August 2009 - Can divorce settlements be altered in the event of a recession?

The recession had led to many divorced individuals having to revisit old maintenance orders. This is due to falls in income, and particularly bonus payments, meaning the maintenance they are paying sometimes exceeds their income. If a maintenance recipient is content to accept that circumstances have changed, it is normally possible to agree a variation without going to court.

However, things are more complicated in the case of so-called ‘clean break’ orders, as these are, by definition, supposed to be a final settlement. However, past cases suggest that there are some circumstances in which a clean beak order can be varied. For example, if an event has occurred since the making of the order which invalidates the basis on which the order was made, where the event occurred within a relatively short period of time after the order was made , or where the application is made reasonably promptly.

However, a recent Court of Appeal judgment (Myerson v Myerson) may have to set aside that precedent.  The case was concerned with an application to vary a clean break order. The original consent order said that the wife would receive 43% of the assets, and the husband 57%. At the time, the total family assets were valued at £25.8million. A substantial amount of the husband’s assets took the form of an AIM-listed company of which he was the funds manager, The husband’s stake was valued at £15million (£2.99 per share). However, the share value subsequently fell to around 27.5p per share, which meant that if the order was fully implemented, Mrs Myerson would end up with 105.2% of the assets and Mr Myerson would be left in debt.

However, the judges ruled that the order should not be varied, for the following reasons:
•    The shares may go up in value in the future.
•    There was concern that allowing the appeal would open the floodgates to a number of similar appeals.
•    The change in the value of the share price was the result of a ‘natural fluctuation’, not a mistaken valuation.
•    The order had been negotiated and made by consent, rather than imposed by the court. It was also Mr Myerson’s decision to keep all of his shares.
•    Because the lump sum was being paid in instalments, the court could vary the outstanding instalments without varying the original order.

This judgment makes it clear that it is generally incredibly difficult to alter a clean break order, even when the drop in wealth of one party has been significant. Where an agreement has been reached, but has not yet been converted into a court order, it will not have the same binding effect. However a court is still likely to take into consideration what had previously been agreed.

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