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Financial Settlements in Divorce are not immune to the Covid-19 pandemic

It is without doubt that these are “unprecedented times” – a phrase that we are most likely to have heard over the last few weeks and will continue to hear amid the Covid-19 pandemic.

The pandemic has had a direct impact on everyone’s lives. It is particularly being felt in the legal system where law firms now have to work (in most cases) remotely and Courts are working in a limited capacity. In an attempt to mitigate the impact, Court Hearings are being heard remotely via video conference platforms, such as Zoom and Skype for Business, but they are also continuing to be held over the phone where appropriate. Even the Legislature – the UK Parliament – is not sitting to pass Bills, such as the No-Fault Divorce Bill that previously fell victim to the delays caused by Brexit (a distant memory now). Whilst the No-Fault Divorce Bill had its first reading in the House of Commons on 25 March 2020, no date has yet been set for the second reading.

The pandemic is also affecting financial settlements in Divorces. For example, parties may now need to revisit valuations of their assets, such as properties, pensions, businesses and shares. One cannot ignore the devastating impact the pandemic has had on the financial markets recently where, as at the time of writing, there has been an approximate 25% decline in the value of the FTSE100 since the beginning of this year. Actuaries may have to caveat their advice with reference to particularly volatile investment markets. The value of a pension, which has an underlying investment, may be impacted by the changes in the financial markets.

Parties who already have a Financial Order in place are also not immune to the pandemic. There are cases where, for example, one party may have lost their job and therefore unable to meet their financial obligations pursuant to a Court Order. There have not yet been any reported cases where Financial Orders have been set aside on the basis that the Court would consider the Covid-19 pandemic to be a supervening event. In such a case, one party would argue that Covid-19 has essentially undermined the settlement agreement reached between the parties and should not be adhered to.

It is almost impossible to set out an exhaustive list of Dos and Don’ts to consider in Finance cases, but we have set out below a brief list of considerations which can assist in these difficult times:

  • Do abide by any Court Order which requires you to pay money, whether by way of a lump sum or by way of maintenance, unless you are unable to do so AND you make an Application to the Court to vary the Court Order to reflect this.
  • Do consider contacting the recipient of any maintenance, in particular, to see whether agreement can be forthcoming to reduce maintenance payments if your own income has decreased. In the same way as mortgage companies, banks and credit card companies are open to accepting payment holidays, it may be possible to achieve a reduction in maintenance for a period of months pending further certainty of the economic situation, and the length of the Government restrictions.
  • Do provide reassurance to the recipient of maintenance that your request for a reduction is temporary.
  • Do provide evidence that your income is being affected.
  • Do think about bringing in outside help to work with you to come to temporary arrangements during these difficult times. Many Mediators are used to holding sessions remotely and dealing with alternative finance arrangements for a temporary period and may only take one or two sessions. Arbitrators are available if there are discreet issues to be dealt with. Lawyers can assist - many are collaboratively trained.
  • Do consider whether to get new valuations of assets. Given the volatility of the markets, you might have to wait several months until matters settle down again.
  • Don’t bury your head in the sand if your partner / partner’s legal representative is trying to arrange alternative arrangements. Should your partner return to Court in the future as a result of your failure to comply with a Court Order, the Court is likely to consider whether your actions were reasonable in the circumstances at the time.
  • Do get any agreement to varying payments recorded in writing.
  • Do remember that the Courts are still operational, albeit with some tweaks. Priority is being given to urgent Hearings. Much of the Court’s work is now being dealt with remotely.
  • Don’t assume that if you reached an agreement, or a settlement by way of Court Order, involving transfer of property, lump sums, transfer of shares, that just because the current situation has undoubtedly affected the valuation of all major assets, and caused business interruption to many businesses, that the Court will consider that the current pandemic will be treated as a “supervening event”. The Court has limited powers to overturn previous agreements and Court Orders if it feels there has been a “supervening event”.
  • Do bear in mind that the crash of 2008 was not considered by the Court of Appeal to be a supervening event, despite the unpredicted nature of the banks’ collapse.

If you do envisage or find yourself in difficulty, please do take urgent legal advice. Our Family Team are available to assist with your queries before taking any action.

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