Settling Cases in Unsettling Times

In these unprecedented times the need for the certainty in any divorce settlement is key. If you have recently reached an agreement or financial settlement you will understandably want to reconsider if the outcome of that agreement remains fair to all parties. If instead you are just beginning proceedings, you may think that it will benefit you to wait out the current economic downturn.

Depending on what stage you have reached in divorce proceedings the courts will approach the question of the fairness of reopening or delaying matters slightly differently and it is key to obtain advice as to what steps to take (or not as it may be) in these unsettling times.

The court gave judgment, but we do not yet have an order – can I re-open the case?

There is a narrow window between when a decision of the court is handed down and before it is sealed where the court can revisit its decision usually on the application of one of the parties. The case of L and B (Children) [2013] UKSC 8 made it clear that the court is able to change its mind as to the appropriate outcome during this window but will still need to consider justly all the circumstances of the case and the decision will need to be in accordance with the court’s overriding objective. In short:

• Judges have jurisdiction to reverse their decisions at any time before the order is drawn up and perfected.
• The exercise of that jurisdiction is not subject to exceptional circumstances: judges should be guided by the overriding objective to deal with the case justly.

The court’s ability to reopen cases prior to the order being sealed is however very limited given the court’s focus on finality and not re-opening cases unless it is justified in all the circumstances. If you feel your case falls within this category, you should take urgent advice.

My ex wants me to sell our house, but I am worried it is now worth less than we agreed.

This is likely to be an issue going forwards given what some are seeing as a slowdown in the housing market. Depending on where you are in proceedings, the first step will be to try and agree with the other side wheter the values should be reconsidered by way of an online market appraisal. If this is not agreed, you may need to make an application to the court. If the court has already ordered a sale and a division of the proceeds you will need to take advice and consider the impact of any changes in values on your ability to rehouse. If a sale has not been ordered, you will want to consider the best way of sharing the risk of the home’s value falling and ensure maintaining the home is affordable going forwards.

We reached a settlement and have a final order sealed by the court – can I set it aside because of the financial effects of the current crisis?

The case of Barder confirmed that the court can set aside a judgment or settlement in very limited circumstances where a new event has occurred which fundamentally undermines the assumptions on which the decision was made, and that new event happened very quickly after the making of the decision. Applications to set aside orders need to be made within a reasonable period of time and it is crucial to take urgent advice as to whether the circumstances of your case may fall within the exceptions.

As yet there have not been any reported decisions as to whether the current Covid19 crisis constitutes an unforeseen and unforeseeable event. During the financial crisis of 2008 the court in the case of Myserson considered whether businesses and property values falling significantly was sufficient to reopen a case. The application was unsuccessful with the Court of Appeal noting that the argument that there have been fluctuations in prices is unlikely to persuade a court to reopen a case unless they have been mistakenly valued or the changes are substantial, unforeseen and unforeseeable. The fact that one party sought to keep a risk-free asset and another a risk laden asset had been their choice and the court would not therefore undo it. In all cases it will be important to consider whether the court and the parties to any agreement considered balancing the risk at the time the order or settlement was reached.

I would like to delay the proceedings until the value of my partner’s shares has risen again – can I ask to adjourn?

Usually times of economic uncertainty will benefit one of the parties and that party may wish to wait until values have risen. Conversely it may benefit the other to proceed quickly. It is important to take advice as not only does delaying an application in the hope an asset may rise present a significant risk that the assets may fall lower, but also the court may approach the case differently if it perceives the delay has been tactical and is intended to gain financial advantage.

It is also key to note that it may also be the case that delaying will mean there is less liquid capital available which will impact on parties’ abilities to negotiate a clean break where maintenance is capitalised into a lump sum. On the other hand, delaying may mean that if the values of property or assets do increase, the increase in value may be seen to be non-matrimonial in nature and a party may not be able to claim that the windfall should be shared unless it is needed. Again, it is important to carefully weigh up the pros and cons of waiting it out.

Is it safe to reach an agreement in the current climate?

Whilst nobody knows how long the current situation will last, it is clear that people still need to conclude financial settlements so that they can plan for the future. The safest way to do this is to carefully consider whether it is better to share the risks of any rise and fall in property and business values and other assets. The courts use the term a “Wells and Wells sharing” where similar categories of assets are shared in similar proportions so that the benefit and risk is also shared. The other approach is to recognise that if one party will be taking the largely risk-free assets (such as the family savings) and the other the illiquid and risk laden assets (such as company shares), the party taking those which are risk free will often receive these at a “discount” to recognise the risk.

In the current climate it is essential to take expert advice on whether and how best to share the risk particularly where business assets are involved. While time will tell whether the court considers Covid19 to be so “unforeseen” that it is able to reopen cases, to ensure any divorce settlement provides as much finality and clarity as possible for all concerned, it will be key that all settlements are very carefully drafted and clearly reflect the degree of risk sharing.

Kerrie Hall is available to help if you need advice about divorce proceedings.

Please note the contents of this blog are given for information only and must not be relied upon. Legal advice should always be sought in relation to specific circumstances.