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COVID affecting divorce settlements - an update

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COVID affecting divorce settlements - an update
Can I change my divorce settlement because of COVID?

 

COVID affecting divorce settlements - an update

In March this year, I blogged about the long-running case of FRB v DCA (no.3).  In that case, the court ruled that the original divorce settlement would not be changed just because of Covid. Now there has been a second case reported – that of HW v WW.

What was this case about?

After a marriage lasting 24 years, the couple reached a financial agreement at court. The wife (W) would retain the equity in two properties judged to be £530,000 and get one-third of the pensions. The husband (H) would keep a company worth £3.2m and would pay W £1m in cash over a period of time. W got less than half of the assets on the basis that her assets were risk-free and H’s were not. 

When was the financial agreement reached?

The financial agreement was reached on 12 March 2020. The UK entered its first national lockdown on 23 March 2020. H’s company was primarily concerned with the supply of commercial office supplies. Within a month it was clear to him that his business was going to be severely affected as more and more people worked from home. 

What did H’s divorce solicitors do?

They wrote to W’s divorce solicitors saying that Covid was an unforeseen ‘and unforeseeable’ event. H applied to postpone the payment of the lump sum for at least 12 months and W countered with an application to enforce the order and add interest to it. H then applied to set aside the original agreement completely. 

What is the relevant law?

A financial order made in divorce proceedings can be set aside by the court if there is ‘a subsequent event, unforeseen and unforeseeable at the time the order was made, which invalidates the basis upon which the order was made’.  The court has to see that:

·         There has been a new event which invalidates the basis on which the order was made;

·         It occurred within a relatively short time;

·         That an application was made back to the court reasonably promptly; and

·         No one else would be prejudiced. 

What did the judge decide?

The judge said that the Covid pandemic was an extraordinary event and that in principle it could open the door to a successful claim to set aside. H had acted reasonably promptly and no one else would be prejudiced if the order were set aside. 

However, Covid was known about at the time the case was settled and ‘not without some hesitation’ the risk to the company was reasonably foreseeable. H chose to take the greater risk because he believed that one day it would produce a greater personal reward. Since both parties had decided to accept risk – H that he might be wrong with the company’s future and W that she might not share in it – the award would stay and H’s application was dismissed. 

What conclusions can we draw from this?

A lot of commentators have suggested that Covid would constitute the sort of event that would lead to divorce settlements being overturned. This case gives authority for the suggestion that it might but that circumstances would need to be fairly extreme for such an application to be successful.

We are always happy to discuss matters with you and offer a free 15 minute initial telephone call. If you would like to take advantage of that, please contact me on 01206 217320 or philip.hoddell@birkettlong.co.uk.

Click here to read about how we help those thinking about divorce or ending a relationship.

 

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