When a couple go to divorce, they need to give thought to the financial claims they are each able to bring. This includes claims for maintenance, claims in respect of pensions and claims to capital.
Within the broad definition of capital would be claims in respect of property, investments, and accounts. It would cover cars and other chattels, land, business assets and shares. Effectively, a claim can be pursued against everything a spouse has an entitlement to both now and in the future, when divorcing in England and Wales.
This includes funds either party might have acquired through claims made in other legal proceedings. Damages for a civil action brought either in their joint or sole names would fall into this category. It would also include personal injury and medical negligence damages.
No matter how wrong in principle this might seem to some, it is quite easy to construct a hypothetical scenario where there is little question as to whether, on an objective basis, the sharing of personal injury damages on divorce would be fair.
There are a great number of variables to every divorce situation and judges are seldom ever asked to consider the same factual matrix twice. It’s for this reason that the law in England and Wales provides the Courts with an extremely broad discretion to look at what would be the fairest outcome, having regard to a number of factors set out in section 25 of the Matrimonial Causes Act 1973.
Included within those factors is the question of the needs of the parties and any children of the marriage.
It is through the application of this needs factor that a party who has received a personal injury payment can seek to better “insulate” their award in the event of a claim on divorce.
This is well illustrated by reference to the case of Mansfield v Mansfield [2012] 1 FLR 117, CA, where a husband had received damages of £500,000 before the marriage had even begun. By the time of their divorce, the couple had been together for six years in total and had four year old twins. The wife argued that owing to her role as primary carer for the children, it would be necessary for her to receive a substantial lump sum to meet their needs. The District Judge dealing with the case on the first time of asking agreed that the source and reasons of the damages payment shouldn’t automatically ring-fence it from the wife’s claims. Of the £600,000 that the couple had between them in total, the Court awarded £285,000 to the wife. The husband appealed.
The case reached the Court of Appeal, where the appeal judges looked at the approach that the lower Courts had adopted. Whilst they said the District Judge dealing with the case was right to not exclude or ring fence the personal injury damages, she had gone too far to the other extreme by disregarding its source or the husband’s need for it.
The Court of Appeal did not change the amount that the wife was to receive. In view of the fact that the wife’s case focused on the needs of children the Court instead ordered that one third of that amount should be paid back to the husband when the children reached the age of 18.
This approach of returning amounts to the other spouse at a time in the future is commonly used in cases where there are insufficient funds to rehouse both the husband and wife. We often see the approach used where needs are being met on divorce through payments from a trust. There, the spouse might have no automatic entitlement to money from the trust, but nonetheless, money is offered by the trustees to meet the children’s needs on the basis that they will be returned to the trust when the children reach the age of 18.
When personal injury or medical negligence damages are in issue during a divorce, it is important to take advice from recognised experts who have experience in dealing with such issues.