Article written and provided by Lucy Greenwood, Partner at International Family Law Group for Beacon Gainer, private wealth advisory services group.
Synopsis
Sometimes people wonder if their final financial orders can be reopened or varied.
Some types of orders can be varied (maintenance, lump sums payable by installments, orders for sale of property and pensions if the application is made prior to implementation and Decree Absolute or it is a deferred lump sum order.
There are very limited and case specific circumstances where undoing any other types of orders in a final order might be possible. (They are often referred to as [1]Barder events after a case where an order was made for the husband to transfer the matrimonial home to the wife who cared for the parties’ two children, but shortly afterwards the wife killed the two children and committed suicide. It was held that this was a new event that invalidated the basis, or fundamental assumption, on which the order was made).
This article considers whether the arrival of the pandemic (just as a substantial final financial order was made was enough to warrant a review).
Background
At the beginning of the outbreak of Covid family law clients were anxious about the impact the pandemic would have on their financial family law matters.
Whole industries were closing and furloughing all or most of their staff, travel and tourism was severely restricted, insurance companies were fearful of huge pay outs, recruitment fell, and commercial property took a heavy hit. This was followed by a steep decline in the stock market.
General murmurings started within the family law fraternity about the risks of settling financial matters during a worldwide pandemic owing to the uncertainty of the economy (here and abroad, particularly for international clients or those with businesses or assets abroad).
However, overtime and as the stock markets bounced back (in some instances to levels higher than pre- Covid) people have become more relaxed and have accepted that the risks associated with Covid, like all commercial risks, just need to be considered carefully.
Similar anxieties were raised in the immediate aftermath of the 2008 financial crisis, but the court deemed the financial crisis per se was not sufficient to mean a financial order should be reviewed.
Is a Pandemic reason enough to overturn a final financial order?
In this context an UHNW family had a final financial hearing in January – February 2020. (The hearing lasted some three weeks). Their case was recently reported in the Law reports on an anonymised basis.
Whilst some of the facts of the case are set out below, this article focuses on explaining:
- How high the bar is set for reviewing or overturning a final financial order
- The importance of professional advice when assessing the quantum of any final award, but also the liquidity of various assets, particularly business assets; and
- What insights can be learned to help others
What Is required in law to reopen final financial orders:
- The new event needs to be sufficient to invalidate the basis for the order and if appealed, that appeal would be certain, or very likely, to succeed
- The new event should have happened within a relatively short period of time after the order was made
- The application to review the order should be made promptly
- It needs to be demonstrated that granting leave to appeal would not prejudice innocent third parties if the outcome were changed; and
- The event must have been unforeseen and unforeseeable at the time the order was made
Very broad outline of the recently reported case:
The husband and wife had one child.
Whilst the extent of the husband’s wealth was not disclosed in the case report, the wife was awarded £64million by the Family Court.
The Husband owns land in various countries, two care home businesses in England, a London property and no less than 25 businesses many of them related entities, as well as plant machinery, office equipment and vehicles.
The wife’s award comprised:
- A matrimonial home (£15million mortgage free)
- A lump sum of £49million payable by 3 installments of: £12million (to repay the mortgage on the family home); £30million within 6 months of the order; and £19million within 18 months of the Order
- Interest at 4% on any late payments; and if any of the instalments were missed then the whole balance would become payable immediately
- Spousal periodical payments at the rate of £720,000 pa to be reduced pro-rata by the proportion of the amount of the £49million which had been paid
- Child periodical payments (£5,000 pm) and school fees
Importantly, the timing of these cash installments was proposed by the husband.
During the course of the hearing the Judge had expressed concerns about the paucity of information/advice the husband had received or presented about liquidity.
The Judge also made some condemnatory findings about husband’s honesty/credibility.
Procedural setting
- Feb – March 2020 – Final Hearing
- 23 March 2020 – England goes into first lockdown
- 27 March 2020 – a hearing to discuss the exact wording/terms of the order (The Husband also invites the judge to defer handing down his/the judgement owing to the Pandemic)
- 30 March 2020 – The judge hands down his judgment to the Parties (in the terms cited above).
