Covid-19 The impact on existing financial agreements and negotiating - - PowerPoint PPT Presentation

Family Finances and Covid-19

The impact on existing financial agreements and negotiating financial agreements

Content

• 1. Introducing the Speakers
• 2. Samantha Jago – DMH Stallard LLP – Common

concerns and Alternatives to Court

• 3. Ben Fearnley – 29 Bedford Row – Reviewing the

impact of Covid-19 on family finances and agreements

• 4. Caroline Bayliss – Excalibur Actuaries – Pension

Reports and Sharing in the Covid-19 climate

• 5. Questions and close

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Samantha Jago

Your speakers today

Family Law Partner +44 (0)1483 467 437 samantha.jago@dmhstallard.com

Ben Fearnley

Family Law Barrister, Mediator, Private FDR Judge and DDJ +44 (0) 20 7404 1044 bfearnley@29br.co.uk

Caroline Bayliss

Actuary – Excalibur Actuaries +44 (0)7454 935125 cbayliss@excaliburactuaries.co.uk

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• Should I initiate divorce proceedings or put this action on hold?
• Should I put on hold negotiating my financial settlement?
• Do I have to go to Court - are they open?
• Can I revisit my financial agreement given the pandemic by

either setting it aside or varying it?

• My former spouse has stopped paying me or reduced their

payments to me and I have a Court Order, what do I do?

• Difficulty in valuing assets and assessing true earning capacity

Common concerns

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• Sets out financial arrangements between divorcing
• r separating couples
• Can be used where parties do not want formal order
• f court at that stage
• Can be drafted to each parties set of personal

circumstances

• Could make provisions pandemic specific
• Provides persuasive evidence before the Court of a

couples’ intentions

Deed of Separation

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• Direct Agreement
• Solicitor led negotiation
• Mediation
• Collaborative Law
• Round table meetings
• Private FDRs
• Arbitration
• Early Neutral Evaluation
• Hearing on paper only?

Think time, costs and outcome.

Alternatives to Court:

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• Fairly soon after agreement has been entered into and

approved by the Court, there is a new event, which may invalidate the basis upon which the agreement was reached

• Think
• Myerson 2009
• Cormick 1994
• Maskell 2003
• Is a fluctuation in the economy outside of the

contemplation of the parties when reaching financial agreements? Variation a better option?

Barder type event?

According to the Institute for Fiscal Studies by May 2020 the % of people in jobs was what % lower than predicted before Covid-19?

• A. The number of jobs was 4% lower
• B. The number of jobs was 2% lower
• C. The number of jobs was 6% lower

Poll

9

Result of question surveys

• A. The COVID-19 crisis led to abrupt

falls in employment, earnings and incomes by April By May 2020, when compared with what was predicted just before the crisis based on trends up to that point, the number of jobs was 4% lower, median after-tax household earnings were 9% lower and median household income (including benefits) was 8% lower (equivalent to an income loss of around £160 per month).

According to the Institute of Fiscal Studies, the number of households paying their mortgage/rent and council tax was how much lower than anticipated for May 2020? A. 14% for mortgages, 11% for rent and 9% for council tax B. 16% for mortgages, 13% for rent and 11% for council tax

• C. 12% for mortgages, 9% for rent and 7%

for council tax

Poll

11

Result of question surveys

• A. Non-payment of household bills

increased sharply after lockdown, and increased further between April and May. By May, the number of households making mortgage, rental and council tax payments was, respectively, 14%, 11% and 9% below what was predicted based on pre-crisis trends. This represented a further deterioration since April, suggesting that some households are increasingly struggling to make ends meet as the crisis

• persists. Poorer households are falling

behind by more on council tax and utility bills. Non-payment of mortgages is spread more evenly across the income distribution.

In a poll of 1,500 adults by Hitachi Personal Finance, what is the top activity that has brought Brits joy during 2020? A. Spending time with extended family B. Financial security

• C. Spending time with their partner/spouse

Poll

13

and finally.....

• A. Spending time with extended family

(30%)

• Financial security (14%)
• Spending time with partner/ spouse

(11%)

and finally......

• r

~ Variations ~ Valuations ~ Vitiations ~

Reviewing the impact of Covid-19 on Family Finances and Agreements

Ben Fearnley

Impact of Covid : Consequences on FR Proceedings

• Job losses / furlough / sudden income reductions : ie

maintenance

• Value of assets reducing / Value of pensions reducing

(xref Caroline Bayliss’ talk) mid proceedings : ie snapshot valuations in a moving market.

