09th Jun 2015

Winning the lottery after divorce by Carla Ditz of Family Law in Partnership

Timing is everything – an analysis of Critchell v Critchell

As a matter of course, family practitioners advise clients on the impact of non-matrimonial property on the overall division of assets on divorce. Clients frequently ask about how future inheritances will be treated and if that big lottery win post-divorce will be out of reach from their former spouse. However, the matter is not always so clear cut.

Matrimonial vs Non Matrimonial property

When looking at the overall pot of money to be divided on divorce, a distinction can  usually be made between matrimonial property (assets which have been built up during the course of the marriage) and non-matrimonial property (assets which were brought into the marriage by either party or which have accrued since the marriage has effectively come to an end).  Whilst this is a rather simplistic definition, in most cases it is possible to easily identify the nature of the asset at hand.  The matter does however become academic where the total value of matrimonial assets is insufficient to meet both parties’ needs going forwards, for example making sure both parties will have adequate funds to rehouse. Consequently, it will be necessary to invade the non-matrimonial property to meet these needs and to achieve fairness as is the overarching principle in these cases.

Critchell v Critchell [2015] EWCA Civ 436 – the facts

In Critchell v Critchell, the parties managed to reach an agreement at the Financial Dispute Resolution Hearing and a consent order was made. The only asset of value in this case was the former matrimonial home with equity of approximately £175,000. It was agreed that the property would be transferred into the wife’s sole name and the wife would remain in the property with the parties’ two children until such time as the property was sold (upon one of the triggering events specified in the order). The husband was to have a charge on the property equal to 45% of the equity – to be realised upon sale. A Mesher-type order was therefore in place. In order to rehouse, the husband borrowed £85,000 from his father and took out a mortgage in the sum of £63,000.

Within one month of the consent order being made, the husband’s father died leaving the husband with an inheritance of £180,000. The wife sought to appeal the consent order on the grounds that the inheritance received by the husband represented a ‘Barder’ event, or superseding event, which ultimately invalidated the basis on which the consent order was made. Her Honour Judge Wright allowed the wife’s appeal and varied the consent order to extinguish the husband’s interest in the property. The husband appealed.

In dismissing the husband’s appeal, Lady Justice Black referred to the four conditions set out in the case of Barder v Barder (Caluori intervening) [1987] 2 FLR 480 as considered by Her Honour Judge Wright. Key was whether the first condition was satisfied, namely that ‘new events have occurred since the making of the order which invalidate the basis, or fundamental assumption, upon which the order was made, so that, if leave to appeal out of time were to be given, the appeal would be certain, or very likely, to succeed.’ Her Honour Judge Wright found that this was satisfied and since the wife’s needs had remained the same, the receipt of the inheritance meant that the husband no longer required a share in the equity of the former matrimonial home to meet his needs. In fact, the husband would remain in a stronger financial position as compared to the wife as the wife would not be living mortgage free nor would she have additional capital. In the circumstances, this was considered just given that the husband’s inheritance was a non-matrimonial asset of which he should retain some benefit.  Further, the husband had previously borrowed £85,000 from his father which he would no longer have to repay.

In her concluding judgment, Lady Justice Black stated that ‘the impact of the inheritance so soon after the hearing was, as the judge observed at para 18, that the husband no longer needed his interest in the former matrimonial home to discharge his indebtedness because it was either wiped out (in the case of the debt to his father) or could be discharged from the inheritance (in the case of the mortgage). To my mind this represented a change in the basis, or fundamental assumption upon which the consent order had been made. It was not so much that the value of the parties’ assets had gone up but rather that there had been a fundamental change in the needs for which provision had to be made.’

Finally, Lady Justice Black emphasised that ‘Barder’ events are indeed rare. In this particular case and crucially, it was accepted that the husband’s father’s death was unforeseen. One of the conditions in Barder is that the ‘new event’ must have occurred within a relatively short time after the order and that this is unlikely to be as much as a year or in many cases just a few months so as to further the public policy goal of achieving finality in litigation. The outcome of the present case could therefore have been very different had the inheritance been received some months later.

In practice

So what if the family fortunes suddenly end up in the hands of your client shortly after a deal has been done and a consent order made? Or a wife tries her luck on the Euromillions lottery a couple of months after her divorce and finds herself sitting on a pot of gold. Whilst these examples can be extreme, the principle remains the same – ‘need’ will prevail and timing is everything.

As practitioners, it is our role to make sure consent orders are agreed in a timely manner and to manage our cases in such a way as to ensure negotiations are not allowed to drift on for months or even years as often happens when the parties are caught up in the court system.

Carla Ditz

Associate at Family Law in Partnership

This article first appeared in the Solicitors Journal, 2nd June 2015