Personal injury (PI) claims can involve lots of money and although rare, they can appear in a divorce case. How then does a divorce court deal with them?
The leading case is Wagstaff v Wagstaff.
Wagstaff concerned an eight-year marriage with no children of the marriage (although the wife had two children from a previous marriage).
The husband suffered an accident and he was awarded PI damages of £418,000. He used the money to buy an adapted home, to start up a business, and to invest to provide an income. The only main asset was the family home.
The court awarded the wife the family home and also awarded her a lump sum of £32,000.
The Court of Appeal confirmed that PI damages were an asset available for the court’s consideration:
”the capital sum awarded is not sacrosanct nor any part of it secured against the application of the other spouse…the reality of course is that the compensation is a financial asset which….has to be taken into account when the court comes to exercise its powers…’.
However, the source of the assets was an important factor in determining how the court exercised its discretion; and each case is very much different from the next.
Of course, Wagstaff is over 20 years old and divorce finance case-law has developed generally over this time.
M v M  is a more recent decision and confirms the family courts’ approach to PI damages. In effect, the court applied the same principles as those expressed in Wagstaff, but interpreted the parties’ needs more generously.
In that case the husband and wife had been married for about 6 years and had 4-year old twins. The husband had received PI damages of approximately £500,000 and which had been resolved before he met the wife.
The first court awarded the wife a lump sum of £285,000, to add to her mortgage potential of £42,000. This left the husband with property and savings of about £320,000.
The Court of Appeal did not interfere with the generous capital sum awarded to the wife, accepting that this was the minimum required to meet the needs of the wife and children. It did, however, order a charge back in favour of the husband (so he would receive a percentage of the house back in the future).
The Court of Appeal justified this by ‘the need to give special reflection to the origin of the family capital and the special purposes for which it was provided’.
The court’s approach to personal injury damages in divorce finance cases is similar to its approach to non-matrimonial property in general eg. inheritances: PI damages will not be ring-fenced and the courts can use them to meet the parties’ needs eg. for housing and income.
Needs, however, will not be the court’s only focus. In M v M the court appeared at pains to stress that the majority of the family’s assets had come from the husband’s PI damages.
In Wagstaff the court also expressed the view that ‘there may be instances where the [PI] sum awarded was small and was specifically for pain and suffering in which case it would be unsuitable to order any of it to be paid to the other spouse’.
How likely the court is to accept arguments focusing on the specific elements of the damages award is not clear, in part because of the lack of case law on the subject. On the one hand there may be an element of the award for pain and suffering and here the court may be willing to look at the purpose for which an award has been made. On the other hand, certain elements of the PI award will be for eg. future care needs; and the courts have to date not made any reference to these when deciding both parties’ needs for the purpose of divorce finance cases.