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COVID19 – Divorce – Is my financial Order final?

COVID19 – Divorce – Is my financial Order final?

The huge impact COVID19 is having on the economy will have a knock-on effect on financial Orders arising on divorce. Whether it is an order recently concluded or one which has been in force for a long period and provided for maintenance to be paid to a former spouse, clients will be asking “what happens next?”.

No matter what your current situation, it is not advisable to unilaterally stop maintenance payments or fail to comply with an Order to pay lump sums or transfer property. To do so, will put you in breach of an order and could result in further and unnecessary litigation. It is therefore advisable to take expert advice from the Family team at IBB Law on best way forward.

The following is intended to be a guide to the current law and thinking about how the family courts will react to the challenges brought about by COVID19 and the impact it will have on company valuations, property valuations, investment portfolios, pensions and of course, income streams.

Financial Orders made, whether by agreement between the parties or imposed by the Court, are intended to be final. There are very limited circumstances where a Court will even entertain a challenge to a Financial Order. Maintenance provisions are capable of variation but the relevant parts of the Order, which deal with capital assets, are generally not – with certain exceptions such as lumps sums – payable by instalments. Finality to litigation is however a core principle.

Variation of Child and/or Spousal Maintenance

It is possible to vary maintenance payments (also known as periodical payments). The type of maintenance you are paying and whether you are the payor or payee will impact on how we at IBB would advise you to proceed.

In brief, financial Orders which provide for child maintenance payments and which have been in place for over 12 months, are capable of variation via the Child Maintenance Service (“CMS”). The Court does not have jurisdiction over most child maintenance issues and so the CMS would handle such disputes.  Child maintenance is much simpler to vary as there is a statutory and formulaic approach for those payors earning up to £156,000 per annum. Whether that is the best route will be fact specific.

Spousal maintenance provisions, payable for the benefit of your former spouse, are capable of upwards and downward variations. If your income has been severely impacted as a result of COVID19 then the courts should take that into consideration as a ‘material change in circumstances’ when looking at an application to increase, reduce or end spousal maintenance payments. However, we would not advise any paying parties to unilaterally stop meeting their maintenance obligations without having taken advice.

Applications to set aside capital settlements – Barder event?

The leading case on this subject is Barder v Barder (Calouri intervenoing) [1987 2 FLR 480] which was heard in 1987.  The facts of Barder are desperately tragic. 5 weeks after the financial Order, the Wife killed the children and then committed suicide. The Court laid out four principles, which must be satisfied for Barder to apply:

  1. New events have occurred since the making of the order which invalidate the basis or fundamental assumption so that the appeal would be certain or very likely to succeed.
  2. The new events should have occurred within a relatively short time of the order having been made. In most cases this would be no more than a few months.
  3. The application for leave to appeal out of time should be made reasonably promptly.
  4. The grant of leave to appeal out of time should not prejudice third parties who have acquired, in good faith and for valuable consideration, interests in property which is the subject matter of the relevant order.

In the more recent case of Richardson v Richardson [2011] EWCA Civ 79, the Court further clarified that “Cases in which a Barder event, … can be successfully argued are extremely rare.”

Whether or not the death of a former spouse will contribute a Barder event depends on the specific circumstances of the case and the basis upon which the terms of the financial Order were reached. If the capital has been shared equally between the parties, rather than one party receiving a more generous percentage of the matrimonial assets, based on an assessment of their needs, then the Court are unlikely to allow the appeal.

It is anticipated that, unlike Barder and Richardson, which featured the death of a spouse; most challenges to Orders will arise from the potential reduction in asset valuations. However, this is not a new concept to the family courts and another leading case, born out of the last recession in 2007, was Myerson v Myerson [2009] EWCA Civ 282. Myerson came before the family courts in 2009 and argued that devaluation could trigger a successful appeal.  The Court disagreed and even though Mr Myerson’s share portfolio had fallen in value by 90%, the court held that natural fluctuation in value, even one this vast, was insufficient to warrant a variation. It was held that the global financial crisis was not unforeseeable or unforeseen. Whether the coronavirus pandemic and its ramifications are unforeseen and unforeseeable events remains to be seen. It could be argued that it is different in nature, and possibly also in scale, to the ‘natural processes of price fluctuation’ as stated in Myerson and we predict that divorcing couples will use this challenge existing Orders.

In summary, if you and your former spouse are unable to agree to a change in the existing order, then the Court can, albeit reluctantly, vary financial Orders. Anybody facing such challenges, should take expert advice.

Contact IBB’s family law experts today

Jolene Hutchison is a Partner in the family team and is leader in her field with regards to financial matters arising on divorce. Jolene and the rest of the team offer fixed fee initial meetings which can be conducted via video conferencing. Please contact Jolene.hutchison@ibblaw.co.uk. Alternatively, you could call to speak to Jolene or another member of the team on 03456 381381.