25th Nov 2021

The Pandemic: Impact on Divorce Financial Settlement

As we (hopefully…) creep our way out of the multi-faceted and devastating impact of the global pandemic, there has been increasing scrutiny of whether divorce financial settlements achieved pre-pandemic, should be reviewed and the criteria to be applied.

A recent High Court decision has grappled with the issue. The husband in the case owned and operated a business providing school meals. The business was inevitably decimated by the impact of school closures during lockdowns. In October 2019, the husband had agreed a financial settlement with his wife in terms that required him to pay a series of lump sums to his wife between 2019 and 2023, and maintenance in a tapering sum until the final lump sum had been paid. The total of the lump sums to be paid to his wife was less than half of the total assets, as it was accepted that this was justified by the husband’s share being largely comprised of the value of his business being a more volatile and ‘risk laden’ asset than the other ‘copper bottomed’ capital assets retained by the wife.

The husband applied to the Court to set aside parts of the settlement due to the financial impact of the pandemic on the business. The Court said that this must have been unforeseeable for it to have any legal basis, and when assessing if it was unforeseeable the Court should focus on its economic impact where is has affected asset values. The Court concluded that the COVID-19 pandemic is ‘probably not’ capable of being sufficient to change the financial settlement in this particular case, as a reasonable person may have said in October 2019 when the settlement was agreed that there was a chance an economic downturn would occur in the next year, resulting in reduced business turnover and increased costs. Further, the basis of the settlement was that the husband was retaining the risk laden assets and had already been given credit for that in the overall split.

However, the Court also said that the issue is case specific and indeed there have been instances where there has been good justification for a settlement to be changed due to the financial impact of the pandemic.

If you find yourself in this position, please do contact us for advice. Berwins' Family Law Team are specialists in this area and are ranked in Band 1 by legal directory Chambers and Partners.

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