Picture: Elisabeth Pacey
When a family get divorced, a typical settlement may more than often involve the family home being sold to free up cash so that each spouse can be rehoused. However, when the family home is a farming business and is often the main source of income, what approach does the Court take? Most farming businesses are asset rich and income poor, with capital tied up in the farm to fund the framework of the business. A dichotomy exists between the wish not to see the farm or any of the land sold as against the contrasting need to find liquid cash to fund a financial settlement, rather than seeing the business saddled with high levels of borrowing. Has the landmark decision by the House of Lords last month (which allowed a wife lifetime of maintenance from her husband) affected how a farmer husband funds his wife's divorce settlement? What if the wife has also been fully involved in the running of the farm and the farming business is run in partnership between each spouse? What if the farm has been in the family for generations, passing from (typically) father to son for centuries?
Whilst a court must always consider whether it is possible to sever the financial ties and obligations between parties so as to achieve a clean break, the House of Lords judgment has left the door open for a spouse to receiving ongoing maintenance and for all the fruits of the marriage partnership to be fairly shared. Where a spouse has brought wealth to the marriage by way of inheritance, this is in principle still a factor that may affect how much the non-inheriting spouse should receive, even if that spouse has made a full contribution to the marriage in other non-financial terms. However, when and how that inheritance was received is critical to the Court's assessment of how much importance should be attached and this also has to be balanced against the core need to find liquid capital so that each party can rehouse. Where the farming business has no liquid capital, or where it can be shown that the sale of the farm would impact severely on the family's income, it may be possible to persuade the Court to move away from the idea of ordering a sale of the farm. Equally, it may be the case in a long marriage that inherited property may well merge into the matrimonial assets entitling the spouse to a share of it on divorce.
It is possible to take steps to protect pre-owned wealth in certain cases, for example by entering into a pre-nuptial agreement. Whilst pre-nuptial agreements are not yet legally binding in England, they are increasingly being taken into account in divorce cases – especially in larger money cases but less so in cases where the parties subsequently have children – as an additional factor for the Courts to look at when awarding a financial settlement. However, specific criteria must be followed at the time the prenup is signed - such as both parties receiving their own independent legal advice and full financial disclosure before the agreement was signed- for the prenup to even have a chance of entering the arena of the Court. Even then the weight the Court will attach to the prenup will depend on the circumstances of the case. Proper consideration should however always be given to the possibility of entering into a Prenuptial agreement and specialist advice taken at an early stage.
Elisabeth Pacey, a Family Solicitor at East Anglian law firm Kester Cunningham John says "Each farming case is different which is why the framework of the law at present allows the Court to adopt a discretionary approach to ensure that proper consideration is given to the intricacies of each case. However the House of Lords were keen to ensure that consistency and predictability is achieved by the Courts to enable and encourage parties to negotiate their own solutions as quickly and cheaply as possible".
The family team at Kester Cunningham John pride themselves on a commercial and sensible approach to resolving complex divorce settlements, tailor making bespoke solutions by utilising the various negotiating tools available so as to meet individual clients' specific needs and requirements in as cost-effective way as possible.
