I am getting divorced. Is my spouse entitled to claim money from the compensation I was awarded for my personal injury?

On 27th July 2011 the Court of Appeal gave Judgment in the case of Mansfield v Mansfield [2011] EWCA Civ 1056 and as a result it is now possible to answer the above question as follows:

“Yes, your spouse is entitled to claim part of your compensation but his/her chances of being successful will depend upon all the circumstances of your case.”

Facts

In 1998 Mr Mansfield was awarded £0.5m compensation for his personal injuries. Thereafter he met his wife and they married in September 2003. During their marriage the couple had twin daughters before separating in April 2008.

Mr Mansfield used his compensation to purchase two properties. The first was an ‘investment flat’ which he rented out and the second was a bungalow known as The Orchards which had, to some extent, been specially adapted to meet his needs. During the parties marriage they and their daughters lived at The Orchards and Mrs Mansfield spent about £30,000 improving the property. Apart from the two properties the parties had assets worth approximately £50,000.

Results

The matter initially came before a District Judge in the Chelmsford County Court who conclude that Mr Mansfield should pay the Mrs Mansfield £285,000 and stated that if this sum was not raised in three months then The Orchards should be placed on the market to enable payment. A large part of the reasoning behind the District Judge’s Order was that he felt that £285,000 represented the minimum sum which would meet the needs of Mrs Mansfield and the couple’s twin daughters who were to live with her.

Mr Mansfield appealed. His first appeal, heard by HHJ Newton, was unsuccessful and so he appealed to the Court of Appeal where Thorpe LJ gave the leading Judgment.

Once an appropriate asset allocation model has been implemented it is vitally important to understand the correlation between investment risk and reward and why diversification is so important. By diversifying investments across funds and fund managers, you are controlling and managing, and to an extent lowering, the overall risk of the portfolio.

Thorpe LJ reviewed the relevant authorities and in particular relied upon Wagstaff v Wagstaff [1992] 1 FLR 333 in which Butler-Sloss LJ said that the “capital sum awarded [to a spouse as compensation for personal injuries] is not sacrosanct.” However, Butler-Sloss LJ went on to say: “In general, the reasons for the availability of the capital by way of damages must temper the extent of, and in some instances may exclude the sharing of, such capital with the other spouse. It is important to stress yet again that each case must be decided upon its own facts.”

Thorpe LJ held that the lower courts had correctly concluded that Mr Mansfield’s compensation was not ring-fenced and he went on to state that it would be wrong for him to interfere with the District Judge’s carefully reasoned conclusion that £285,000 represented the minimum amount required to satisfy the needs of both Mrs Mansfield and the twins. However, Thorpe LJ concluded that the facts of the case were such that the lower courts should have given Mr Mansfield a charge over the property which Mrs Mansfield would purchase with the £285,000 on the basis that he could only enforce it when the twins finished tertiary education (i.e. a ‘Mesher Order’).

As a result Mrs Mansfield was ordered to give Mr Mansfield a charge expressed as a percentage of the value of the property which it was anticipated she would purchase and that the percentage should be calculated so that on the day the property was purchased the Husbands’ charge would be worth £95,000 (i.e. 1/3rd of £285,000).

Rational/Analysis of the decision

Thorpe LJ said that the “rationality of [such an order] is obvious. There is a fixed amount of capital within the family. For the immediate future [Mrs Mansfield’s] needs for a substantial share rest upon her function as the primary carer [for the twins] ….. and that need has a reasonably obvious termination on the majority or the conclusion of tertiary education for these twins. Neatly, it is just at this stage, when she has achieved the task upon which her needs rest, that the husband’s need for return of capital is likely to be augmented by the ordinary processes of ageing, which are in turn likely to accentuate his disabilities.”

Standing back it is clear that the Court in Mansfield had the unenviable task of trying to divide limited resources between an injured husband and the couple’s children who, pursuant to the Matrimonial Causes Act 1973, were the Court’s primary concern.

