Personal Injury (PI) and Clinical Negligence settlements and divorce.

My marriage is breaking down, what will happen to my personal injury damages?

Now that I have joined a Barcan Woodward a Firm specialising in PI and Clinical Negligence claims I am seeing more clients who ask this question. The relationship could be breaking down as a direct result of their accident or circumstance following the clinical negligence. There are many different reasons that relationships break down but the stress and difficulties that can be caused by accident or injury can often have a significant impact, particularly if behaviour or physical ability is changed as a consequence.

So how do the Family courts decide what is fair when making orders about the assets (including damages) and income in divorce cases? Essentially the courts have a wide discretion and no two outcomes are the same as they are based upon each couples own particular circumstance.

The court must consider the factors which are set out in s25 Matrimonial Causes Act 1973 and these factors have subsequently been amplified by precedents set by case law over the years.

The courts primary consideration is to the welfare of any children of the family and this can often take priority over the interests of the injured individual. After that it becomes s25 factors being:

a)     the income earning capacity property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future;

b)     the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future;

c)      the standard of living enjoyed by the family before the breakdown of the marriage;

d)     the age of each party and the duration of the marriage;

e)     Any physical and mental disability of either of the parties of the marriage;

f)       The contributions which each of the parties has made or is likely to make in the foreseeable future to the welfare of the family including any contribution by looking after the home or caring for the family;

g)     The behaviour of the parties if that behaviour is such that it would be inequitable to disregard it;

h)     Loss of any benefit by reason of divorce – usually pension rights and benefits.

So where do damages and compensation fit in to the process? Clearly if a settlement is about to or has been made then it will become a resource available for distribution/division between the couple. Damages have never been ring fenced. Their purpose must be taken into account in any settlement but the court needs to balance the needs of the parties, not just the injured individual.

The Courts in 1976 in case of Daubney said “that damages following a PI claim will be part of the pot, unless the victim has ongoing special needs”

The leading authority was given in case of Wagstaff v Wagstaff (1992 1 FLR 333)  where five years into the parties marriage in 1981 the Husband had a serious accident leaving him as a paraplegic. The parties separated two years later. In 1988 he was awarded £418,000 in damages which he invested in a specially adapted house, investing in a business and also a trust to provide an income.

The court at first instance awarded the wife £32,000 which the Husband appealed and on appeal the amount was reduced to nil. The Wife appealed to the Court of Appeal who reinstated the payment to her of £32,000 on basis that a damages award was not sacrosanct and the amount was a sum which the husband could afford to make without affecting his quality of life and was fair.

In C v C (1995 2 FLR 171) the whole family, Husband, Wife and child were injured in a RTA. All were injured but husband’s catastrophic injuries left him with a permanent disability and brain damage. In 1991 H received damages by way of a structured settlement in excess of £5m.  He received an initial payment with annual payments for life but with a life expectancy of 40 years.

Wife made a claim as she had no substantial assets and limited earning capacity due to child dependency. Initially her claim was dismissed, but she appealed seeking a nominal maintenance order and small lump sum and the ability to claim against husband’s estate after he died.

The Court of Appeal decided that there was no available capital given the extreme needs of the husband and that she should not have a maintenance order as it would impact upon wife’s eligibility for state benefits and fact it could impact upon Husband and his needs.

The most recent case and therefore authoritative decision was given in Mansfield v Mansfield (2011 ECWA Civ 1056) in 1998 before H and W met, H received approx £500,000 in a PI claim that had left him partially disabled. He bought himself a bungalow which was adapted for his needs and a second flat to provide an income.

H and W lived together for about 18months and married in 2003. W invested £30,000 of her own money in the bungalow during the marriage and twins were born in 2005. They separated in 2008 and wife sought enough capital to provide a home for herself and the children.

At the first hearing the Judge ordered the husband to provide a lump sum of  £240,000 to enable W to buy a home and given 3 months to raise that sum or face sale of the home he adapted for himself. He appealed and the Judge confirmed that the settlement was fair. The Husband continued to appeal to Court of Appeal who confirmed that the lump sum was about right and therefore they wouldn’t interfere however the Court of Appeal ordered that a third of the value would revert to him once the children were no longer independent.

So how do you protect the damages? The only practical steps will be to consider a pre or post marital agreement and record any contributions to property in carefully drafted declarations of trust.