Since the decision in the eponymous case in 1987, courts have been using Duxbury calculations to decide on spousal maintenance between parties who want a clean break. However, as every case presents different facts and challenges, in order to understand the principle of Duxbury calculations, it’s important to look at the questions which arise through its application.
What is a Duxbury calculation?
As per Vardags’ previous article, Duxbury calculations are the product of Duxbury v Duxbury , where the wife, who was due to receive a lifetime maintenance award, agreed with the husband to seek a financial clean break. The resulting calculation that was created by the wife’s team took the wife’s lifetime income needs and considered them in relation to factors such as her life expectancy in order to estimate what she would need by way of a lump sum, so that, rather than receiving spousal maintenance for the rest of her life, she could instead receive this sum upfront. The resulting ‘Duxbury tables’ consider the sex, age and the level of annual income needed by the receiving party. The calculations are based on predictions and approximations of income yield, capital growth, inflation and life expectancy.
When is a Duxbury calculation appropriate?
Following Vaughan v Vaughan , where Wilson LJ held that, in assessing periodical payments Duxbury continues to be the right approach to quantifying capitalised maintenance, Duxbury calculations seem to be the default path. This calculation is therefore entirely appropriate where the parties wish for a financial clean break and have the assets available to do so.
As was decided in WS v WS , a Duxbury calculation can also be applied to a party’s pension in lieu of an annuity-based calculation. In this case, the court was asked to determine the basis on which to calculate the husband’s pension provision for the wife as part of the financial proceedings. The Duxbury approach was held to be correct and preferable to an annuity-based calculation, particularly for the finality and certainty that it could bring to the parties where it was too late to start exploring the option of a pension attachment order.
When is a Duxbury calculation not appropriate?
Whilst the law may have stated that the Duxbury calculation is the most suitable approach to calculating capitalised maintenance, as with applying any generic concept to an individual set of facts, there are risks involved.
The most pertinent risk is that the receiving party, having capitalised their maintenance, may remarry, as was the case in Dixon v Marchant where the wife took a large capital sum and then remarried the following year. The husband had sought to set aside the consent order on the basis that new events had occurred which invalidated the fundamental assumption upon which the order had been made, however, the judge concluded that the fundamental assumption was to address the outstanding maintenance. As it was held that there was nothing in the agreement which made implicit or explicit that the parties intended to give the husband any right to claw back any part of the lump sum if the wife should remarry, it was held that remarriage was ‘a risk that the husband had to bear’.
Another risk to consider is that the capitalised sum may go to the benefit of others, i.e. the individual with whom the receiving party is now cohabiting or even be frittered away. As was the case in Duxbury, where there was a question regarding the man with whom the wife was now cohabiting, it is a real risk that the maintenance paid may go to others as well as, or even instead of, the intended person. However, as was held in this case, the court has to consider the receiving party’s reasonable needs and the sum of money needed to meet those needs; how the money is spent is up to them. Therefore, as was held in Duxbury, s.25 of the Matrimonial Causes Act 1973 is a financial, not a moral, exercise.
The Duxbury Paradox
Another concern regarding the Duxbury calculation is the ‘Duxbury paradox’. This concern relates to the assumption that, as the capitalisation of maintenance takes life expectancy into account, an older wife will receive less than a younger wife. However, as Lord Nicholls surmised in White v White , a Duxbury calculation is useful as a guide in assessing the amount of money required to provide for a person’s financial needs as it is a means of capitalising an income requirement, but that is all. Discussing Holman J’s reference to ’the well known paradox that the longer the marriage and hence the older the wife, the less the capital sum required for a Duxbury type fund’, Lord Nicholls continued that, as he had emphasised, financial needs are only one of the factors to be taken into account in arriving at the amount of an award. Therefore, whilst the amount of capital required to provide for an older wife’s financial needs may well be less than the amount required to provide for a younger wife’s financial needs, it by no means follows that, where resources exceed the parties’ financial needs, the older wife’s award will be less than the younger wife’s.
For this reason, whilst it would certainly be a consideration for an older party receiving spousal maintenance that the capitalisation of such may put their financial award at a lower level, it would be only one of the elements taken into consideration by the court.
What are the alternatives?
Over recent years, the use of Duxbury calculations has been questioned by some professionals, who consider that they produce unrealistic results, or even suggest that they may not allow the receiving party the ability to make provision for others in their will. Whilst there is certainly value to this argument, the income that one party may receive from another by way of spousal maintenance is only one facet of the financial proceedings, and therefore, whilst it is a comprehensive tool, it is not a limitless measure of what one party may receive by way of financial settlement.
Whilst the Duxbury calculation is effective in capitalising maintenance, it is not the only option. One alternative could be to instruct a financial adviser to calculate an appropriate capitalisation, to take the individual factors of the case into account, and another could be to consider structuring the payments in such a way that they derive from a financial vehicle where any leftover funds are returned to the paying party. The viability of these options will inevitably depend on the individual circumstances of your case, however this is just one of the reasons why it is so important to seek legal advice from those with the ability and flexibility to consider and further your case to its full effect.
To read more about Duxbury tables, click here