The competing interest can be understood if the law is considered from the point of view of each spouse. Someone in Mr Mansfield’s position may well say: “When we married my spouse promised to take me ‘for richer or poorer, in sickness and in health’ and yet now that we are divorced I am left sick and poor whilst my ex-spouse is left rich and healthy”. In response a person in Mrs Mansfield’s position may well respond: “If we had stayed together our children would have benefited from living in well appointed house in a good area. Why should the children be deprived of this just because we have separated?”

Two further observations

Firstly, it is interesting to note that within personal injury cases the Court has decided that it should not as a matter of policy award damages to a Claimant whose marriage has broken down because of the injuries which he/she has suffered. (See Pritchard v J H Cobden [1987] 1 All ER 300). Is this fair? There is no doubt that divorce often leads to a decline in a ‘standard of living’. If it can be proved that an injured party’s marriage only broke down because of negligently caused injuries then it is certainly arguable that it is unfair to deprive him of compensation for his ‘divorce generated loss’ whilst at the same time sharing what compensation he does receive with the non-injured spouse.

Secondly, it may still be possible to argue that damages awarded specifically for ‘pain and suffering’ are not available for distribution. In Wagstaff Butler-Sloss LJ said; “There may be instances where the sum awarded was small, and was specifically for pain and suffering, in which it would be unsuitable to order any of it to be paid to the other spouse.” It is unclear whether damages for pain and suffering remain ‘ring-fence’ after the decision in Mansfield. The fact that damages for pain and suffering awarded to a bankrupt do not pass to his/her trustee (see Ord v Upton [2000] Ch 352) gives some support to an argument in favour of ring-fencing the said damages upon divorce as otherwise a bankrupt could potentially be left in a better financial position than a solvent but injured ex-spouse.

What can be done to protect a compensation award?

As will be apparent it is now clear law that compensation for a personal injury is not ring-fenced and the Court has more than adequate powers to prevent a party circumventing this aspect of the law by means of a sham arrangement.

However, especially if a party is awarded compensation before he/she marries it would be worth considering the following options in order to try to preserve the value of the award post divorce:

  • Placing the compensation in a discretionary trust of which the injured spouse is a beneficiary. Please be aware however that how trusts are treated by the within ‘Financial Remedy’ (aka ancillary relief) proceedings is a complex area which is beyond the scope of this article.
  • Entering into a pre-nuptial agreement. Whilst such an agreement is unlikely to be binding it will probably be a factor which the Court will take into account when determining the case.
  • Try to ensure that the damages award itself is clearly broken down so that it is possible to identify what has been given for pain and suffering, increased care costs, lost earnings etc. If this is done then it may be easier to demonstrate to the Court that a particular sum will be fully consumed meeting an essential need of the injured spouse and hence should not be regarded as being available for distribution upon divorce.

Article by:
Simon Charles
18 St John Street Chambers
0161 278 1800
[email protected]

This entry was posted in Uncategorized. Bookmark the permalink. Both comments and trackbacks are currently closed.
  • Twitter

  • Testimonials

    Whilst my client’s situation is obviously very complicated, you made it very straight forward – quite an art!
    Before I chose Gresham I spoke to a number of IFA’s but none of them gave me the same confidence I had when I spoke to Morven. Everything, both written and spoken, is explained in an easy to understand way. All my pensions have been dealt with extremely efficiently and I am very happy with the service I have received from everyone at Gresham.
    Thank you so much again for your time and brilliant advice.
    Thanks again for your advice, you have given me the kick I needed to take control and I’m very grateful for that.
    It’s lovely for us to have nice friendly advisors like Jonathan and Morven.
    Morven’s guidance about pensions and investments has provided us with excellent returns, even during the recent turbulent financial times. She has been a helpful and friendly advisor for many years and we wouldn’t hesitate to recommend her.
    I just want to thank you and your team so very much for all you do for me throughout the year. It is a real comfort to know that my investments are in such capable hands. I literally couldn’t do it on my own.
    I’m really impressed by how responsive you have all been to get this through against such a tight timescale.
    The professionalism of your service continues to give me confidence that we are pursuing the optimum route with our finances. The sound advice you provide is more critical than ever in the current climate.
    Thank you for your visit today. We enjoyed meeting you and found you to be very thorough and knowledgeable. As a result, we now have a positive outlook concerning the future of our finances
Main Menu