On divorce or separation, parties often issue financial proceedings to divide the matrimonial assets. This is a difficult process in itself but further complications can arise where one party to the proceedings has received a personal injury award post-separation. Undoubtedly, this gives rise to the question of whether or not said settlement will be considered by the Court in deciding on the fairest division of assets and on any lump sum to be awarded.
The starting point is usually s25 Matrimonial Causes Act 1973, which highlights the factors that the Court will consider, such as the income and earning capacity of either party as well as their respective needs, responsibilities, contributions to the relationship and their conduct. These factors will always be considered against the yardstick of equality,so the starting point is generally an equal distribution of assets unless something causes the Court to distribute differently. In order to achieve this, it is important to establish whether or not any personal injury award forms part of the ‘matrimonial pot’ and therefore subject to distribution and/or a claim by the other party.
The case of Wagstaff is a good indicator of the Court’s treatment of personal injury awards.In this case, the Husband suffered an accident in 1981, and the parties subsequently parted way in 1983. It wasn’t until 1988 that the Husband received an award for the personal injuries sustained, and that award was in the sum of £418,000 which enabled him to purchase his own property and to renovate it to accommodate his disabilities. There was an initial lump sum order made for £32,000 for the Wife, but this was overturned on appeal, given the Husband’s needs being of paramount importance and that the Wife had no immediate financial needs. On further appeal by the Wife, the Court held that an award for damages for personal injury was a financial asset to be consider pursuant to the s25 factors. The Court was of the opinion that the award left a clear disparity between the parties which needed to be redressed and in a bid to restore fairness, the Court re-imposed the lump sum order.
This case made substantive reference to the earlier decision in Daubney,in which both parties had received personal injury awards following a car accident. However, the Husband invested his award in a business which later failed, whereas the Wife invested hers into the purchase of a flat (separate to the matrimonial home). The Husband applied for the matrimonial home to be transferred to him and the registrar allowed the transfer subject to the Wife’s beneficial interest of five-twelfths of the proceeds. On appeal, the Judge reduced her interest to 30% but did not take into account the flat that she had bought with her award. On appeal by the Husband and cross-appeal by the Wife, the Court again found that such awards needed to be taken into account when assessing the financial circumstances of each party and reduced her interest to 15% (factoring in her absolute interest in the flat).
However, whilst the above may lead the reader to believe that personal injury awards are very much within the confines of ‘matrimonial pot’, but regardless of that, the Court will also prioritise need over compensation/sharing. The ongoing medical position of the injury party will be of absolute prominence in any decision. Thus, if the entirety of that award is what is needed to meet the ongoing needs of that party, it may not be interfered with (regardless of whether or not it is deemed a matrimonial asset). As an example, the case of C v C, the Husband was awarded damages in excess of £5million by way of structured lifetime payments and on application for provision by the Wife, the Court considered that given the Husband’s extreme needs, there was no capital that could be distributed to the Wife. It is the writers opinion that therefore the balance is not an easy one to strike, and whilst the Court will be prepared to consider such monies as matrimonial assets, there would likely need to be a surplus (once the needs of the injured party have been assessed) for any considerable distribution to take place.
The Powers of the Court to make such an Order are broad at the best of times, but any damages received by one party will be taken into consideration when assessing. Next, the ongoing needs of the parties (including any children) will be considered alongside where the award came from and what the purpose of that award was. As such, cases need to be considered on a fact-by-fact basis. Of course, the situation could have been avoided in its entirety if nuptial agreements were made in the first instance, but often this is not the case.
 Miller v Miller  UKHL 24
 Wagstaff v Wagstaff  1 WLR 320
 Daubney v Daubney  2 WLR 959
 C v C  2 FLR 171
Contact Gillian Lavelle, solicitor at MBH Solicitors, to discuss your family & matrimonial requirements in confidence at:
www.wigansolicitors.com Tel: 01942 206060 Address: 26 Bridgeman Terrace, Wigan WN1 1TD Twitter: @MBHSolicitors Find Gillian on Facebook: “McCarthy Bennett Holland – family solicitor”