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Asset value drops could see divorce settlements reopened

Unforeseen devaluation and market falls could mean reopening cases for the recently divorced


Being forced into lockdown with loved ones can be difficult at the best of times. It has been reported that divorce rates in China are set to skyrocket after rising numbers of people contacted lawyers when the stay-at-home orders were eased.

It is a painful process; which, in some cases, can be lengthy and acrimonious.

So, after negotiations about the distribution of wealth and assets are concluded, the last thing that any party would want is to have to get back to the boardroom and reopen discussions.

But current devaluations could mean that those who have got a divorce recently may be able to reopen their case and reach an alternative agreement. 

This is because the circumstances on which the previous settlement was based may have changed, including financial hardship, assets falling in value, childcare and school arrangements to name a few. 

In some cases, lawyers have had to agree on temporary terms, on top of the ones set out in the settlement, to help their clients cope during the pandemic. 

To understand how this could work, International Adviser spoke with Miranda Fisher, partner in the family law division at Charles Russell Speechlys. 

Exceptional events 

Reopening a divorce settlement is not something that can be done easily, Fisher explains. 

Previously, it’s always been very confined and limited circumstances to revisit a financial settlement or a court order that’s been made within divorce proceedings.  

There had to be finality in litigation, and it’s always been very hard to reopen orders other than in really specific and limited circumstances.  

And one of the major talking points at the moment amongst the profession is about whether the covid crisis, and really the consequences of covid, is going to enable family lawyers to make an application to the court to set aside a previous financial settlement or court order made in divorce proceedings before the lockdown started really.  

So, anything up to about February or March of this year, when we didn’t know that we were about to go into lockdown,” she added. 

Fisher believes clients could be successful in their applications because nobody could have predicted the implications of the outbreak of the virus and of lockdown. 

Limited timeframe  

But not every divorcee will be able to take advantage of the situation, Fisher clarified. 

“I think it only really applies to settlements that were entered into in about March of 2019. Anything before that, I think it’s too long.  

“The basis of these applications is that they have to be made quite quickly after the order was made. Usually, anything which happens within a year.” 

And to trigger the reopening of the case, family lawyers need to make a ‘Barder application’ – Barder is the name of the case that was first successful in doing so. 

After the 2008 crisis, there was a widely reported instance, the Myerson case, where the husband suffered greatly from the financial crash and asked for the divorce settlement to be re-argued. 

But the court of appeal ruled against him, because it said that market fluctuations – however drastic – are part of the market cycle and are not an unforeseen event, and they do not constitute enough reason to reach a different divorce agreement. 

This has made Barder applications even harder because very few events pass the ‘unpredictability’ test.

But the question is: is covid and the impact of it, something more? Is it a black swan event, something that nobody could really have foreseen?” Fisher asks. 

I think it is.” 

Still a bit to wait 

But it’s still early days, she warned. 

“We’ll have to see what the judges think, because I do think there will be a test case probably on this at some point in the course of the next year,” Fisher added.   

We’ve got some months to come, another year to see how it all plays out, as far as the economy is concerned.  

But if the general reporting in the media is right about what’s going to happen to the worldwide economy, it’s going to dwarf what happened post-2008.  

So, I do think at that point is one of probably the most interesting from a family law perspective at the moment that people are looking at, and it certainly is a hot topic amongst the family law profession. 

Coming to terms with change 

There probably won’t be a verdict any earlier than a year because even the courts are struggling with lockdown. 

They are currently hearing the most urgent cases remotely via video calls, and proceedings are moving at a much slower pace than usual. 

But Fisher believes this is a wake-up call for the court system in the UK. 

“The one thing I do think is that the court system has had to embrace technology in about three weeks.  

[In normal circumstancesthey were probably going to take about 10 years to get to grips with [it]. And I do think that it will transform the court system.  

I’ve already done three remote hearings. It’s an underfunded court system which is going to realise that this is a much more costefficient way of dealing with things,” she added. 

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