Our team: Hetty Gleave
At the beginning of 2020 the word on everyone’s lips was Brexit. By February that was rapidly overtaken by a new word in our vocabulary, Covid, and the implications of a deal/no deal Brexit seemed to pale into insignificance.
The sudden and drastic measures ushered in as a result of the Covid virus have caused seismic changes to our way of life, law and liberty. The practical changes to the way that family law operates have been unprecedented, for a system that traditionally takes years to adapt to modern working practices. We have all been forced to learn how to conduct court hearings by telephone or video link, which have worked with varying degrees of success. Meetings by Zoom, another new word in our vocabulary, are now the norm.
However, in terms of how courts approach outcomes for parties, one of the problems thrown up by the impact of a sudden and dramatic cessation of economic activity has been the valuation of various asset classes in an uncertain and rapidly changing market. The massive volatility and fluctuation in stock prices and uncertainty of property and business valuations have caused courts to consider carefully how divorcing couples’ assets are divided fairly. The FTSE index is down c15% on this time last year with the inevitable consequence that parties have struggled to agree what their assets are really worth compared to this time last year, and therefore how to apportion them fairly on divorce.
In April 2020 a husband claimed that his investment of £300,000 in a gym venture had been devalued and then “killed off” by the Covid pandemic, and so should not be taken into account as an asset. The Judge agreed but held that anything he did recover should be shared equally with the wife. Similarly, in July 2020 the court applied a 10% discount to the trading value of business to reflect likely disruption caused by both the Covid pandemic and Brexit.
However, in contrast, in May, a different judge decided there should be no adjustment to asset values as a result of the pandemic as he believed that in due course the values would be restored.
The initial freeze on the housing market meant it is was unsafe to assume values had been agreed even a couple of months earlier. However, the subsequent SDLT holiday re booted the housing market and valuations then appeared to bounce back to pre Covid levels, but are still a subject of debate depending on which part of the country the property is situated.
In terms of income and maintenance, unemployment has risen dramatically during 2020 and sources of income that might have been considered reliable may no longer be available. Companies have been withholding dividends to shareholders as they do not want to be seen to be paying out profits, especially if they have been in receipt of Government handouts through the furlough or other Government support schemes. Courts have had to take this into account when considering the term of any maintenance order as well as the amount to be paid.
In April a Judge recognised that it may now take a wife a longer period of time than would have previously been considered reasonable to re-enter the job market, and so extended the term for spousal maintenance. No doubt this argument will become commonplace as we move into 2021 and furloughed staff become redundant, flooding the market with applicants who have more recent working experience and no children to work around.
The courts have also had to take into account the ability of parties to raise funds necessary to discharge their liabilities pursuant to an order as the strain on income and economic uncertainty has caused lenders to be much more cautious. In May the courts accepted that a husband’s commission income would be much reduced due to Covid and therefore gave the husband a year to raise a lump sum, rather than a period of months as would have been usual. The same concern was repeated in May when the courts ordered a lump sum to be paid in 3 months, specifically referencing the fact that it would have been even earlier had it not been for the “extraordinary circumstances” caused by the Covid pandemic.
As we move into 2021 and life outside the EU, there will inevitably be more economic uncertainty and the issue of valuations and employment will no doubt continue to pose challenges for both parties and the courts. We can only hope that the recent developments of both a Brexit deal and a Covid vaccine will enable us to look into the future with a bit more certainty, but only time will tell.