Family Barrister Bethany Armitage writes:
The bread and butter for most practitioners will be the oh so familiar “small money” cases, they require little introduction, a reflection of the average client who requires legal assistance.
The vast majority of people have limited assets during the course of any marriage and this is further compounded when they separate, dividing capital fit for one household into capital fit for two is a challenging task that all courts are faced with.
As Lord Nicolls observed in Miller and McFarlane “In most cases the available assets are insufficient to provide adequately for the needs of two homes. The court seeks to stretch modest finite resources so far as possible to meet the parties’ needs.”
The importance of accounting for the needs of both parties was observed in the case of A v L (Departure from Equality: Needs) [2011] EWHC 3150 (Fam), this case is crucial for any lawyer when considering how to divide capital and meet the parties needs in a “small money” case. This case showed a court applying financial remedy legal concepts within the tight restrictions afforded to those with limited means.
The courts rarely publish judgments on “small money” cases which is why those which are published should be considered vital as part of our understanding as to how to conduct our cases. The reason for the lack of judgments is simple, the majority will be first instance decisions in lower courts given the limited assets involved and remembering the costs associated with appealing any decision there is a reduced likelihood of any low value cases coming to the surface.
In this case Moor J noted that “I entirely accept that needs can justify a departure from equality but, if the court is to do so, it is necessary to consider the needs of both parties. I equally accept that disparity in earning capacity can justify departure, but again this has to be considered in the context of the needs of both parties not just the wife. Where resources are limited, the needs of the applicant – still typically the wife, with whom any children of the family may continue to make their primary home – will predominate. However, both parties will still need a home and an income and the financial means to maintain contact with any children of the family and share in their care. And so even in such modest or “small money” cases, a balance must be struck to ensure that any order is fair. A failure to consider the “financial needs” of both parties may render an order unfair, and so liable to be set aside on appeal.”
Another important factor highlighted in A v L was the necessity for the courts to provide sufficient reasoning when deciding to depart from equal division including the ability to specify why such a departure from equality would still enable the parties needs to be best met. As in the case of A v L, if the court fails to articulate adequate reasoning the decision may be subject to criticism in any appeal.
In the more recent case of JM v MM [2015] EWFC B74 HHJ Wildblood QC again noted that this was a “small money case where the costs have become disproportionate” given the assets were just under £300,000 and the total costs spent (including H’s appeal) totalled £127,538.56, each party having already spent between £30,000-£37,000 each on legal costs in the first instance.
Although this case does not delve into detail nor significant analysis about the importance of meeting the parties needs and how this may impact any division on the basis of equality, it does provide commentary criticising the fees expended by both parties (both being urged to attend mediation at the conclusion). It also provides importance to practitioners working on cases involving limited assets, in part as a result of declining or failing businesses which has become a particularly hot topic since the wake of the Covid pandemic. In cases with limited assets and businesses with significant liabilities, the court must take a detailed approach to consider the value of any business and the impact on any party retaining such a business when there is little other capital to rely upon.
Likewise, HHJ Wildblood QC draws attention to the importance of calculating a parties liabilities as precisely as possible in limited assets cases, quite clearly where there is minimal capital to divide and debts to be repaid, the court must take into careful consideration the impact of any party having to repay their liabilities and how this may reduce their capacity to meet their housing or income needs, it being all too common for practitioners to be involved in cases where the parties have accumulated significant debts.
The recent case of JM v KK [2021] EWFC 54 highlights as A v L did, that stretching finite resources can be challenging but that the court will make every effort to ensure both parties needs are met. The parties’ needs were modest, with realisable assets worth £154,000 which included a flat in Kent and a property in India. As is the norm in many cases involving modest means, the wife had liabilities amounting to £43,000. The only other asset of value (other than savings which had been expended on the disproportionate £150,000 of legal fees collectively spent) was H’s pension worth £80,000.
This case is another one which is pertinent in reminding parties not to squander money on litigation unnecessarily, this being particularly relevant in low value cases where such capital is necessary in order to meet the parties needs, as Cohen J noted in this case “the result of what has happened has been financially disastrous for the parties.”
Cohen J in particular reminded the parties in his judgment that “This case has been a classic example of how what is sometimes described as small money cases can be infinitely more difficult than cases involving larger sums. It is the decisions that each party took as the marriage broke down and in their understandable desire to be the carer of their daughter have been hugely detrimental financially to them both.”
The issue of getting a valuation right can also be drawn from the judgment provided by Cohen J, plainly in a low value case any difference in the proposed valuation of a property between the parties can have a significant impact given the limited means available, therefore it is important for this to be determined at the outset to avoid dispute later on.
Again, this case highlights the particular importance in critically examining the parties’ debts in cases involving modest means, quite often because there is an expectation that a party needs to repay their liabilities with any split in the capital, therefore analysis as to how and why some of the debts occurred, as in JM v KK is relevant.
Similarly, Cohen J considers ‘soft loans’ that W acquired from friends and family for legal fees, a common occurrence amongst low value cases because they can ill afford to pay for the litigation. The overarching theme being that there may often be an acceptance that a party will inevitably need to repay certain debts at some stage and this needs to be accounted for, therefore a vigorous analysis needs to be taken to consider how likely it is that each debt needs to be repaid.
Finally, a vital part of the judgment comes towards the end when Cohen J reminds himself of the first consideration, that being the welfare of any child and in situations where the court may struggle to rehouse both parties, the presence of any child and that of any primary carer will be at the forefront of the court’s considerations.
Despite limited reporting on low value cases, the two more recent cases are a demonstration that the principles established in A v L remain relevant, as summarised in JM v KK we are reminded that “…in some circumstances equality will be appropriate but in others it will not…” and that as a result of the parties’ needs sometimes “a departure from equality is justified…to reflect all the circumstances of the case and to ensure that both parties have proper housing in which they can look after N [the child]…”
