If your marriage has come to an end, reaching an oral agreement with your ex as to how marital assets should be divided in a divorce may seem the simplest course of action. However, a case in which a woman came within an ace of losing her family home showed why dispensing with legal formality is hardly ever a good idea.
Following the collapse of the woman’s marriage, her husband moved out, leaving her and their young daughter in occupation. He thereafter made no contribution to the mortgage or any other costs associated with the property. Her legal difficulties began several years later when, following their clean-break divorce, the husband was declared bankrupt on his own petition.
He owed in the region of £140,000 and his trustees in bankruptcy sought to enforce the debt against his interest in the former matrimonial home, his only significant asset. Following a hearing, a judge found that the ex-couple owned the property in equal shares. He ordered it to be sold with vacant possession so that the husband’s portion of the equity could be paid to his creditors. Having unsuccessfully resisted the orders, the woman was ordered to pay the trustees’ £18,000 legal costs. That sum was to be deducted from her share of the equity.
Upholding her challenge to that outcome in the light of fresh evidence, the High Court accepted her account that, following their separation, she and the husband had reached an oral agreement that he would have no share in any increase in the property’s value subsequent to him moving out.
The Court noted that such an agreement was entirely sensible and understandable in order to preserve the home for their child until she grew up. Both of them were at the time anxious not to disrupt or unsettle the child. The agreement was entirely consistent with the position on the ground and the unmatched financial contribution that the woman had made to the family’s welfare post separation.
By assuming sole responsibility for paying the mortgage and other outgoings on the property, the woman had acted to her detriment in reliance on the agreement. Her and the husband’s common intention that any appreciation in the property’s value would belong to her alone gave rise to a constructive trust in her favour.
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