It may seem logical that personal injury damages awarded for someone’s on-going medical needs following a serious injury would be ring-fenced on a divorce. Unfortunately, this is not necessarily the case.
The leading authority on this point is Wagstaff v Wagstaff from 1992 in which, when referencing an attempt to ring-fence damages on divorce, it was stated that “the capital is not sacrosanct nor any part of it secured against the application of the other spouse”.
The Family Court has a great deal of discretion in this regard. The starting point is that matrimonial assets should be divided equally – the ‘sharing principle’. The question then becomes whether the award, or elements of it, can be categorised as matrimonial or non-matrimonial. This will depend on the particular circumstances of the case.
For example, following an injury, improvements or alterations may be undertaken to the family home. Matrimonial homes are generally considered to be matrimonial property and are treated as a joint asset of the parties, regardless of how these are owned. If the damages have been “mingled” in with matrimonial assets, this could change their nature such that the sharing principle may apply more forcefully.
However, even where an award could be considered entirely non-matrimonial, the aim of the court is to achieve fairness and, as noted above, it has an extremely wide discretion, so this is where the principle of need is considered. Section 25 of the Matrimonial Causes Act 1973 dictates the approach to be taken and states that the first consideration is the welfare of any minor child.
It can perhaps already be seen how the medical needs of an injured husband or wife can begin to be side-lined. Children come first. Where there are not enough assets to provide for everyone’s needs, children get prioritised.
Even if there are no children, in a case for example, where a breadwinning spouse is seriously injured and receives a substantial sum in damages which essentially becomes the entire monetary pot of a family where the other party has never worked and has no assets of their own, and a relationship breakdown follows, how does the other spouse provide for themselves following the divorce? The only recourse for the court to meet both parties’ needs is to that pot.
Generally speaking, where a case is being determined by reference to needs, the injured party’s needs will perhaps (and certainly more so where there are no minor children) carry far more weight as a factor than the non-injured person’s needs. The discretion afforded to the Family Court which in theory allows personal injury damages to be raided also allows consideration in context. The fact that such an award is intended to meet on-going medical needs or is non-matrimonial in nature enables arguments to be raised as to the treatment of those funds. Damages which are focused on ongoing medical needs are, therefore, arguably less likely to be interfered with by a court.
That does not, however, mean the other party’s needs carry no weight. Further, an award structured around loss of future earnings rather than on-going medical needs, for example, may be far more likely to be open to attack. Quite simply, this is because, had the individual not been injured and so actually earned that income, the other spouse may have been entitled to maintenance on divorce.
There are various ways to minimise the risk of personal injury damages being exposed on a divorce including consideration to the structure of awards, personal injury trusts and other wealth planning tools, as well as pre or post nuptial agreements. It is advisable consideration be given to these options at the earliest opportunity, preferably before separation is even in contemplation.