Whose Bonus Is It Anyway?

Writing out a cheque in settlement of an ex-spouse's claim in divorce proceedings can be an unedifying experience at the best of times, ameliorated only by the certainty that it's the last instalment. However, in cases where the capital assets are insufficient to permit the parties to go their separate financial ways, the Court may consider it appropriate to make an order which provides for part of an ex-spouse's on-going maintenance to be paid from a percentage of the breadwinner's future bonus payments.

Bonus payments in the finance and banking sectors are usually contingent not only upon market factors but also work related performance. Consequently it may seem inherently unfair that a proportion of such bonuses may be ordered to be paid to a former spouse who is no longer making any contribution to the home-life of the breadwinner.

It is important to remember that the Court will only take account of future bonus payments where there is insufficient capital in the "matrimonial pot" for a "clean break" to be ordered. A clean break divides the existing capital and ends further financial claims between former spouses. This is often the desired solution but where capital is more limited, recourse may be had to future income to fund spousal maintenance payments by one party to the other either for a fixed term or during their joint lives (i.e. until one of them dies).

Percentage Rules

Historically, there has been no cap on the amount a party could receive from their spouse's future bonus payments. If, for example, the Court awarded the wife 15% of the husband's future bonus payments for their joint lives, the wife would receive 15% of the bonus whether or not the bonus was in the sum £1,000 or £1 million.

There is however some good news. In the recent English case of H v W [2013] EWHC 4105 (Fam), the High Court gave guidance about the correct approach to assessing, making and drafting spousal periodical payments orders payable from future bonuses.

H v W: Round One

The parties in H v W started to cohabit in 1992, married in 1997, separated in 2011, and were therefore together for some 19 years. The husband was the managing director of a bank and earned approximately £250,000 gross, plus a non-guaranteed bonus of about £200,000 consisting of cash and deferred cash and shares. The wife had not been in the workplace for approximately 15 years at the time of trial, but had previously been a legal secretary. The judge considered that the wife had a...