Delay in making a financial claim in divorce proceedings
In these posts, we have often spoken of the importance of completing the financial arrangements as part of divorce proceedings. A failure to do so may make it very difficult for such a claim to be made successfully at a later date. A recent case in the Court of Appeal has brought this issue into sharp focus.
Mr and Mrs B married in 1984 and separated in 2002. Decree Absolute was pronounced in 2005. There were no court orders made at the time relating to the finances of the parties.
In 2013 Mrs B issued an application in court for a financial order. Mr B attempted to say that an agreement had been reached between him and Mrs B in 2005, following a joint meeting with a solicitor. His argument was that the agreement had settled the financial matters and that Mrs B should not be permitted to make her claim eight years later.
Mrs B’s application came before a judge in 2015. Having heard all the evidence, the judge rejected the argument of Mr B that there had been a previous full and final settlement by agreement in 2005. The judge decided that Mrs B had made it quite clear in 2005 that Mr B would have to make clear his financial position before she could consider a final settlement and that no such disclosure had taken place.
Having reached those factual conclusions, the judge proceeded to decide what financial arrangements should apply and made court orders accordingly. In doing so, the judge held that whilst the delay by Mrs B in making her claim was a factor that should be taken into account, it was not fatal to her claim. The judge took account of the value of the assets at the time of the trial in 2015 (and not at the time of separation) and then discounted those values to take account of the delay.
The Grounds of Appeal
Being dissatisfied with the decision of the judge, Mr B appealed to the Court of Appeal. The stated grounds of that appeal were that the judge:
- was plainly wrong in his conclusion that the parties did not reach an agreement in 2005
- failed to have sufficient regard to the wife's delay in bringing the claim and the lack of any cogent explanation for it
- failed to have sufficient regard to the value of the assets at the time of separation
- failed to have sufficient regard to the husband's contribution to the business after separation
- failed to have sufficient regard to the evidence that the business would not be sold and would be passed instead to the children so that its value would not be realised by the husband
- failed to have sufficient regard to the risk attached to the business including from potential tax liabilities connected with the business
- his determination was wrongly based on entitlement rather than need
The decision of the Court of Appeal
The alleged agreement in 2005
The Court of Appeal highlighted that the decision on this was a question of fact and as such, was for the trial judge. The Court of Appeal would only interfere with a decision on facts found after hearing evidence if that decision was plainly wrong and could not be justified by the evidence. No such conclusion could be reached in this case: the trial had been eminently fair and the decision of the trial judge could not be criticised.
The Court of Appeal decided that of critical importance was the finding that Mrs B had made it plain in 2005 that she would not come to any agreement unless Mr B had made full financial disclosure, which he never did.
The judgment reiterates the importance that is attached to an assessment by a trial judge of the oral and written evidence and his impression of the witnesses.
The Court of Appeal held that it was clear that the trial judge had properly considered the fact that, as a matter of public policy, there should be the minimum of delay in concluding financial arrangements after divorce.
The judge had also dealt with any effect the delay had had on the financial affairs of Mr B and whether it had caused any serious prejudice to him.
The explanation by Mrs B for the delay, which if unacceptable, might have reduced or eliminated her claim, had also been examined by the judge. The judge decided that the delay should result in a reduction of the share in the available assets which she might otherwise have received. Mrs B was awarded a 30% share rather than the usual 50%, although part of the disparity was accounted for by the increase in the value of one of the assets, a business, attributable to the efforts of Mr B since 2005.
Entitlement as against need
The Court of Appeal agreed with the judge that this was a case which required a decision not primarily focusing on the 'needs' of Mrs. B, but rather on her 'entitlement' as a legal right to share fairly in the available assets. The trial judge had undertaken an exemplary examination of the 'entitlement' issue and had fairly reduced the award to take account of the delay.
The lessons from this case are clear:
- it is vitally important that all financial issues are finalised in a clear and unambiguous way as part of the divorce proceedings
- any significant delay is likely to have an adverse effect on one of the parties
- in this case, both parties suffered.
- Mrs B’s share of the assets was reduced because she did not proceeded with her claim quickly
- Mr B failed to make proper disclosure of his financial position at the time of the negotiations in 2005, which meant that Mrs B was allowed to make her claim even though several years had elapsed