Richard Kershaw examines the impact of market volatility on divorce settlements in Finance Monthly

Richard’s article was published in Finance Monthly, 25 February 2021, and can be seen here.

Richard Kershaw, Partner in our Family & Relationships department, explains that the economic turbulence caused by the COVID-19 pandemic has raised complex questions around the fairness of divorce settlements, particularly where asset values have fluctuated dramatically. While the family court values the finality of settlements and encourages a long-term perspective, it does allow for re-opening in rare cases.

However, recent case law, such as FRB v DCA (No 3), demonstrates the court’s reluctance to revisit agreements solely due to market volatility. In that case, despite the husband’s claim that his assets had been severely impacted by the pandemic, the court found insufficient evidence and emphasised that he had voluntarily chosen a cash settlement after the pandemic had begun, thereby assuming the associated risks.

Richard notes that the court’s stance mirrors its approach following the 2008 financial crisis, reinforcing that market fluctuations, however severe, are not typically grounds for altering a settlement.

For those currently negotiating, it is crucial to assess the risk profile of each asset and consider how best to share or allocate that risk. For finalised settlements, while re-opening may be unlikely, there are still practical steps available. These include negotiating payment delays or applying for variations in maintenance if financial circumstances have changed.

Ultimately, while the courts aim to uphold the integrity of settlements, they also recognise the need for flexibility in managing short-term financial pressures.

Read the full article on the Finance Monthly website [external link].