Evidencing Earning Capacity: Expert Assessments with Potential for both Cooperation and Conflict

Published: 01/07/2024 07:00

Embarking on divorce proceedings is not just the end of one chapter of life but the start of a new one. Judges determining applications for financial remedies on divorce or dissolution of civil partnership aim to ensure that the former spouses are each on as stable a financial footing as possible as they enter into that new chapter. One of the most frequent and important questions parties to divorce have is, ‘How will I be able to manage my finances without being able to look to anyone else for both financial and practical assistance?’ This question is pregnant with anticipation and concern about prospective disaster: What will happen if I haven’t worked outside of the home for years or decades? What will happen if I have only ever worked part-time or on a minimum wage? What if I used to earn lucratively in a professional position but my spouse and I decided that I would take a step back to bring up the family or support other dependants? What if I know nothing anymore of how to behave in a workplace environment? How do I even get a job in an age of internet searches and recruiters?

These questions and similar can induce mental stress to the point of paralysis on a divorcing party as familiar routine is thrown into disarray. It can cause those parties to take action, for example, to reduce their current working arrangements so that they appear more dependent on the other party than they were during the marriage. That behaviour in turn may lead to that second party also rearranging their working life so that their income is diminished in an attempt to fend off an income claim. Sometimes this behaviour develops unconsciously via the worry, leading to poor mental stability and illness, negatively impacting a divorcing spouse’s ability to be properly present in their working life.

These concerns should be at the forefront of the mind of a matrimonial finance on divorce adviser when considering the earning capacity a party to a marriage has or is likely to have in the foreseeable future, including any increase in that capacity which it would be reasonable for that party to take steps to acquire (that being one of the s 25(2)(a) Matrimonial Causes Act 1973 factors that the court must consider when determining whether the financial provision made for each party is fair and reasonable).

Litigants have historically found that this criterion is addressed in quite brusque fashion, with their being ascribed an earning capacity that many cannot imagine they might have. So how might an adviser prepare the litigant for that event? What tools are available to give a party afraid for the future a realistic plan to help them – a map to financial independence?

In recent times advisers have turned to providers of earning capacity reports to assist. These first appeared in or around 2014, deriving from personal injury and employment litigation where mitigation of loss needed to be established. Keith Carter of Keith Carter & Associates published an article in Family Law1 explaining how their reports had been used in a particular financial remedy case in the High Court. One example given was of evidencing the employability of a husband who had been made redundant at or around the age of 52. A single joint expert was appointed to consider the state of the employment market in the husband’s field of work, his marketable skills, and the availability of suitable vacancies. Another was of a wife who wished to move abroad with the parties’ child, asserting that she could not gain employment in the United Kingdom. The husband instructed the author’s firm as a shadow expert, or consultant, to investigate what might be available to the wife in England and Wales, obtaining her CV from LinkedIn and then analysing the related jobs market, with the court accepting this evidence and the court finding that the wife could work in the United Kingdom.

These reports gained traction, but were expensive and became quite divisive, since they analysed the jobs market in cold, hard fashion, and appeared to fail to take account of a person’s vulnerabilities and sensibilities, Their use came to an abrupt halt with the decision of Moor J in Buehrlen v Buehrlen2 in which he considered whether their use amounted to a ‘necessity’ as required by Family Procedure Rules 2010 (SI 2010/2955) 25.4(3) and in accordance with the definition of ‘necessary’ in Re TG3 and Re HL.4 He determined that they were not necessary. The information in the report before him included that which was available publicly and opinion which Moor J considered was up to the judge to assess, namely what the likely job the wife was able to achieve and her potential income, having heard all the evidence and having assessed available job adverts. He said, ‘The judge hears the evidence, hears the cross-examination, comes to an assessment of the witness, including the individual characteristics and traits and abilities of the witnesses and decides what is the appropriate earning capacity to ascribe. I do not believe that it is helpful or useful, in the vast majority of cases, to expand financial remedy proceedings to have this sort of expert evidence. I am concerned that it will, in general, lead to more contested hearings, to longer contested hearings and to increased expense to the parties’.5

With that, the use of these reports in court cases came to an end, and they are unlikely to be revived, save for in very limited circumstances where the parties agree to obtain one and where one or both parties has never worked/has never entered the labour market, and now needs to develop an earning capacity in order to meet their needs independently of the other party or of any other resource they previously had (such as bounty provided by extended family or trusts). In those circumstances the ‘necessary’ criterion is likely to be met. Do they still have a use, though, outside court proceedings?

