COVID-19 EXPERT LEGAL INSIGHTS

Am I stuck with my divorce settlement
after coronavirus?

17 April 2020

The coronavirus pandemic is changing the world dramatically. It can feel as though the ground is shifting beneath your feet. If you are recently divorced, or are currently getting divorced, that feeling may be a familiar one.
 

We can’t predict what the health implications of COVID-19 will be for us individually, or for the community we live in, but some economic effects are already being felt by many who have already either lost their jobs, been furloughed or had a reduction in income. Many, including higher earners like partners in accountancy and law firms, are having their earnings reduced and bonuses placed on hold. Many are also are seeing the value of assets they have built their financial lives around plummet as the property market stills, businesses struggle and pension values decline. But there is hope. The Office for Budget Responsibility (OBR) warned the pandemic could see the economy shrink by a record 35% by June but have also said that there may be a strong recovery once the lockdown is lifted.

Will my divorce settlement change in light of coronavirus?

In this rapidly evolving environment where people’s financial circumstances are changing, many are asking if their divorce settlement still applies. In this blog, which is the first in a series on the subject, we set out some preliminary guidance.

Reopening your case – have you suffered a 'Barder' event?

If you have a settlement recorded in a Court order, you or your former partner can ask the Court to reopen your case on the basis that coronavirus is a 'Barder' event. In order to do this, you would need to show that:

  • The impact of coronavirus has invalidated the basis or fundamental assumptions of the order;
  • The order was made shortly before the coronavirus outbreak (within months rather than years);
  • You have brought the case to the attention of the Court swiftly;  and
  • The Court is not being asked to take action which would unfairly prejudice a third party – for example, the Court is not being asked to reopen a case to transfer a family home back to a spouse which has been sold to a third party, in good faith.

One thing which could invalidate the basis of an order is a significant change in the value of assets. For that argument to be made successfully, the following elements, set out by Lady Justice Hale in Cornick (No 1) need to be made out:

  • Coronavirus needs to be regarded as an ‘unforeseen and unforeseeable’ event
  • Which has
    • happened since the date of the last hearing; and
    • has altered the value of the assets dramatically such that there is a substantial change in the balance of assets set out in the order
  • The change in value, however dramatic, is not the result of natural price fluctuations.

Family lawyers are already discussing the extent to which a global pandemic like this is unforeseeable and whether it can be argued that price fluctuations flowing from it are not ‘natural’. We will not know for sure until a test case goes before the Family Court and, given the priorities of the stretched courts at present, that may not be for some time. We can, however, consider the facts of your particular case in light of existing case law and our past experience.

At Kingsley Napley LLP, we are no strangers to advising and supporting clients through unprecedented times. We know how the Barder principles operate having acted in the case of AW v the Executors of HA & others [2015} EWHC 2233 (Fam), where the court held that a Barder event had occurred and reduced the original financial award by around 2/3rds.

Varying a past divorce settlement

Barder cases are rare. They should be considered but in most scenarios, it will be more appropriate to ask the Court to vary your settlement. An application to vary could be made in respect of:

  • Maintenance – if you cannot afford to pay spousal maintenance, or expect that you will soon be unable to, you may need to vary it for a period or on a permanent basis;
  • Capital – if lump sums in instalments are due to be paid, or assets transferred, and doing it would now result in a manifestly unfair outcome for one party, you may want this part of your settlement varied; and/or
  • Pension – if your pension or pension share has suffered a significant decline in value, you may want your settlement varied to take account of this.

In the next blogs in this series, we will provide guidance on each of these areas of variation. Later in the series, we will explore how to keep things moving with current divorce proceedings at a time when everything feels uncertain.

Resolving divorce settlements during the coronavirus crisis

The Family Courts are adapting fast to the remote working environment but they are extremely stretched. Many cases have been adjourned and the most urgent cases are, quite rightly, being prioritised. This means that many financial cases are taking longer than expected to be heard and that there may be a backlog of applications once the lockdown restrictions are lifted and things start returning to normal. Alternative options to Court are still available at this time, including mediation, private FDRs (using a senior barrister as a judge) and arbitration wherever appropriate and that has only increased since lockdown began. There are many options available and we can help find the best one for you. See our previous blog for further information.

Please note that the general guidance provided within this blog is accurate at the time of writing (17 April 2020). It does not constitute legal advice and specialist advice should be sought in individual circumstances.

Further information

You may be interested in reading our other blogs about various challenges families and separating couples are experiencing in the face of the current crisis:

See also our wider range of coronavirus blogs for other topics.

If you are affected by any of the issues covered in this blog, please contact a member of our team of family and divorce lawyers or click here to get started online and find out where you stand.

 

About the authors

Jane Keir is a partner in the family and divorce team. She acts for equal numbers of men and women and many of her clients come from across the country and abroad, as well as London.  Much of her work involves an international element and she works with other lawyers, accountants, actuaries, financial advisers, wealth managers and investigators in order to provide a thorough and comprehensive service to her clients. Among other recently reported cases, she acted for the successful wife in RC v JC, a landmark compensation case, and she represented the successful party in protecting the wider family’s wealth in the case of Daga v Bangur.

Cady Pearce is a senior associate in the family and divorce team. She advises on a range of private family matters involving both finances and children. She has experience of complex financial cases and often deals with cases involving overseas assets and unusual issues. Cady previously worked in the financial litigation team at a Magic Circle law firm and is familiar with complicated financial structures. She has a particular interest in cases involving City professionals and businesspeople.

 

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