Help Needed for Recession Effects on Personal Relationships?

Recent Headlines:

"Couples cannot afford to split"
“Cut losses whilst something to divide”
“Just when you thought it was all over”
“Give me refund on Divorce Settlement", says Husband "Wiped out by Recession"

We read headlines like these almost daily at the moment. They describe three situations that many couples are now facing directly from the impact of the downturn in the global economy:

1. Couples who have made the decision to separate permanently during the last 12 months and are waiting for the right time to leave;
2. Couples whose relationships have broken down as a direct consequence of the financial downturn; and
3. Those whose relationship has been formally terminated recently or in the last few years and their settlements are undermined by the financial crisis.

Recently the case of Myerson examined the impact of the financial crisis on settlements. The parties agreed terms in February 2008 which were embodied in a formal Consent Order at Court. The Husband argued that since the settlement was agreed the change in the financial landscape has had a quite different impact to what was anticipated by both sides. The Consent Order gave the wife 43% of the total £25.8 million fortune, her share being taken in cash and the family home. The husband’s settlement consisted mostly of shares, which had plummeted by 90% leaving, he argued that the Consent Order left his former the wife with “105% of the couples assets, he with -5%”. He still owed some of the cash settlement and stated he needed to borrow money to pay her.

The Court ruled that the Order stood – had the shares increased hugely the husband would have benefited. The time to look at the division of the marital pot was at the date of the Court Order and the Court declined to change that position. We question whether the decision would have been the same had the original February 2008 order been imposed by the Court rather than agreed between the parties.

Another relevant recent case headlined, “Now buy- to- let tycoon wants a £4.7 million, divorce deal reprieve”. In this case, the former husband claims that his once £100 million fortune is now down to the last £3 Million because of the loss of value of his property portfolio, that the cash needed to pay his former wife the lump sum ordered by the Judge last year, is now just not available because of the fallen property values and downturn in the property market.

Courts do not renegotiate or vary “final” settlements lightly, or at all. Stringent conditions must be satisfied before the Court will interfere and upset an arrangement that brought a conclusion to the litigation, most attempts to do so are likely to fail.

As for continuing maintenance Orders, since 1 November 1998 it has been open to a payer or payee where there is a continuing Maintenance Order to apply to the Court for a lump sum to capitalise the maintenance against the payer to relieve the lifetime obligation, or reduce the period of the payments. It does not just work in the Payer’s favour. Many Payees will be anxious about the ability of the Payer to continue to make these payments in the current climate. The Payer cannot merely cease making the payments because of loss of employment or substantial reduction in income but must make an application to vary the original Order downwards immediately. Redundancy payments, or golden handshakes are clearly a resource available to relieve the burden of the paying party of the continuing maintenance obligation, or to give the payee the security of payments albeit by lump sum rather than continuing regular payments. An agreed or even Court imposed variation may well suit both Payer and Payee in bringing certainty to their financial positions in these uncertain times.

Head of  Family Law