Headline-grabbing, high value divorce settlements were very much a bi-product of the times when the British economy appeared to be on the rise. Now that the country is experiencing a downturn and assets are depreciating, these financial payments look very different, so are tough times grounds to reconsider a divorce settlement?
As we search for the green shoots of recovery the effects of the downturn are still resonating in the Courts as some divorcees are counting the costs of their credit crunch divorces. Deals hammered out before the effects of the crisis have taken on a completely different complexion as property prices have plummeted and shares are in freefall.
If fund manager Brian Myerson had looked into his crystal ball back in March 2008 at the effect of a downturn in the economy he might have pursued a completely different financial settlement from his divorce than that reached with his wife of 26 years. The original order divided the assets valued at the time at £25.8 million as to 57% to Mr Myerson and 43% to his former wife. It was agreed that his wife would retain £9.5 million in cash and a beach house in South Africa valued at £1.5 million. Mr Myerson retained the couple’s shares in his company Principal Capital then worth an estimated £15 million.
You could be forgiven for thinking that, as a fund manager, he would be acutely aware of the risks in placing all of his proverbial eggs into one basket but, as the share prices began to tumble, the reality of his decision had catastrophic implications for him. Indeed, rather than retaining 57% of the assets, he in fact owes his former wife money, with her retaining now what is in effect 105% of the wealth. In the present financial climate, it is difficult to muster a great deal of sympathy for the former multi-million pound city tycoon but Mr Myerson had hoped that such a significant change in his fortunes would enable him to ask the Court to revisit the original order and redistribute the assets.
Mr Myerson’s request met with short shrift from the Court of Appeal Judges who said “why should the Court subsequently relieve him of the consequences of his speculation by rewriting the bargain ..?” Whilst one of the Presiding Judges Lord Justice Thorpe observed “that’s a rum do” the case law is clear, “the natural process of price fluctuation whether in houses, shares or any property … however dramatic” does not undermine the basis of a Court Order. Basically a deal is a deal!
The implications of this decision are fairly clear. To enable the fairest financial settlement to be achieved it is essential to spread the riskier assets between the parties in a divorce so that you can both share in the rise and fall in value of those assets. There are many whose divorce settlement has been significantly affected by the economic downturn but only the most extreme of circumstances will undermine the very basis of the Order. These circumstances include where an incorrect value had originally been placed on an asset but not where the value of the asset had fluctuated after the hearing.
Carmelita Ardren is a partner and head of Raworths’ Family Law unit. To contact Raworths telephone 01423 566666 or visit our offices at Eton House, 89 Station Parade, Harrogate, HG1 1HF.