COVID - EFFECT ON FINANCIAL CLAIMS ON DIVORCE

Early on in the pandemic, there was speculation as to the effect of Covid on family clients’ financial claims and on orders which had already been made. Two recent judgments have dealt with this.

Is the pandemic a reason to set aside an order which has already been made?

HHJ Kloss in HW v AW 2021 EWFC B 20 dealt with an application to set aside a financial consent order on the basis of the pandemic and its impact upon the value of the husband’s business.

The husband was to pay a series of lump sums totalling £1m.  The applications before the court were a stay application on behalf of the husband, an enforcement application on behalf of the wife and then a set aside application on behalf of the husband. The judgment was concerned with the set aside application. Under the terms of a consent order, the wife received about 40% of the capital and about 33% of the pensions, after a long marriage. She received cash and property and the husband retained his business as he wished. The matter settled at the Financial Dispute Resolution appointment which took place on 12 March 2021, and the order was made on the 13 March. The UK entered the first national lockdown on 23 March.

The husband’s business traded in the distribution of commercial photocopiers etc. He said that the pandemic had resulted in a substantial drop in the value of shares in the company and his ability to pay the lump sums ordered was affected. The wife argued that the pandemic and the financial impact of it fell within “natural processes of price fluctuation” and thus the husband should not be able to succeed in his application to set aside. The judge rejected that, stating “the Covid-19 pandemic is an extraordinary event, different in nature and scale, to any similar world event in the lifetime of the parties….it is akin to a war, with tentacles spreading across the world”. He found that in principle, the pandemic can open the door to a successful set aside claim (a so called Barder event) but not in this case. He reached the conclusion that the risk to the company was reasonably foreseeable even though the full extent was not. In any event, the overall assessment of the impact of the pandemic and more general factors led the court to exercise its discretion against the husband. The husband had after all chosen the path of greatest personal risk by keeping the company, which was projected to lead to the greatest personal reward for him. If his business had increased in value as a result of for instance supplying PPE, the wife could not have sought an increase.

Accordingly, the economic effect of the pandemic could have formed the basis of a set aside, but not in this case.

Could the loss of employment as a result of COVID lead to an increase in maintenance from a nominal amount?

This was dealt with in AJC v PJP 2021 EWFC B25. In this case, the wife had a nominal maintenance order (eg 5 p pa) for herself made by consent in 2012. There were two children, currently a son of 17 dividing his time equally with his parents and a daughter of 14 spending more nights a fortnight with the wife. The final financial order provided that the wife would have 69% of the proceeds of sale of the family home and a pension share and the husband retained his business interests. She received nominal spousal maintenance until the husband was 65 (in eight years’ time). The wife was an airline pilot and thus was without work as a result of the pandemic. She was earning £65,000 per annum. She was on universal credit, child benefit and child support of £900 per month. She had a total income of £2,000 and she claimed income needs of £3,500. The husband’s income was not clear but it was said to be monthly net of £7,900, although he had a substantial mortgage, paid child support and school fees. The wife was asking for £2,000 per month for herself. Any lesser amount would be taken pound for pound from her welfare benefits.

The wife argued that the matter should be treated as an ordinary variation application and so given that she had lost her job, the order should be varied albeit she was expecting to be able to resume work. The judge disagreed, and said that varying a nominal order is different partly because of the parties’ expectations. He dismissed the application for variation to a substantive amount, and dealt with it at an early stage at the first hearing, to avoid extensive disclosure and costs. The judge did not agree that losing her employed income as a result of the pandemic, whilst not of course her fault, was sufficient to allow a variation from a nominal maintenance order. The misfortune had nothing to do with the relationship. He said that “a nominal spousal maintenance order made almost a decade earlier is not the basis for coming back to court to ask for a short term financial support provision”. He did not, however, dismiss the spousal maintenance order and so the nominal maintenance remained. 

Given that the nominal order was presumably intended to enable the wife to support herself and the children if she was unexpectedly unable to work for instance through illness, as a matter of principle should she be worse off for not being able to work as a result of an unexpected pandemic? The parties had after all agreed nominal maintenance and presumably the wife will remain funded by the taxpayer until she can find a job.