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Coming back to bite you; delayed divorce claims

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13/03/2015
Kathleen Wyatt, the wife of a former new-age traveller turned multimillionaire, was told on Wednesday by the Supreme Court of the United Kingdom that she could claim a divorce settlement from her ex-spouse – despite the divorce dating back to 1992, and his fortune being made many years later.

Kathleen Wyatt and Dale Vince met in 1981, and married in 1983. During their marriage, neither had any income, leading what the court dubbed a “hand to mouth…travellers’ lifestyle”. The pair divorced formally in 1992, after a lengthy separation. As neither held any assets at the time, no “financial order” was imposed. However, in 1996, Vince established windfarm manufacturer Ecotricity, which today is valued at around £60m; in 2011, Wyatt launched a claim for £1.9m in financial support from Vince.

The Supreme Court’s surprising decision underlines the little-understood fact that family courts operate according to different rules to most other areas of the law. Limitation periods – the time limits within which a party can bring a claim – usually restrict action to six years after an event,  but no such rule applies in divorce proceedings.

President of the Supreme Court Lord Wilson emphasised in the judgment that “there is no time limit” to claims for financial provision. Lord Wilson did, however, acknowledge the claim faced “formidable difficulties” due to the delay, and Wyatt not playing any part in Vince’s subsequent success.

The decision naturally strikes a loud note of caution for separating couples. Commenting, Vince branded the ruling “mad”, stating that it would lead to divorcees “looking over their shoulders” for decades and signalled “open season for people who had brief relationships a quarter of a century ago.”

Some in the legal profession appear to agree with Mr. Vince, believing that the landmark judgment will prompt a deluge of retrospective financial claims from ex-spouses. Mei-Ling McNab of Brachers said “this case will open the floodgates”, and his words have reverberated in much mainstream news reporting on the case.

However, others in the sector contend that the precedent will only have minor implications, for very few. Should you be worried? Your Money spoke to a number of experts in the field of family law to find some answers.

Andrew Newbury of Slater and Gordon believes that all divorced and divorcing couples have significant grounds for concern. “Many are under the mistaken impression that concluding a divorce brings about an end to financial claims,” Newbury notes. “In truth, all divorcees are at risk of their former spouse bringing financial claims many years after their marriage has ended.”

“The latest court statistics show that over a third of divorcing couples have no final divorce settlement –at least a third of divorcees are therefore at risk,” he warned.

James Brown, at JMW Solicitors said that he expected “many thousands of individuals will at least explore the possibility of making financial claims against their former partners.”

“Whatever happens, the case clearly underlines the lack of a limit on when someone can make a claim,” he concluded. “It doesn’t matter whether you divorce in your twenties and return with a claim when you’re 80.”

Catherine Thomas of Vardags likewise said that many divorcees will already be investigating the prospect, and she “expect[ed] a number of similar cases to emerge.”

Making the case against an impending influx, Michael Gouriet of Withers said that “the extraordinary circumstances of the suit make it an extremely rare beast. “As such,” Gouriet believes, “it will not open the floodgates on historic claims being reopened and appealed.”

Julian Ribet of LMP echoed Gouriet’s sentiments, stating that “the judgment does not mean that all ex-spouses can reopen their financial settlements to have a second bite at the cherry to obtain more.”

However, Ribet does acknowledge that the case “illustrates the importance of obtaining proper legal advice and ensuring that at the time of the divorce the parties obtain a binding court order dealing with the division of their assets.”

Marilyn Stowe of Stowe Family Law said the case was a symptom of a wider trend of courts increasingly taking into account ‘post separation accrual’, “in other words, wealth accumulated after a couple splits.”

“There was another interesting case recently – B v B.”

In B v B, a judge ordered a wife be allocated 40 per cent of her former husband’s shareholdings as lump sum payments after the shares had matured, even though the shares had been purchased after the separation.

“In that case,” says Marilyn, “the judge applied the concept of fairness, saying that it was about a ‘broad recognition by the court, after considering all the factors, of the value of the claimant’s role in the whole marital partnership’.”

“The Court always considers the case assets at the date of the hearing, not the date of divorce or separation.”

Those who have amassed sizeable personal wealth post-divorce shouldn’t fear the prospect of half of their newly-found largesse being taken by a former partner, Stowe believes. “Obviously, Wyatt will not walk away with half or anything approaching that,” she says, “but, she certainly could secure a sum comparable to her own contribution to raising her children during the marriage.”

Stowe is certain, however, that there will be more cases of this ilk to come. “This is definitely a judgement that will be referenced in the future. It is crucial that divorcees move to ring fence their post-separation assets and incomes in any settlement.”

 

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