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Financial remedies application: what happens if there aren’t enough assets to meet needs?

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James Harbottle
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Financial remedies application: what if there aren’t enough assets to meet needs?

Paul Jacobs Finance Manager - Management Accountant
Paul Jacobs Finance Manager – Management Accountant

On a financial remedies application one of the most important factors for the court to consider when deciding what order to make, and often the decisive factor, is the needs of the parties and any dependent children.

And the primary need of the parties and children in most cases is of course for suitable accommodation. The court will therefore want to ensure that the settlement meets that need.

But what if the available assets are insufficient to meet the needs? How does the court approach the case then?

A recent judgment of the Financial Remedies Court sitting at Brighton gave the answer. The judgment is unusual in that most published judgments involve couples who are either wealthy or extremely wealthy, which may obviously not be that instructive for couples of more modest means.

But this judgment did not involve individuals of great wealth.

Assets and debts

Financial remedies application: what happens if there aren’t enough assets to meet needs?

The case concerned a wife’s financial remedies application. The parties had married in 2013 and have a seven year old child. The wife also had three children from her previous marriage.

The former matrimonial home was purchased in the husband’s sole name, in 2013. 

The parties separated in 2019, when the wife left the home, and went to live in rented accommodation, with the four children.

The husband then commenced divorce proceedings, and obtained Decree Absolute in the spring of 2020.

The financial circumstances of the parties was roughly as follows.

The capital assets totalled some £410,000, comprising the former matrimonial home which had an equity of about £250,000, the wife’s £90,000 interest in her former matrimonial home that she still owned with her first husband (realisable when the children of that marriage grow up), and other assets of the husband, worth some £70,000.

The wife earned £35,143 gross per annum. She was also in receipt of Universal Credit in the sum of approximately £1,300 every 4 weeks, Child Benefit of £140.60 every 4 weeks, and child maintenance from the husband. She had various debts, totalling about £70,000. She and the children continued to live in rented accommodation.

The husband earned £70,400 per annum. He had about £11,000 debts. He continued to live in the former matrimonial home.

Best in the circumstances divorce finances

Deciding the case His Honour Judge Farquhar said that the housing needs of the parties and children would normally be met by ensuring that suitable properties could be retained or purchased to accommodate them. However, that was simply not possible in this case.

In such a situation, he said, the court must simply do the best it can in the circumstances, striving to achieve an outcome which is fair to both parties, and which puts them in a place whereby they will be in the best position possible to obtain such accommodation in due course.

Here, this meant that the wife should be left with sufficient to pay off her debts, which would mean that she should eventually be able to purchase a property of her own.

The husband, meanwhile, would have to sell the former matrimonial home, and purchase a smaller property to live in.

Accordingly, Judge Farquhar ordered that the former matrimonial home be sold and that the net proceeds be divided as to £150,000 to the wife, and the balance to the husband (the figures were actually set out in percentage terms, rather than as a set figure, to allow for price fluctuation).

This settlement would leave the wife with about £80,000 after payment of her debts, which would not be enough to enable her to rehouse herself. She would therefore have to remain in rented accommodation for the time being. However, her financial circumstances should improve in the future, as her childcare responsibilities reduce, and when she receives the £90,000 from her original matrimonial home. The judge estimated that this should lead to her being in a position to be able to purchase a property at some point in the next five years.

As for the husband, he would be left with £100,000 from the former matrimonial home, and his other assets of some £70,000, less his debts. Together with a mortgage, the judge considered that this should be sufficient for him to meet his housing needs.