- The husband appeals the Order
- 18 August 2020 – The Court of Appeal refuses the husband’s application for permission to appeal the substantive order
- 28 September 2020 – (just before the first instalment was due) Variation applications were issued:
- The husband applies to vary the order both as to overall quantum and as to the time for payment and produces a statement in support
- The wife seeks to vary her maintenance to £2.5million per annum, increase the interest rate on missed instalments to 8% and an order for her legal costs of £1.4million (for various aspects of the proceedings)
Around this time the concerns about the stock market were diminishing as the markets were improving.
What happens at the hearing to vary the final financial order?
As part of his evidence for the variation application the husband filed a statement.
The Judge found the husband’s statement vague and that it dealt mainly with the macro-economic impact of the pandemic without specifics about the husband’s changed financial position, including an absence of:
- Trading figures
- Profit and loss accounts
- Underlying documentation or valuations; or
- Any indication of his current overall wealth
The husband also sought to revalue all his businesses and other assets (the estimated fee for which was c. £300,000 – £400,000 plus taxes) and estimated it would take about six months to complete them.
The judge said the husband had not set out sufficient evidence to support his case that there was a need for a full review but was also unconvinced any information the husband would supply to the valuers would be impartial.
Incidentally, the husband had also just bought a leasehold of an apartment in one of the most prestigious and expensive blocks in Monte Carlo.
Judge’s conclusions
- No case had been made by the husband to show the husband’s wealth had been impacted severely by the pandemic
- The timings of the instalment payments of the £49million lump sum could be reviewed
- The wife’s interim periodical payments were increased to £1.2m pa backdated to the date the first instalment of the lump sum was due to be paid
- Most of the wife’s legal costs were awarded (without potential recourse for the husband to challenge them)
- No increase in the interest payment and no interest on the late repayment of the lump sum equivalent to pay off the mortgage on the family home, (as the husband was still paying the mortgage)
Insights for future clients
- The court is very unlikely to interfere with a final financial order.
- On two occasions (The 2008 financial crisis and the current pandemic) the courts have deemed external events alone are not enough to cause financial orders to require review.
- It is essential when making any final settlement to consider liquidity and which assets are shared. Whilst there is often a desire to pay in cash because it is cleaner and quicker, it is also far harder to raise should be the businesses or other assets diminish.
- In this case the capital sums were payable by instalments (hence variable). In many cases the opposite objective of absolute finality and set lump sums being paid is sought.
- The bar is set very high indeed to undo final financial orders which would not ordinarily be variable.
- If somebody elects to retain less-liquid or business assets, they must take on the economic risk associated with that election. That is why it is sometimes better to share different types of assets on a % basis to pay an overall award (so the risk is shared).
- The importance of transparency in financial disclosure cannot be overstated.
- Both parties need for advice, prior to the conclusion of a case or final settlement, not only about family law but also about how any settlement is going to be afforded, structured, paid and when.
Lucy Greenwood
The International Family Law Group LLP
© March 2021
About Us
Lucy Greenwood is a Partner and Solicitor at iFLG. Lucy has specialised exclusively in the field of family law for over 25 years. Her areas of expertise are matters involving financial matters related to relationship breakdown both nationally and internationally, including cohabitation and separation agreements, pre-nuptial and post-nuptial agreements. The Legal 500 2021 states that ‘Lucy Greenwood is outstanding, a first-class operator for divorce and finance cases.’
The International Family Law Group LLP is a specialist law firm based in Covent Garden, London. Our legal team includes specialist accredited English lawyers, mediators, collaborative lawyers, arbitrators, and Australian lawyers. We look after the interests of families and children, with a specific focus on international families. A key area of our work is recognition of foreign marriages and divorces and the financial consequences of relationship breakdown. We are committed to the use of digital innovations for the benefit of clients and resolution on international family law cases. We have outstanding links with law firms and specialist family lawyers within Europe and worldwide. Our website is full of helpful information including a 24-hour abduction and emergency line at www.iflg.uk.com. The Legal 500 2021 comments that ‘iFLG now has a presence across all areas of family law. There are few London practices with the strength in depth which iFLG can offer’
[1] Barder v Barder (Caluori Intervening): CA 1987
FRB and DCA (No.3) [2020] EWHC3696 (Fam)
