Impact of the Recession on financial settlements

The fall in the value of property and shares during the recession is inevitably affecting financial agreements during divorces, as the value of the assets can change considerably post settlement.

Recent case law shows that despite a change in circumstances, Courts are unwilling to alter the asset division agreed in Consent Orders. In the case of Myerson, the husband applied to vary an agreement which provided that he pay a lump sum of £11 million to his wife in instalments. His application to recover some of the lump sum was issued because his shares (which he retained after the divorce) plummeted in value during the recession and he was struggling financially.

The Court dismissed his application, citing that shares of this nature always carry risks and that the husband should have anticipated them when he entered into the agreement. The rationale for the decision is that the value of assets such as shares can fluctuate in both directions, i.e. if the husband’s application were allowed, the wife could successfully apply in future if the shares’ value increased. Therefore the variations to the Order could potentially be endless, and from a wider perspective the floodgates could open to similar applications.

The law differs when it comes to spousal maintenance. As maintenance is seen as an ongoing liability and is usually linked to income, case law suggests that due to the recession the Court will look favourably on reducing maintenance payments. In contrast the case of MacFarlane involved a wife successfully applying for her spousal maintenance to be increased in line with the husband’s improving income following the divorce.

Bina Modi – Family Law Department
bina.modi@smithpartnership.co.uk