What is the Duxbury Calculation in UK Divorce Cases?
Matters can quickly become complex when it comes to working out how financial assets should be split in the event of a divorce. Judges who are asked to make decisions on a lump sum payment to be paid by one party to the other have to take into account a wide range of factors and considerations, including age, income and financial need. One of the main tools for working out how much of a lump sum is needed is the “Duxbury Calculation”. The Duxbury Calculation helps courts decide on a fair and equal distribution of assets following divorce or dissolution. In this article, we will explain the purpose of the Duxbury Calculation, where it originated, and how it works.
Duxbury v Duxbury
The Duxbury Calculation gets its name from the landmark case of Duxbury v Duxbury, which set the standard for calculating lump sum payments for ongoing financial support after a divorce. In this particular case, the divorcing couples lived an extremely wealthy lifestyle while married, but both had extra-marital relationships. The wife was living with another man, who, compared to her husband, was of modest means. Because the husband agreed that his ex-wife was entitled to a comfortable lifestyle, it was mutually decided that their extra-marital conduct was not relevant.
The judge ordered the transfer of property and a lump sum payment by the husband to the ex-wife in accordance with the Matrimonial Causes Act 1973. Subsequently, the husband appealed on the basis that his ex-wife’s cohabitee would also benefit from the lump sum payment and that the possibility of her remarrying was grounds for a smaller lump sum order and periodical payments. The original decision was held on the grounds that the judge had to consider the wife’s reasonable needs and the sum of money needed to meet those needs. Ultimately, the judge took the view that how the money was spent was up to her and that applying the Matrimonial Causes Act 1973 is a financial, not a moral exercise.
What is the Duxbury Calculation?
The Duxbury calculation is used to work out how much money should be paid by one spouse to the other in the form of a lump sum to cover their financial needs after divorce. The main aim of the Duxbury Calculation is to work out how much is needed to provide the receiving spouse with enough income for the rest of their life. The calculation takes into account a range of factors such as life expectancy, inflation, and investment returns to figure out a lump sum that, when invested, would generate a steady income for the remaining years of the recipient’s life.
Life Expectancy – the calculation considers how long the receiving spouse is expected to live based on established actuarial tables based on age, gender, and health.
Income Needs - the calculation looks at the reasonable income needs of the receiving spouse, including housing, living expenses, healthcare, and other financial responsibilities. The aim of the calculation is to enable the receiving spouse to maintain a similar lifestyle to that enjoyed during the marriage.
Inflation – another major consideration is inflation. The lump sum must not only cover immediate needs but also adjust for the increasing cost of living in future years.
Likely investment returns – The calculation works on the notion that the lump sum will be invested to generate the needed income for the receiving spouse. It assumes a certain rate of return on the investment, taking into account the current economic conditions.
When is the Duxbury Calculation used?
The Duxbury Calculation is typically applied when the court decides that a clean break between divorcing parties is warranted. A clean break is appropriate when one spouse, usually the one with less money, needs ongoing financial support. The courts use the Duxbury Calculation to make sure the receiving spouse receives a fair and reasonable lump sum amount for their financial needs. In this way, providing a lump sum removes the need for ongoing maintenance payments and spousal support.
While the Duxbury Calculation is widely accepted, it has its criticisms. One of these is the uncertainty tied to predicting future events. Changes in the economy or unexpected events can affect the actual financial outcome. It is also argued that the Duxbury Calculation does not consider all of the unique circumstances of each case, leading to potentially unfair results.