Two into one won’t go: Dividing assets in a small money case

Two into one won’t go: Dividing assets in a small money case

It is relatively rare for a financial remedies case involving small or modest assets to be reported. However, a report of the judgment in such a case was published last week, and it contains lessons for all divorcing couples, particularly those of modest means.

As the case demonstrates, an obvious consequence of a couple separating is that they will need two homes rather than one. And this in turn means that their financial resources will now have to stretch to cover the additional cost of two homes rather than one.

Clearly, this is not a problem when there are sufficient assets to cover those costs. But what if the couple’s assets aren’t sufficient? How do you get two out of one?

That was the conundrum facing the judge in the case

Making a bad situation worse

The case concerned a couple with a 12 year old daughter.

The couple’s means were quite modest. Their realisable assets were worth £154,000, although they did have some savings, more of which in just a moment. The assets comprised a flat in Kent in the husband’s sole name, and where he lived, which had an equity of £130,000, and a property in India, where the wife lived, which had an equity of some £24,000.

The wife had debts of some £43,000, and the husband had a pension worth £80,000.

The marriage broke down in 2019 and the husband issued divorce proceedings. The couple then engaged in expensive litigation, arguing over with whom their daughter should live.

Two different judges were critical of the way in which they conducted that litigation, which cost them some £150,000, exhausting their savings, and more. That money could have made a significant difference to the outcome of the financial remedy proceedings, which were the subject of the judgment.

Perhaps the biggest lesson from the case is this: don’t make a bad situation worse by frittering away modest assets on legal costs.

“Impossible to find a solution that can leave both parties happy”

The judge ordered that the husband should keep the flat in Kent, but pay the wife a lump sum of £48,000. The property in India was transferred to the wife, and the wife also received 25% of the husband’s pension (most of which had been built up prior to the marriage).

Clearly, this settlement left both parties in a difficult financial position. The husband had to raise the lump sum which the judge accepted was “at the absolute upper limit of what he can afford”, and the wife would be left with little, after paying her debts.

If the couple both lived in this country and did not have a second property, it is very difficult to see how the assets could have been divided so as to leave them both with suitable accommodation (for their daughter as well as themselves).

The judge, Sir Jonathan Cohen, concluded his judgment with the following words:

“This case has been a classic example of how what is sometimes described as small money cases can be infinitely more difficult than cases involving larger sums. It is. The decisions that each party took as the marriage broke down and in their understandable desire to be the carer of their daughter have been hugely detrimental financially to them both.”

All separating couples should of course avoid incurring unnecessary legal costs on expensive litigation, but this is especially so for couples of modest means. If there aren’t enough assets to go around then some very hard decisions have to be made, and making the situation worse by dissipating what assets there are is a folly that should be avoided no matter what.