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Divorce agreements: what could happen in the future?

View profile for Karen Johnson
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Divorce agreements: what could happen in the future?

In the divorce courts there is a great deal of encouragement to couples to reach agreements about the division of their finances. Most couples prefer the certainty of an agreement compared to the uncertainty of a trial with all of the attendant expense and emotional distress. 

The recent High Court case of CB v EB demonstrates that the desire to reach a divorce settlement should not prevent a careful consideration of what might happen in the future. 

In this case, the husband (H) and the wife (W) had been married for 22 years. They reached an agreement in 2010 that they wanted to divide their capital assets in a broadly equal fashion. Some of the properties they owned were divided and others were to be sold. However, one of H’s companies was in the process of developing two further properties and he expected to make anywhere between £2m and £6m in profit. 

In due course, W applied back to the court to get her share of the anticipated profit. Neither property had sold by that stage but the couple reached an agreement which provided that W would receive total lump sums of £660,000 in full and final settlement of all claims and on a clean break basis. 

Unfortunately, one of the sales then fell through and the other property was repossessed which left H in a very difficult financial position. He told the court that he had been left with a net worth of about £1m compared to W’s net worth of about £8.5m. Because the parties had wanted to reach a fair division, he suggested that the court should revisit the original agreement in order to achieve that.

The judge in the High Court stated the existing law, which is that agreements should only be set aside for reasons of:

  1. Fraud or mistake;
  2. One spouse concealing assets;
  3. An unforeseen change of circumstances very soon after the order was made;
  4. Certain other technical grounds which have no application in this case.

The court stressed that there was no discretion to set aside an order because subsequent events made it appear unfair. H left the court very disappointed.

There is a clear lesson here. None of us has a crystal ball and no one can predict what might happen to the value of a future asset. I suspect that in most people’s minds will be the thought that if H had made a great deal more profit on his two properties he wouldn’t have been offering to share that profit with W. The fact that he made a loss was his misfortune but nothing that the court was prepared to address.

It is important to carefully think through the consequences of any agreement that you want to make. 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 217305 or karen.johnson@birkettlong.co.uk.

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