Can the COVID-19 Crisis Justify Reopening Financial Orders in Divorce?
Can the economic havoc wreaked by the COVID-19 pandemic justify the re-drawing of final financial orders made following a divorce? The High Court has ruled in a guideline case that the answer to that question is 'probably not'.
The case concerned a couple whose principal asset was a business in the education sector. A judge ruled on the financial aspects of their divorce in October 2019, a few months prior to the onset of the pandemic. She ordered that, of total assets worth £4.75 million, the husband should receive 58 per cent and the wife 42 per cent.
The wife agreed that the husband should keep the business, an asset that pre-dated the marriage and which thus had, to some extent, a non-matrimonial element. The unequal division of assets was also justified by the fact that the husband's shares in the business carried an element of risk and were not comparable to cash in the bank.
The business was hit hard after COVID-19 reached these shores and schools were closed as part of the lockdown. The husband applied to set aside parts of the order on the basis that the pandemic was an unforeseen and unforeseeable event that resulted in devastating financial consequences, which invalidated the fundamental assumptions on which the order was based.
Dismissing his application, however, the Court focused on the economic impact of the intervening event, rather than its cause or nature. The damage caused to the business by the pandemic was, in the end, no different from that which might have arisen from the 2008 global financial crisis. Although each case had to be decided on its own specific facts, the pandemic was probably not an event that could justify reopening a final judicial order.
The Court acknowledged the impact of the pandemic on the business's turnover and profitability. The initial blow had, however, been softened by its receipt of £3.1 million from the government's furlough scheme. It had also taken a low-interest £460,000 coronavirus business interruption loan and had good prospects of bouncing back from the crisis.
A reasonable person would have said in October 2019 that there was certainly a chance, which could not sensibly be ignored, that there would be an economic downturn in the next year. It was absolutely clear that the basis of the judge's order was that the husband would be retaining assets which were risky and, for that reason, would be granted a greater than equal share of the assets.