Butler v Butler and Needs Cases

In the relatively recent case of WC v HC, Peel J helpfully set out a summary for the law for finances on divorce, including in relation to the three essential principles being considered by the court when considering any case brought before them, i.e. the parties’ “needs”, compensation and sharing.

As made clear in the judgment, the vast majority of cases will begin and end at the parties’ “needs”, as few have a surplus of assets over what they require to move forward financially independently whereby sharing can be considered. The starting point for the court in relation to financial matters is that the matrimonial assets should be divided equally, and non-matrimonial assets should be retained by the party who owns them unless there is a good reason why they should not. However, where there are basic financial “needs” to be met, and these cannot be met when dividing assets on a 50/50 basis, there can be a departure from this starting point.

As the judgment in WC v HC notes, needs are an elastic concept and must be considered in the wider context of the case at hand.

However, the types of “needs” the court will tend to focus on are:

• Ensuring the needs of any children on the family are met (the needs of any children will be the court’s first consideration);
• Ensuring that each party is housed in stable accommodation following separation, usually through suitable purchased accommodation;
• Ensuring that any liabilities, either matrimonial or non-matrimonial, can either be cleared or serviced in the long term; and
• Ensuring that each party can meet their reasonable monthly outgoings in the future, including on retirement.

Defining a “need”

Establishing a party’s needs is an evidence-based exercise and this begins with the exchange of full and frank disclosure via a Form E. Schedules of outgoings are provided by each party showing, in detail, how a party spends their monthly income and what funds they require each month to makes ends meet. Payslips, P60s and tax returns are obtained and provided to evidence income. Evidence relating to debts to enable them to be quantified is produced. Housing particulars are provided showing suitable accommodation in the local area if they were to move from the former matrimonial home.

However, the court can take quite a wide view on what can be considered “reasonable” outgoings or a “suitable” property, and people are often surprised as to the extent of the court’s powers in this regard.

For example, if the parties will be unable to both rehouse in purchased in accommodation within a mile of their current property, the court could well take the view that the parties can move much further away, to a cheaper area, if it means they can obtain secure purchased housing. The court, in these circumstances, would prefer to see the parties move further away than run the risk of living in insecure rented accommodation. Similarly, whilst the court will pay heed to the previous standard of living the parties enjoyed, the court will take a view as to what can be achieved with the assets and income available.

Insufficient assets

But what if the assets available to the parties are insufficient to meet both parties’ needs? This is a question that was put before Moor J in the recent case of Butler v Butler.

This case essentially centred on a single property owned in a husband’s sole name purchased with the proceeds of a prior inherited property. It was a wholly non-matrimonial asset, however, where necessary, assets of this kind can be utilised by the court to meet the parties’ needs. The wife, who had no assets of her own and limited income, argued that the property should be sold and she should receive 75% of the proceeds of sale to enable her to rehouse.

The court concluded that the husband should pay to the wife a lump sum of £58,000, representing the most he could raise by way of mortgage against the property.

The judgment made clear that any award in excess of this would have only resulted in the house being sold and both parties being effectively homeless, and the court needed to take into account the entire background of the matter, i.e. that the property was wholly non-matrimonial, the parties had been separated for some time and the fact that the husband was 64 and reaching the age of retirement.

As this case shows, there is no specific approach in these circumstances and the court can only work with the assets available. Even if the case is a “needs” case, it does not mean that a must make an order that will meet both parties’ needs.

It is important to note that the children of the family and their needs will be the primary consideration for the court, with a focus ensuring that they have as much stability as possible. This can mean securing purchased property for them near their existing schools. In the event that the parties cannot both secure purchased accommodation from the divided assets, the court may consider it necessary to order and unequal division of the assets to ensure that one party can purchase a property sufficient to meet the children’s needs (usually the party who the children live with the majority of the time).

Similarly, the court can make what is known as a Mescher Order to delay the sale of the family home, allowing the children to remain there with one party until they reach a certain age, at which point the property is sold and the net equity divided more equally.

Approach

In light of the complexities involved, it is important that all parties going through a “needs” case remain realistic and pragmatic in their expectations as to what the likely outcomes could be if they begin costly court proceedings. Fundamentally, it is inevitable that both parties are going to experience a drop in their standard of living in circumstances where you will be seeking to fund two properties, as opposed to one, moving forward.

There is a risk, where parties are unrealistic in their expectations, or unwilling to acknowledge the inevitability of change, that significant legal costs can be incurred. The courts are making clear that there should be an effort from all involved, including legal advisors, to ensure that costs are proportionate in these cases and that the parties endeavour to protect the assets they have to give them the best opportunity to move forward independently in the future.