2020 was undoubtedly a challenging year, and many are finding that their financial situation has changed significantly since this time last year.
With the UK having now officially parted ways from the EU without a comprehensive free trade agreement having been reached, many ex-spouses are looking at how they can readdress their financial portfolios, writes Matthew Taylor, senior solicitor at Stowe Family Law.
Amicable split sours?
In 2019, 108,000 couples got divorced and a proportion of these may now be considering challenging their divorce settlement as a result of their financial situation having changed post-Brexit or as a result of the pandemic.
However, the grounds upon which a person can re-visit a variation order following a court’s decision regarding the financial remedies of a divorce are very limited.
The court considers the principle of finality as paramount and there are only a handful of instances in which capital orders (for pensions, lump sums, properties and so on) can be varied.
The only hope of having a capital order re-assessed is if circumstances have changed since the settlement was made in where a ‘Barder event’ occurs.
A Barder event is named as such because it relates to a high-profile case, Barder v Barder, in which an ex-wife was given the family home in her divorce, where she lived with her children, only to then kill the children and herself weeks after the transfer of the deed.
Subsequently the ex-husband made a court application to reverse the order seeing as the purpose of the order (to provide a family home for his ex-wife and children) was rendered invalid.
As a result, what was considered an invariable order could potentially be re-assessed by the court provided four conditions were met including;
- the application to set aside is made promptly;
- new, unforeseeable events occurred since the order was made;
- that these new events happened a short while after the order; and
- that third-party rights over the subject are not prejudiced by the application.
It is only in the rarest of cases that such an application will be successful.
Unhappy precedent
Following the 2008 financial crisis, many applications were made following ex-spouses’ asset values depreciating greatly, only to be denied by the courts.
Even considering the extreme situations presented by Brexit and a global pandemic, it is unlikely that an order would be varied due to a change in asset values.
While covid-19 and the subsequent damage it causes to the economy couldn’t have been foreseen, it is possible that a court would view the pandemic in a similar way it does a recession.
The majority of financial orders are structured in the form of a series of payments that are paid out over a significant period of time; there are two different kinds, which sound similar but are legally very different: “a lump sum by instalments” and “a series of lump sums”.
Neither a one-off lump sum nor a series of lump sums can be varied, although a lump sum by instalments can be.
Reducation in circumstances
It’s important to consider the wording of the order because most will specify the format in which the payments must be made.
In instances where this is not clear, there may be scope for arguing that the outstanding amounts are variable.
Should one party seek to vary a lump sum by instalments, the court will consider all circumstances pertaining to the case, which would include any changes that may have occurred to the parties’ circumstances – financial or otherwise.
For payors who have experienced a reduction in their income or asset value, it may be a useful provision under which they can challenge the order.
However, if there is any expectation that the financial difficulties are merely temporary, the court will most likely vary the timetable for payment provided, so long as the payee is not disastrously impacted as a result.
If there has been a wholesale change that has occurred due to, say, a company liquidation for example, it may be that the order be discharged entirely.
Support payments
With regard to maintenance payments (whether child or spousal) these are always variable, meaning the amount to be paid can be increased or reduced, along with the term of payment.
Similarly, unlike capital awards, the order can be terminated altogether.
Upon considering a spousal maintenance variation application, the court will look at all circumstances pertaining to the case.
A key factor will be whether the payor is able to fulfil their payments.
If the payor loses his job or suffers a loss of income, their ability to make the payments will be affected, so the court will balance these against whether the payee’s income needs can be met if repayment is reduced or terminated.
In instances where a payor has investments or savings which could be used to pay the ex-spouse, it’s worth looking at capitalising the order by paying a one-off lump sum to replace the future income, giving a clean break order so that no future claims can be made.
Jurisdiction for varying child maintenance lies with the Child Maintenance Services (CMS) in the first instance, where no court order exists within the last 12 months governing the amount to be paid.
Where a CMS calculation has previously been in force, an application can be made to the CMS for a downwards revision if the payor’s income has reduced by 25% or more.
The court can deal with a variation application in instances where the payor’s income exceeds the CMS’s maximum assessment of £156,000 ($213,458, €175,606) per annum gross and a court order has been made in the past 12 months.
Capitalising child maintenance to avoid future payments is, however, not possible other than in extremely rare circumstances.
This article was written for International Adviser by Matthew Taylor, senior solicitor and head of the Liverpool office at Stowe Family Law.
