Risk taker Myerson twists on 19 and gets a 3

All eyes are now on City tycoon Brian Myerson following his unsuccessful attempt to convince the Court of Appeal to set aside his £25.8 million divorce settlement as the economic downturn has left him feeling unable to comply with the terms of the agreement. While the judgement of Lord Justice Thorpe in the Court of Appeal is clear and unequivocal, natural-born risk-taker Myerson may decide to take his chances and appeal to the House of Lords.

Myerson was seeking a decrease to the lump sum of £11.2million he agreed to pay to his ex-wife last year following the demise of their 26 year marriage. Following the agreement, and within a 10 month timescale, the credit crunch conspired to decimate the value of his share of the settlement to £1.17million.

The legal principle the Court of Appeal had to grapple with was whether the economic downturn represented a Barder event, a supervening or extraordinary event that no-one could have predicted, allowing the court to set aside the original agreement.

The case of Barder spawned litigation in which ex-spouses have tried to re-open court orders as to the distribution of capital. It is worth noting that the case itself was somewhat extreme: the wife committed suicide and killed the children only 5 weeks after an order was made. Naturally, the court agreed with the husband that it would be unfair for the capital settlement to stand, since it gave the now deceased wife most of the capital assets.

Since then, other less extreme events have been viewed as Barder events, such as re-marriage of one party soon after a court order, accountancy evidence forming the basis of the agreement being found to have been completely wrong, and a variety of other issues felt to be fundamental to the original order. However, courts will generally decline to re-visit a capital order once it has been made. Many have tried and failed to persuade the courts to re-open orders and the caselaw is littered with such failures. For now at least, Myerson can be added to that long list.

Lord Justice Thorpe rejected the appeal for a number of reasons, but primarily because price fluctuations in the shares market are not unforeseeable. Mr Myerson of all people would surely agree that the markets can go down as well as up. (Had they gone the other way, he certainly would not have been bringing his application!)

The current state of family law in England and Wales is that while the level of maintenance can be varied upwards or downwards if financial circumstances change - and we are seeing a great many such applications these days - one-off lump sum payments or other such capital orders are final.

Only if there has been some sort of fraud by one of the parties, or a non-disclosure of significant sums, or some such trickery, can one expect an easy attack on a capital order. But there is also the possibility of a Barder application, if there has been a fundamental change that neither party could possibly have foreseen. Mere change in asset values has been litigated several times as a Barder event, with varying degrees of success, but generally very little.

It is clear that there are thousands of divorce settlements that have been jeopardised by recent adverse economic conditions and the Court of Appeal were more than aware that to rule in Mr Myerson’s favour would be to open the floodgates and swamp the courts with similar applications. Public policy considerations such as congested court lists are important, and no doubt weighed heavily on the court’s mind.

Other reasons why Mr Myerson failed are that the original order was agreed rather than imposed on him, and as the Court noted, he still has the opportunity to turn his fortunes around as “unusual opportunities are created for the astute in a bear market”.

There is another interesting point on Myerson, which is that the lump sum was payable by instalments. Such orders are viewed more along the lines of maintenance orders and are therefore considered variable where good reason arises – though perhaps not as easily as a maintenance order. It may therefore be revised downwards when Mr Justice Bennett reviews the matter in July, despite the failure of his Barder application.

Those feeling the pinch of the current recession may want to review their financial orders made in divorce proceedings. We recommend that the focus be on maintenance reviews, rather than capital set-asides, but there may well be room for review where there has been a non-disclosure or a significant and unforeseen change in circumstance.

The words of Mrs Justice Hale in the 1994 case of Cornick may make a good starting point for anyone in this situation: Is the change in asset value simply a “natural process of price fluctuation” or has a wrong value been attributed to an asset which, had it been known about at the time would have led to a different order? The difference could be crucial.

This is a complex area of law and legal advice should be sought. If Mr Myerson appeals on, only time will tell whether or not the Law Lords will give clear and detailed guidance on the many issues now arising.

For more information please contact Andrew Perryman on 01483 215359 or andrew.perryman@morrlaw.com