The recent case of NO v PQ is a salutary lesson for anyone contemplating investing their share of the matrimonial assets in a business venture.
In simple terms, the lesson is: if the venture fails, you may not get a second bite at the ‘divorce cake’.
In the case the husband had been a successful restaurateur for many years. In 2017 he sold his restaurant, which realised the net sum of £1.3 million. By 2017 that sum had depleted to about £600,000.
The parties discussed what they wished to do with this money, and in 2018 it was agreed that they would develop a new, high-end, restaurant and bar.
The marriage broke down and in September 2018 the husband handed back his wedding ring. Shortly after that he moved out of the family home.
In 2019 the wife expressed the view that she did not want to be in business with the husband anymore.
An agreement was therefore reached between them. The parties were in dispute about exactly what was agreed, but the judge accepted the wife’s explanation that the husband’s investment in the new business would “come out of his side” of the divorce settlement.
Unfortunately, and for reasons we need not go into here, the new business failed.
Divorce proceedings took place, and the wife issued an application for financial remedies. At this point the only really significant asset was the former matrimonial home, which had an equity of about £625,000.
The wife’s position was that she considered that she was entitled to the former matrimonial home, in the light of the 2019 agreement.
The husband, on the other hand, claimed that there was no such agreement, and sought an order that the former matrimonial home be sold, with the net proceeds divided equally.
The question for the judge was: was the husband entitled to a share of the equity? Clearly, he was in a predicament of real need.
As indicated above, the judge found that there had been an agreement between the parties in 2019. He therefore found that found that, notwithstanding his needs, the husband was not entitled to more than he had already received as a result of the agreement.
As the judge stated, making no provision for a party in real need was an unusual outcome. However, he felt that it was justified as the only fair outcome on the facts.
You can read the full judgment here.
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