Depending on how they are used, the answer is ‘yes’. The author is aware that they are used by couples collaboratively where a divorce is not hostile in order to help the ‘jobseeker’ to explore options for their future. The report compiler interviews the parties, researches the market, and makes proposals for progression back to work, taking into account their caring obligations, health needs and potential lack of confidence. These reports can also be useful in mediation settings. Where divorcing spouses are able to work co-operatively and communicate well, then these can be useful tools. It may be that such divorces are few and far between and matrimonial finance barristers and judges are the least likely to meet such relatively amicable separating couples, but the author is certain that they are out there.

The other use for such reports might be where one party has found themselves or has put themselves in a disadvantageous position. Examples might be where a city trader has been convicted of dishonesty offences or where a teacher has been convicted of a sex offence. Perhaps a driver has lost their driving licence through totting or other driving-related offence. In those circumstances, the assessment and report would be helpful to assist the affected party to understand how their actions might be taken into account, how the negative impact can be mitigated, and what other legitimate sources of income generation are available to them.

There is an obvious risk, however, that the commissioning and use of these reports could cause entrenchment of positions and hostility. Where one spouse obtains a report about the other spouse’s earning capacity without their consent, there are likely to be arguments about use of personal data (as we see sometimes where one party obtains mortgage capacity evidence via the use of documents disclosed within the course of proceedings) and about whether a fair picture has been painted of the ‘jobseeker’ – whether a fair assessment has been carried out in circumstances where their ability to work is likely to be in dispute. The desire to obtain these earning capacity reports in order to have a weapon to oppress the ‘jobseeker’ is likely to be strong in many a hostile case. If one party can say to the other, ‘Look, it’s not just me who says you can work harder or differently. This report I’ve obtained from someone independent says as much and look, this is what you could do’, they are highly likely to be met with resistance and the generation of further hostility, leading to polarisation of positions and, as Moor J noted, a decrease in the likelihood of a settlement.

There are also obvious concerns about the scope of the instructions given to the assessor. The potential maintenance payer will be looking for evidence to show that there is no need to pay maintenance and, in commissioning such reports, may well minimise issues of poor health, caring responsibilities, confidence and the decisions the parties made during the marriage as to whether and how the ‘jobseeker’ should work. There will be no utility in a report of this nature and the costs incurred in obtaining such a report and responding to it might well, in contested financial remedy litigation, fall back on the party commissioning the report. The author envisages costs orders being made against the commissioner when costs are increased as a result of the use of such reports without agreement. In the light of the decision in Buehrlen their proposed use in hostile cases might amount to litigation misconduct, and certainly there would be an argument to say that the costs for commissioning that report should be credited to the commissioner’s side of the balance sheet as part of their share of the assets already had and expended, per the suggestions of DDJ Hodson in P v P6 and HHJ Hess in YC v ZC.7

What does this mean for financial remedy practitioners? The issue of foreseeability of future employment and increases in earning capacity needs to be treated with sensitivity and care when the practitioner or the other party proposes to the ‘jobseeker’ what they might be able to do. A practitioner might propose the obtaining of such an assessment/report from a suitably qualified person (often recruitment professionals or careers advisers) to their ‘jobseeker’ client to help them to see what is available to them. Assurance should be given that the assessor will take into account perceived or actual obligations and perceived, anticipated or actual vulnerabilities of the jobseeker. Mediators might propose the obtaining of a report jointly, as might the one-party, one-lawyer form of dispute resolution in order that both parties could see from a neutral third party what might be available. The scope of the letter of instruction can be delineated by agreement. These reports might be useful and desirable to assist in the collaborative process. Arbitrators might commission them by agreement or where they would otherwise find them useful. These reports are useful in other areas of litigation and can be used as a positive tool, rather than just a stick with which to beat the prospective jobseeker into submission.

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