What is the Coronavirus impact on financial settlements?

The Coronavirus impact on financial settlements is, unsurprisingly, a question many of my clients have asked me in the last few weeks, and is an issue which requires serious consideration. I would say that great caution should be applied whether it is a case of considering reopening a final order recently made; attempting to renegotiate a financial agreement not yet made into an order; or choosing to continue with ongoing negotiations.

Will courts re-open financial settlements due to Coronavirus outbreak?

There is little doubt that the courts are likely to remain extremely reluctant to re-open orders already made. Historically, given the importance attached to finality in obtaining financial settlements, it is only the most truly exceptional circumstances that have justified reopening a financial settlement.

But what if a spouse has died of Coronavirus shortly after a final order had been made? Or what if one of the parties had retained a business which has collapsed as a result of the pandemic? What would happen if a spouse is unable to pay a lump sum due to collapse in asset value or a decrease in house prices?

Needless to say, as a result of the Coronavirus outbreak, economic life has to a large extent been suspended. We are experiencing international lockdown; there are restrictions on travel and our ability to work; and there has already been an exceptional impact on some sectors of the economy.

Supervening event

The value of houses, shares or any other property or asset might go up or down, as we all know, and sometimes there are wild fluctuations. These would not normally justify making an application to re-open a final order, but we are currently in uncharted waters, literally without precedent. There is leading case law to suggest that if a new event has invalidated the basis upon which an order was made, and some further conditions are met, it may be possible to overturn an order already made. In legal speak, we would be talking about a situation where a “supervening event” has occurred. In other words, where something “unforeseen or unforeseeable” has happened since the order was made which has dramatically altered the value of an asset part of the financial settlement. Has this in turn created an imbalance between the parties which fundamentally undermines the basis on which the order was made?

Normally, the circumstances in which an order would be set aside are very few and far between. However, some legal practitioners might be of the view that the Coronavirus pandemic and its effects could be considered such a supervening event. They would argue that the economic impact of the pandemic simply cannot be compared to the natural processes of price fluctuation. Therefore, especially if an order was made or an agreement reached on the basis of the parties’ needs, it may be possible to argue that, as a result of the pandemic, the order or agreement is no longer fair. In such circumstances, I might be cautiously inclined to consider very seriously an application to set the order aside. There may be of course possible contra arguments, so it is very important to consider each case on its own specific facts. There will also be a narrow window of time in which the impacts of the pandemic were unforeseeable, and it seems doubtful that any agreements reached or orders made before March 2019 or after March 2020 would be re-opened.

Ongoing financial negotiations

In respect of ongoing financial negotiations, in my view one particular issue to watch out for at the moment is to avoid settling a case where one of the parties has to pay a fixed lump sum from the sale of a house. The housing market is currently in lockdown and prices may very well collapse in the not too distant future. It is therefore difficult to imagine circumstances in which paying a fixed lump sum (as opposed to a percentage) would be considered to be fair.

As with any application, the court will exercise its discretion and may consider other appropriate available remedies more attractive than re-opening an order. I would say though that one thing that is certain in this climate of uncertainty is that in these kinds of cases time will be of the essence. Therefore, if you are concerned about any aspect of your financial settlement, it would be sensible to seek legal advice promptly.

If you would like some further advice about a financial settlement, please do not hesitate to get in touch with a member of the Family team.

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