• Orders already made which perhaps no longer seem as

fair as they did : ie query whether orders can be re-

• pened on Barder grounds.

Maintenance : Variation Generally

• s.31(7) MCA - ‘all the circumstances of the case’
• Assessment of needs being ‘elastic, fact-specific and highly

discretionary’ (NS v SS)

• need not be a ‘root and branch’ forensic examination of the

parties’ finances and the court is entitled to take a ‘light touch’ approach (Morris v Morris)

• Introduction of the 2014 ‘fast-track’ procedure
• Costs of variation can be disproportionate – see FPR PD28A 4.4 re

costs orders: ‘this may be of particular significance in applications for variation orders and interim variation

• rders or other cases where there is a risk of the costs becoming disproportionate to the amounts

in dispute’

Maintenance : Capitalisation

• Not suited to unpredictable times – crystallises future risk.
• The court’s approach remains the ‘three questions’ as set out in

Pearce v Pearce

1. What variation to make? 2. From when should it start? 3. What is the ‘Duxbury’ figure?

• Risks inherent for each party.

Valuation of Assets

• Pensions
• Private companies
• Impact of Covid recently referred to in OG v AG (Mostyn J)
• Remember valuations are inherently vulnerable – an ‘art’ not a

‘science’

• Per Moylan LJ in Martin three ways the court can take into

account the valuation of a company, each dealing with risk in a different way.

• 1. Fix value and offset in cash

if that is approach, should case proceed or wait until economy stabilises? If proceed, how is ‘Covid risk’ factored in?

• 2. Sell the shares

should we take the goose that lays the golden eggs to market?

• 3. Share the shares

do you really want to leave divorced spouses co-shareholders?

Is Covid a ‘Barder’ event?

• Ratio of Barder (per Lord Brandon) four conditions:
• 1. ‘New events.. Invalidates the basis… upon which the order was made’
• 2. ‘Relatively short time of the order being made’
• 3. ‘application… should be made reasonably promptly’
• 4. ‘should not prejudice third parties who have acquired in good faith

and for valuable consideration interests in property’

Change in Value as Barder?

• Cornick – increase in value of shares. Per Hale J, three categories:
• 1. Asset correctly valued at trial changes due to natural process of price
• fluctuation. Court should not allow appeal.
• 2. If wrong value put on asset at trial where had the court known there

would have been a different order. Appeal could succeed if no fault of person alleging mistake.

• 3. Something unforeseen and unforeseeable happened since hearing –

but these are few and far between. Application failed.

• Myerson – decrease in value of shares – application failed
• Maskell – loss of job – application failed
• S v S – impact of White v White – application failed. Three

propositions:

• 1. New event must be a complete change of circumstances and not a

development of facts known or which should have been known.

• 2. ‘Unforeseeable’ means not envisaged and could not reasonable have

been envisaged.

• 3. If the events could have been ascertained with diligent inquiry then

the application will not succeed.

So to answer the question (or not):

• Is the economic impact of Covid-19 a subsequent event?
• Is

the economic impact

• f

Covid-19 ‘unforeseen and unforeseeable’?

That does not mean ‘literally incapable of being imagined’ but ‘reasonably could not have been predicted’

• Does the economic impact of Covid-19 invalidate the basis on

which the order was made?

thoughts, questions and discussion…

thoughts, questions and discussion…

Pensions and divorce and Covid-19

Caroline Bayliss October 2020

cbayliss@excaliburactuaries.co.uk www.excaliburactuaries.co.uk

Recent Developments

Covid-19!

But first a little revision……...

Pensions 101

■ Defined benefit - (or final salary) - a pension for life (and for spouse), increases before and after retirement ■ Defined Contribution- (or money purchase) - a pensions ’pot’- income depends on investment return, longevity, increases in payment etc.

Pensions and Covid-19

■ Defined Contribution- (or money purchase) – fund values decreased

Pensions and Covid-19

■ Defined benefit – different impacts:  Mortality increased  Assets may have decreased  Cost of benefits may have increased  Discretionary benefits removed  Companies become insolvent?

So…….what does that mean for pension splitting?

• Earmarking/Attachment
• Sharing
• Offsetting

Questions?

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Samantha Jago

Your speakers today were:

Family Law Partner +44 (0)1483 467 437 samantha.jago@dmhstallard.com

Ben Fearnley

Family Law Barrister, Mediator, Private FDR Judge and DDJ +44 (0) 20 7404 1044 bfearnley@29br.co.uk

Caroline Bayliss

Actuary – Excalibur Actuaries +44 (0)7454 935125 cbayliss@excaliburactuaries.co.uk