Is an inheritance safe after a divorce financial settlement?
15 May 2015 by Andrea Godfrey
The recent case of Critchell v Critchell  concerned an inheritance that a husband received after financial matters with his wife had been agreed and embodied in a consent order made within divorce proceedings.
The parties had been married for approximately 9 years and had 2 teenage children. The Husband moved out the former matrimonial home (“FMH”) while the Wife remained with the 2 children. The Husband then bought a house by borrowing £85,000 from his father and the balance of £63,000 was raised through a mortgage. The Husband’s house therefore had very little equity, while the equity in the FMH was around £175,000. This was the only real asset of the relationship.
At a Financial Dispute Resolution hearing the District Judge gave the parties an indication as to what he believed would be a fair outcome and they settled. The terms of the agreement were embodied in a consent order that the FMH would be transferred to the Wife and the Husband would have a charge over the property which equated to 45% of the net proceeds of sale. He would only be entitled to his 45% on the happening of certain events, such as the youngest child reaching 18 or finishing full-time secondary education, whichever was later, or the wife cohabitating. The result was that the parties capital was almost equal, although the Husband would have to wait for his share.
Sadly a month after the agreement was reached, the Husband’s father died unexpectedly. Under his father’s Will, the Husband was to receive a lump sum of £180,000 but the Will also contained a provision that the loan to the Husband to purchase his house (£85,000) was to be written off. The Wife then lodged an appeal out of time against the consent order claiming that, because of the inheritance, the charge the Husband had against the FMH should be cancelled, so she owned 100% equity in the FMH. Although the appeal was out of time, a Circuit Judge gave permission to appeal. The Court had to consider whether this case constituted a Barder event where the Court had to decide whether there been a new event which invalidated the reasoning behind the original consent order?. The judge found that the original order had been agreed on the basis of the parties needs – in this case housing. The Husband needed his charge against the FMH so that he could eventually pay back the debt to his father. However, because of the terms of the Will, he no longer had to pay this loan back and he had also inherited an additional £180,000. The Court considered that this “had invalidated the basis or fundamental assumption upon which the consent order was made” The Judge therefore allowed the appeal and ordered that the Husband’s charge on the FMH be cancelled.
The Husband appealed to the Court of Appeal which agreed with the earlier Court and the Husband lost his charge against the FMH. The Court did however state that cases in which a Barder event can be successfully argued are extremely rare. The Court stated “The present judgment is not intended to change the jurisprudence on the subject and is no more than an application of the principles to the particular stark facts of this case”
This case highlights that assets acquired after a final financial order in divorce proceedings, for example an inheritance are not always “untouchable” and in very rare cases, the whole financial settlement can be reconsidered by the Court at a later date.
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