The global pandemic and how it effects existing property orders and childcare payments

The Deal is off!

Or is it?

The onset of a global pandemic has wreaked havoc on all our lives but it has also wreaked havoc on all of our assets. House prices have changed, share prices have changed, superannuation balances have changed and in some cases incomes have changed.

Some of us are on jobkeeper, some of us are on jobseeker, and some of us have had our businesses forcibly shut down by the government.

Fair to say none of us thought we would be here.

So where do you stand if you have a property agreement with your ex but covid has ravaged your asset values. Is your agreement still valid or can you change the split?

And can your existing child support payments be altered to reflect your changed circumstances?

When talking asset values it is very hard to change an agreement already registered with the courts. Basically, there are four reasons why the court will set aside an agreement. And most importantly it is at the total discretion of the judge no matter what reasons you may have.

1:There was some sort of fraud or one of you was under duress to sign the agreement. e.g. one of you failed to disclose something significant.

2:One of you has not honoured the agreement and the other has significantly suffered because of it. e.g. the superannuation was not split when it should have been and the value doubled or halved.

3:Something has changed that makes the orders impractical or makes it impractical for them to be carried out. It is important to know that this is not just difficulty carrying them out but an inability to carry them out. e.g. No-one payed the mortgage and the investment property was repossessed so it cant be sold and the proceeds split.

4:The circumstances of your children have changed so much that honouring the agreement will make the child suffer hardships. This must be something totally out of the ordinary that cannot have been predicted. e.g. one of your children is in an accident and requires significant care so selling the family home will mean hardship for the child.

To change your existing court orders your new circumstances need to meet one of these factors but they also to be both serious and unique. Minor transgressions of these rules will not be looked on favourably by the judge. To help to clarify the kind of things that will result in a change of orders we have included an article from The Times of London which has a few good examples of the kind of things that may cause a change of existing orders.

You may argue that a global pandemic is the very definition of serious and unique and that is probably true in some ways. But to change your orders you would need to go to court and prove that to a judge. And that will probably cost more than it is worth to you. Each day in court is $900 and that is without the cost of lawyers so to argue something as complex as this would take a lot of time and preparation and would quickly become very expensive.

It may sound a little unfair, and in some ways it is. The law’s were certainly not designed to factor in a once in a century event, but the reason is the whole idea behind court orders. The basic idea is to provide a clean break and to provide certainty so each of you can move forward with seperate financial futures. If people were able to go back and forth and change court orders it would never end, and people would be in court till the day they died.

And remember the most important point. Even if one or more of these things have happened to you it is still totally up to the judge whether your court orders will be changed or not.

Child support payments are a totally different prospect though. Child support is assessed based on income and the ability to pay so they are altered all the time. If your circumstances have changed you need to ask for a re-assessment. 

However we can not recommend strongly enough that you at least try to talk to your ex before changing child support agreements. If your ex relies on child support payments to look after your kids and the payments stop or even go down out of the blue that will cause stress and that stress will cause trouble.

On the other hand if your ex is warned that you are having trouble paying, they may still not be happy about it but at least it is not unexpected.

So is the deal off?

Probably not. But everyone has been hit by this in one way or another even movie stars like Robert De Niro.

And always remember, you are splitting your combined assets so if your’s have gone down so have your ex’s.

Coronavirus splits divorce specialists

Catherine Baksi

Thursday August 06 2020, 12.01am BST, The Times

Coronavirus

Lawyers using Zoom to attend court hearings from their kitchen tables after their children had not gone to school for months, and a chancellor offering to pay a tenner towards dinner would have seemed like a fantasy a year ago.

Whether the government’s response to the coronavirus pandemic and the dire economic fallout could have been foreseen, however, is a question that family lawyers have been grappling with and one for which the courts will have to determine an answer.

Caroline Holley, a partner at Farrer & Co, says that it is “inevitable” that family courts will face a “flood of applications” from divorced parties seeking to vary the terms of agreements reached before the global pandemic.

As businesses go bust and thousands of people lose their jobs — or see their property, investments and pensions tumble in value — financial settlements reached in pre-Covid days may no longer be affordable, and lawyers are already fielding many enquiries.

Financial arrangements that follow a divorce, whether agreed between the parties or determined by the court, are recorded in a binding order. Elements relating to maintenance payments for children, or a former spouse, can be varied after a change in circumstances.

Changing the parts of an order that relate to capital — lump-sum payments or transfer or sale of assets such as homes — cannot be varied. In limited circumstances either party can apply to have the order set aside as part of what is known as a “Barder” event.

The principles come from a 1987 case in which a consent order transferred the husband’s interest in the former matrimonial home to his wife, who would look after the two children. Five weeks after the order was made, and before the transfer had been put into effect, the wife killed the children, then herself, leaving her estate, including the house, to her mother.

To overturn an order there must be new events that invalidate the basis or fundamental assumption on which the order was made. These must have occurred within a short time of the original order being made. Emma Gill, a partner at Vardags, says that the circumstances required must be “pretty serious and unique”.

“While Covid on the face of it absolutely fulfils that criteria, it’s not unique or individual to one couple — it has affected couples worldwide,” she says, and predicts that courts will be “unsympathetic” to applications

The Matrimonial Causes Act 1973, Gill says, requires the courts to give involved parties a “clean break” to provide finality so that they can move on with certainty to individual financial futures. Introducing an element of uncertainty undermines that principle.

In a subsequent case, Myerson v Myerson in 2009, the husband’s shares plummeted in value from £2.99 per share when the order was made to 27.5p on the date of the Court of Appeal hearing. Appeal judges ruled that the natural processes of price fluctuation, however dramatic, do not satisfy the Barder test. Some lawyers have argued that any reduction in asset values because of the virus could not be considered a Barder event.

However, Holley suggests that “it may well be possible to argue that the results of the pandemic and, in particular, the government regulations which effectively shut down parts of the economy, went beyond the natural processes of price fluctuation and therefore could constitute a Barder event.

“Could anyone have foreseen entire sectors of industry being prevented from trading? It is almost certain that this is a question the courts will be required to grapple with,” Holley says.

Brett Frankle, a partner at Withers, agrees that it may be arguable, but that success is likely to be limited to a few orders made just before lockdown.

The economic uncertainty caused by Covid has led some parties to put the brakes on making final agreements. Others, Frankle says, are opting to sort matters out rather than remain in limbo. “As this situation becomes the new normal,” he says, “people realise there is no silver bullet that will make things better in six months. They don’t just need to consider money; it’s about emotions and wellbeing too.”

Using the courts to resolve financial disputes on divorce, Gill says, is “not particularly agile at the best of times”. With increasing delays resulting from an influx in applications, Gill predicts that parties will be more enthusiastic to opt for alternative dispute resolution — such as a private financial dispute resolution with the help of a judge or arbitration — to achieve a negotiated settlement.

Across the Pond, Robert De Niro, the actor, has sought to vary the allowance that he gives to his estranged wife, Grace Hightower, claiming that the pandemic has had a significant effect on his earnings.

In the UK many separating couples had hoped that the Divorce, Dissolution and Separation Act, which passed through parliament in June, would introduce simpler, speedier and less acrimonious “no fault” divorces before the year was out. However, the legislation will not come into force until next autumn.

On a more cheering note, Frankle says: “April, May and June is usually prenup season, but as Covid forced many couples to postpone summer weddings, we are now preparing prenups for winter weddings.”

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