This article was originally published in Edward Fennell’s Legal Diary and can be accessed here.
Can you re-open a divorce settlement due to Covid-19?
Since the gravity of the Covid-19 pandemic became clear, divorce lawyers have debated whether its financial impact could suffice to overturn a divorce settlement. The recent decision in FRB v DCA (No. 3) [2020] EWHC 3696 (Fam), in which a husband sought to reopen a £64m award made in March 2020, now offers a judicial perspective.
The family court places great weight on finality in divorce settlements, meaning subsequent events can only justify re-opening a case in exceptional circumstances. In general, there will need to have been an unforeseen and unforeseeable event which invalidates the basis of the order.
Where the settlement includes a lump sum payable in instalments, as in FRB v DCA, the court’s power is slightly broader. However, after the 2008 financial crash, the Court of Appeal made clear in Myerson v Myerson [2009] EWCA Civ 282 that “the natural processes of price fluctuation…however dramatic” will not justify reopening such a settlement.
In FRB v DCA, the final order of 30 March 2020 provided for the husband to pay the wife £64m in property and cash. Just before the first cash instalment became due on 30 September 2020, he applied to re-open the settlement due to Covid-19’s financial impact. His application failed, largely because he had not evidenced how the pandemic had impacted his financial position.
However, Mr Justice Cohen also pointed to the need to take a long-term view. He noted that the major stock market indices had rebounded to above their pre-Covid-19 levels and added “most commentators believe that at some stage within the next couple of years the world economy will be back to where it was”.
His words suggest that, as widely anticipated, it will be difficult to re-open divorce settlements due to Covid-19’s financial impact. Yet there may be cases where it seems clear that a party’s financial situation will not rebound – for example, if their business has collapsed due to the pandemic – in which case they may have a stronger argument. For others, adjusting the timing of payments, and varying the level of ongoing maintenance, may provide some relief.
