Family law partner, Justine Flack looks at the effect of the Covid-19 pandemic on divorce settlements and gives some practical steps for those who feel their settlement has become unfair in light of the circumstances.
Coronavirus has been brutal, not just for those who have become ill or for people who have lost loved ones but in terms of the impact on our day-to-day life. There are few of us who would have imagined entire businesses operating from employees’ homes or the complete shutdown of our social and leisure facilities. It felt as if this came upon us in the blink of an eye.
The sudden changes which have affected individuals and businesses have the potential to affect financial settlements on divorce. Many clients are not negotiating at present, electing to wait for some stability to return. Others have withdrawn settlement proposals. But what is the position if your settlement was agreed shortly before lockdown, you have your order but it is now potentially unfair in terms of the asset split? This may come about because a previously strong business is experiencing a downturn or may have collapsed completely or investment values are significantly affected. Can anything be done about the terms of the order?
There is the provision to return a matter to court when there has been what is known as a Barder(1) event. This is where there is a significant change in circumstances within months of the order. It arose from a case where the wife received the family home in the divorce to allow her to provide for herself and the children. Shortly afterwards she killed herself and the children. The husband applied for the order to be set aside and for the family home to be transferred to himself.
To argue that there has been a Barder event there must have been a significant change which was unforeseen and unforeseeable at the time the order was made. It must undermine the basis on which the order was made. Does economic or business collapse count?
The answer at this point is uncertain. The financial impact of Covid-19 is probably greater than anyone would have predicted. It is anticipated that it will affect finances throughout the world which is more extensive than a normal recession. The global nature of many businesses means that the impact will potentially be more significant than previously known. Was this foreseeable? There is a reasoned argument that says it was not.
Against this however is the argument that where businesses are concerned there is always risk. They are not considered 'copper bottomed' like houses, land and money in bank accounts. The risk that sits with them should always be taken into account when negotiating a settlement in any event. It could be argued that financial failure is a known risk. Likewise, share values can go up and down (sometimes drastically) even when not in a pandemic. Previous cases have shown that an economic downturn has not been accepted as a reason to set aside the terms of an order. The question is whether the circumstances now, frequently described as 'unprecedented', will be deemed as different.
If an application is to be made it needs to be submitted promptly. There cannot be a delay between the impact of the event and the application to court. Failure of the business or the unfairness which is alleged will need to be solely as a consequence of Covid-19 rather than as a result of other issues. The effects will need to be long term rather than transitory. This potential application will only apply to orders made before the pandemic, not since it started. I suspect that judges will be mindful of how they deal with such an application because of the precedents that will be set. These applications are notoriously difficult at any time.
Other elements of an order might also be affected by the current situation. The ability of a party to pay maintenance may be limited. In that case an application for a downward variation can be made if the recipient is not willing to compromise matters, even in the short term. If a lump sum is payable by instalments you can apply for the payment period to be rescheduled and extended.
It is hoped that the financial effects will not be long lasting; properties will sell, investments will recover their value and businesses will survive. There are however uncertainties around this.
Where difficulties with implementing an order are felt, try and negotiate with your former spouse in the first instance; agreement is always better (and cheaper) than court proceedings. However, ultimately an application may need to be made to court and if that is the case get advice early because delay could prejudice your position.
(1) Barder v Barder (Caluori intervening) [1988] AC20
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