Credit Crunch - Reopening Of Divorce Settlements

A recent case highlights how the current economic situation and the value of shares held by one party to a divorce can have a significant impact on the financial settlement arising from that divorce. 

Poor Mr Myerson.   In February 2008 he agreed a resolution of the financial disputes following divorce when the shares in his company were valued at 299 pence per share.   

The division left his ex wife with 43% of the assets whilst he retained the other 57%. 

By the time his application got to the Court of Appeal in March 2009, the value had reduced to 27.5 pence per share, leaving his ex wife with 86% of the value and Mr Myerson with 14%.  

Unfortunately for Mr Myerson the Court refused his application to appeal against the original Order which he had brought on the grounds of the current economic crisis.   

There was only one other reported case before Myerson seeking leave to appeal against a financial Order on the basis of a change in share value and that was in 1994 when a wife appealed because the shares had risen substantially in value. The wife, in that case, was as disappointed as Mr Myerson.  

The Court of Appeal does not want such appeals going forward.   They say that the change was a “natural” albeit “dramatic” change in the value of the shareholding and that did not give rise to a right of appeal. The Court of Appeal took the same position in the 1994 case.  

There are very limited circumstances in which similar appeals have any chance of success and the Court of Appeal is keeping the lid tightly screwed down to avoid a flood of cases. If, as with Mr Myerson, the lump sum is being paid in instalments it may be possible to apply to vary the instalments themselves and if there had been a new intervening event which took place shortly after the Order was made (other that a worldwide economic downturn!) that might give rise to a successful appeal. It did not help Mr Myerson with his appeal that he had been promoting the viability of his company very loudly in the financial press and extolling the financial acumen of the new manager he had brought in. The Court took the view that he had agreed the Order; it had not been imposed on him by the Court but freely entered into and that he was in the best position to manage the company to become financially successful again.  

Mr Myerson was told to return to running his company and to do his best to increase its value.   The Court of Appeal noted that “unusual opportunities are created for the most astute in the bear market”.  

This case shows that agreed financial settlements can not be renegotiated if one party later changes their mind. Make sure that appropriate legal advice is obtained before making any commitments or agreements.

For further information or advice, please call Maggie Roberts, partner on 01823 625692 or email maggie.roberts@footanstey.com

Published 19/06/2009. The author of this article is Maggie Roberts