As the courts move to a remote system and the virus outbreak impacts on personal finances and asset values, Bethany Meyrick addresses the implications for divorcing couples.
With the fast-developing global pandemic Covid-19 wreaking havoc on our daily lives, there is a feeling of uncertainty in the air. What does this mean for those in the midst or outset of a divorce or separation, and what impact is it having on the financial aspects involved?
Inevitably, a key consideration for a separating couple will be how to deal with their finances. The starting point for any case is a 50/50 split of all assets in the matrimonial pot, subject to the principle of needs. That means that if one party “needs” a certain amount of money to rehouse appropriately, perhaps in order to house a child with them, then the court can depart from the equal split and award one party more than half. Arguments often arise both in the context of “needs”, and also in establishing what is in the matrimonial pot in the first place (for example, inherited assets or assets acquired before the marriage may be treated differently).
As we have already seen in the financial markets, coronavirus is having a substantial impact on asset values. This means that what might have been available in the matrimonial pot a month ago, is now significantly less. An asset slump such as this is usually in the interest of the financially stronger party, the “payer”, rather than the financially weaker party, the “payee”. Now is therefore a good time for the payer to seek financial resolution, whereas the payee may want to slow the process down.
It is worth noting, however, that in cases where the finances are complex, parties often need to appoint third-party experts to carry out valuations of assets, for example properties and companies. In light of the lockdown, parties will find it increasingly difficult to appoint experts to carry out these valuations.
So, what is the best way forward for those wanting to press on with their divorce and financial settlement? Lawyers are obviously well-equipped to continue solicitor-to-solicitor negotiations and the Family Courts remain open (but are moving on to a remote system as far as possible). Another route available is Alternative Dispute Resolution, which is a process designed to move the court system on to something akin to the private medical system. For those willing to spend a bit more, you can pay for your own judge (usually a senior barrister) to conduct a private hearing at a time and place of your choosing. There are various advantages to this, one of which in the current climate is that you are likely to be in a more controlled environment sooner.
Finally, it is worth considering the impact that the coronavirus is having on those who have already divorced or separated, but remain connected to their ex-spouse/partner financially. As the reality of the coronavirus is starting to sink in, many are beginning to worry about their income streams in the context of ongoing maintenance obligations.
The general principle is that if there is a material change in circumstance, you can make an application to vary maintenance. Whether the impact of the coronavirus will constitute such a change will be very fact-specific. Perhaps you have been made redundant or own a company that is facing significant financial difficulty. The courts have a very broad discretion in variation applications, and it is certainly going to be worth considering if you find yourself in a position where you simply cannot continue to pay your ex-spouse/partner at the current level. The first step should be to write to your ex-spouse/partner to explain the difficulty and anticipated drop in income and, giving sufficient notice, suggest a temporary reduction of maintenance. It will then fall on the payee to enforce the maintenance order, however, it is likely that the court will be lenient on the payer in the next few months while we see how things pan out.
We live in extraordinary times and it is hard to predict the extent to which the coronavirus will impact the financial aspects of divorce. However, for the time-being both parties should be mindful that courts are likely to expect reasonable accommodations to be made in this uncertain and unsettling environment.
Bethany Meyrick is an associate at Collyer Bristow LLP.