statistically, black and minority ethnic (BME) employees and those over 35, are less likely to pass.
An employee claimed indirect discrimination on grounds the assessment was a provision, criterion or practice (PCP) which put groups of people with certain protected characteristics (such as being of a certain race, colour, ethnic origin or age) at a substantial disadvantage compared with groups of people who did not.
The employer argued that an employee claiming indirect discrimination had to show why the claimed disadvantage arose. It was not possible to prove group discrimination in the abstract. The Court of Appeal agreed, and the discrimination claim failed.
However, it also noted that an employee could, in principle, use the statistics as evidence that he or she was personally substantially disadvantaged by the PCP. This could be enough to show, in the absence of any other explanation, a prima facie case of discrimination. The effect of doing so would be to reverse the burden of proof in a particular claim, so it became the employer who had to prove there has not been discrimination.
- Employers faced with an indirect discrimination claim should ensure the employee can show why the alleged discrimination arose. Failure to do so may mean the claim fails
Case ref: Home Office (UK Border Agency) v Essop & Ors  EWCA Civ 609
Case law: Court gives guidance on maintenance payable to ex-spouses, including when they fail to get a job
Ex-spouses paying or receiving maintenance should consider whether the maintenance could be ended or varied following comments in a recent ruling. They should also consider whether they can apply to reduce maintenance on the basis that their ex-spouse should go and find a job.
The media recently gave significant coverage to a legal case in which a husband applied to reduce maintenance payable to his ex-wife. The media took an interest because the court told the ex-wife she should go out and get a job rather than rely on her ex-husband for financial support. The judge said: “There is a general expectation… that once a child is in year two, most mothers can consider part time work consistent with their obligation to their children”.
A subsequent legal decision has provided further guidance on the factors that courts should take into account when deciding whether to award (or continue to award) maintenance to an ex-spouse, how much it should award and for how long. The guidance also covers the vitally important issue of whether and when ex-spouses receiving maintenance should take steps to become financially independent – which often means getting a job. They include the following:
- maintenance should only be awarded on the basis of need
- it should not usually be awarded for the joint lives of both husband and wife, but for a defined term – perhaps with an option to apply for an extension when the terms expires
- arrangements should encourage the payee spouse’s transition to independence
In this case, a wife claimed maintenance of £60,000 per annum for 27 years, with a right to apply for an extension at the end. She also claimed 30% of her husband’s net bonus each year, capped at £70,000 per annum.
The husband offered payments of £24,000 for 12 months, decreasing to £18,000 per annum for the next four years, then £12,000 per annum for a further six years, with no extension.
The Court awarded maintenance of £30,000 per annum for an extendable term, to expire after 11 years when the couple’s youngest child reached 18. It also awarded her 20% of the net bonus, capped at £26,500 per annum. Maintenance was to meet an ex-spouse’s needs, not to allow them to enjoy the same standard of living as when they were married. The Court ruled that the amount it had awarded was enough to meet the wife’s needs, and was a fair division of her husband’s income, net of school fees and the maintenance itself.
The Court also gave the following guidance:
- Maintenance should aim to meet only those needs of an ex-spouse that arise because of choices made during the marriage - such as how long the couple were married and whether they had children. If an ex-spouse’s needs are not the result of such choices, maintenance should only be awarded to the extent it reduces significant hardship.
- Awards should be limited in time, to encourage an ex-spouse’s transition from dependence to independence as soon as just and reasonable, unless this would cause ‘undue’ hardship (it had to be undue hardship – mere hardship is acceptable)
- If the circumstances mean the court could either award maintenance for an expendable term or make a ‘joint lives’ award, it should favour the former.
- An ex-spouse’s standard of living can be relevant when assessing levels of maintenance but is merely one factor, to be considered against the overall aim of encouraging a transition to independence.
- Maintenance should not amount to an unfair proportion of the paying spouse’s available income.
- If the paying spouse’s income includes a discretionary element, the maintenance can be structured accordingly, with strict needs funded from the basic salary, and discretionary needs funded from the discretionary element (subject to a cap).
- If an ex-spouse applies to extend their maintenance at the end of the original term the court should investigate why they have not become independent within that period.
- When deciding whether a maintenance award should be extendable or not, the court should usually favour the financially weaker ex-spouse.
- Ex-spouses paying or receiving maintenance should consider whether the maintenance could be ended or varied following a recent ruling, and whether an ex-spouse receiving maintenance needs to go out and get a job.
Case ref: SS v NS  EWHC 4183
Case law: Court clarifies when spouse’s ‘special’ contribution justifies departure from equality on division of matrimonial assets
Wealthy individuals considering divorce should determine whether their contribution to the families’ welfare has been sufficiently special to resist a claim by their spouse for equal division of assets if they divorce, taking into account any matching contribution by the spouse.
A couple were married for 20 years. The husband was in financial services, and his work took him and his family to Japan. He became extremely wealthy during the marriage. When they divorced, his wife claimed half of his fortune. Her claim was based on the usual legal principle that the roles of breadwinner and homemaker were equally important so that the starting point was that assets should be divided equally.
The husband resisted her claim. One of his arguments was that he had made a special (sometimes called a ‘stellar’) contribution to the marriage, justifying a departure from the usual assumption.
The High Court said that a special contribution rarely justified a departure from the usual assumption. For it to be sufficiently special:
- The circumstances must be ‘wholly exceptional’, and ‘obvious and gross’. It was extremely important to avoid discriminating against the homemaker in a marriage.
- A contribution is not special if there is a corresponding special contribution to the welfare of the family by the other spouse. There needs to be such a disparity between the contributions of each spouse that it would be inequitable to disregard it.
- Particularly, very high earnings are not a special contribution in themselves. They are only special if, in the circumstances, it would be inequitable to treat them as not being special. It is the quality of a spouse’s wealth, not the extent of it, which is important. For example, a windfall would not be enough.
- Each case should be decided on its own facts.
The Court found that the husband’s claimed ‘special’ contribution did not justify a departure from the assumption of equality. He had worked hard and was good at his job, but was not unique. Part of his success was also attributable to being in the right place at the right time.
The Court also ruled that his contribution was matched by his wife, who had contributed to the welfare of the family by coming with him to Japan and bringing up her children there in a socially and culturally different society.
The Court therefore divided the matrimonial assets equally between the spouses.
- Wealthy individuals considering divorce should check whether their contribution to the welfare of their families has been sufficiently special to resist a claim by their spouse for equal division of assets if they divorce, taking into account any matching contribution by their spouse
Case ref: Gray v Work  EWHC 834
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