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07 August 2018

How long is too long? (or things that could come back to bite)

It is not uncommon for couples to separate but not deal with finances. We often come across cases where couples continue to have joint properties or joint bank accounts long after their marriage has broken down or have continued to run a business together even though they are divorced. But what happens if one person decides to bring a financial claim many years after the marriage has ended? In 2015 it was reported that the Supreme Court had to consider an attempt by a husband to strike out a wife’s financial claim brought 31 years after a two year marriage had broken down during which time the couple had had 2 children and lived in poverty. Subsequently the husband had become extremely successful so that, at the date of the proceedings, he was worth in excess of £50 million. Lord Wilson considered that the wife’s financial application faced ‘formidable difficulties’, nonetheless she was permitted to proceed with her claim and subsequently that was settled for a lump sum of £300,000.

How is this possible? A few principles.

In giving judgment Lord Wilson attempted to set out the following principles:

‘Consistently with the potentially life-long obligation which attend a marriage, there is no time limit for seeking orders for financial provision or property adjustment for the benefit of a spouse following divorce… such orders may be made on granting a decree of divorce “or at any time thereafter”. Yet there is a prominent strain of public policy hostile to forensic delay. The court will look critically at explanations for it; and, even irrespective of its effect on the respondent, will be likely, by reason of it and subject to the potency of other factors, to reduce or even to eliminate its provision for the applicant. Nevertheless it remains important to address its effect on the respondent. In some cases… a respondent can show that he has assumed financial obligations or otherwise arranged his financial affairs in the belief that the applicant would make no claim against him and that he has done so in a way which, even if it were possible, it would not be reasonable for him to put into reverse’.

Lord Wilson continued by saying ‘It is a dangerous fallacy… that the current law always requires rich men to meet the reasonable needs of their ex-wives… In order to sustain a case of need, at any rate if made after many years of separation, the wife must show not only that the need exists but it has been generated by her relationship with her husband’.

And finally:

‘But the wife has a point which may prove to be much more powerful… In the discharge of its duty (when considering financial claims) the court will be required… to have regard to “contributions which each of the parties has made… to the welfare of the family, including any contribution by looking after the home or caring for the family”. Such contributions are not limited to those made prior to the separation or even during the marriage’.

A recent example – A v B

In the case of Mr A and Mrs B the judge, Mr Justice Baker, was not helped by the conflicting evidence from the parties on a number of key events. It was agreed that A was now 59 and B 61; that they had married in April 1983 and subsequently had two children before the marriage broke down in 1991. Shortly after the separation A had started divorce proceedings, although a copy of the petition could not be found and it was therefore not known whether or not the petition had contained any financial claims against B. The divorce had been finalised in June 1992 but no financial orders had been made. One of the disputes was over whether or not there had been any form of financial agreement reached by A and B at the time of separation or afterwards.

Following separation A had remained in the former matrimonial home with the children until 1994 when it had been sold.

It seems that relations between A and B remained close and in 2006 B and her new husband acquired a property in their names, ‘X House’, which became the home of A and the children. Subsequently, his second wife also moved in.

At the hearing a significant dispute appears to have been over the exact reason for the acquisition of the property and the basis upon which it was occupied by A. Was he only to be able to occupy the property whilst the children lived there or did he effectively have some kind of right to occupy the property for as long as he wanted?

When in 2013 a dispute blew up over the nature of the occupation and whether, and when, the property should be sold A consulted solicitors and commenced financial proceedings. These led to a hearing at which A sought an order, in one form or another, allowing him to remain in the property for the rest of his life and payment of some debts.

Mr Justice Baker directed himself to the relevant statutory factors and the leading cases explaining how these factors had been applied by the courts in recent years, particularly since 2000. The judge considered the concepts of ‘need’, ‘compensation’ and ‘sharing’ and the overarching principle of ‘fairness’.

Counsel for A submitted that he had a need to remain in the property for his accommodation and because he and his wife ran a business from the premises. It was argued that this ‘need’ was generated by the relationship even though X House had been acquired after the divorce. It was submitted that this unmet need arose from a promise about A’s occupation of X House.

It was also argued that A had a claim based on ‘compensation’ in that it was said that he had foregone employment opportunities as a result of his role as a primary carer of the children.

B’s response was that A had had every opportunity to readjust financially over the previous 12 years. Rather than take the opportunity to maximise his earnings and make provision for his retirement whilst living rent free, he had chosen to spend his earnings, living beyond his means and falling into debt. B should not be seen as an insurer against all hazards and should not be responsible for those elements of A’s needs which resulted from his own choices.

A’s case was probably not helped by the fact that the judge was apparently not impressed by his evidence. The judge apparently found A to be ‘hesitant, vague and at times inconsistent’.

The judge asked himself various questions. Had there been an agreement concerning financial matters in the period 1992 to 1994? The judge decided that despite the absence of a formal agreement, the parties did reach an informal agreement with which each was satisfied and which was fair in all the circumstances. The matrimonial home had been sold with negative equity and B (using funds provided by her new husband) had paid off the outstanding debt. The jointly owned insurance policies were divided between the parties. The judge also accepted B’s evidence that she had paid a lump sum amount into one third of her redundancy payment. In addition, she had agreed to pay maintenance for the children. In the judge’s opinion this amounted to a comprehensive resolution of the financial arrangements arising from the marriage and the divorce. He was confident that, if the parties had been asked at the end of 1994 whether there was anything outstanding to be resolved between them, they would have said no.

However, as the judge went on to explain, the fact that the parties had resolved their financial arrangements did not, of itself, preclude either A or B seeking financial relief pursuant to the divorce but it was a significant factor to be taken into account when considering any such claim.

The judge preferred B’s evidence as to the basis of A’s occupation of X House concluding that whilst A may have come to assume that he would be able to live there indefinitely, neither B nor her husband had made any promises or statements to that effect. The judge explained why he was satisfied that the property had been acquired by B and her husband as an investment rather than as a home for A.

So, whilst the judge opined that it was clearly established that, in certain circumstances a party to matrimonial proceedings may be awarded financial remedies many years after the divorce, the present case was not one of them and A’s claim was dismissed. The judge denied that one reason was that the applicant was a man and he proceeded to set out five reasons:

  • The parties had reached a fair and amicable resolution of all financial issues at the time of separation, or shortly thereafter;
  • A had received financial assistance from B during the children’s minority not least by means of rent free accommodation;
  • B could not fairly be asked to meet A’s needs;
  • A had not suffered disadvantage in his career so as to found a claim based in compensation. The support he had received from B had enabled him to follow the career and life of his choice; and
  • B had assumed financial obligations towards A and arranged her affairs on the assumption that A could not and would not make any claim against her.

Ultimately, this case does not answer the question of ‘how long is too long’? Yet again it demonstrates the flexibility and discretion that the court has to strive for a result that is fair. Each case will turn on its individual facts and the application to those facts of the factors laid down by the 1973 Act but at least we now have some pointers.

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