Divorce - Hard times for Fund Managers.

News that Fund Manager Brian Myerson has applied to the High Court to set aside his divorce settlement may have bemused some observers, who can only dream about the lifestyle that his wealth enabled him to live.  Brian Myerson was ordered in February 2008 to pay to his wife approximately £11m.  That was at a time when his investment company comprised nearly 57% of the value of the assets, with Mrs Myerson receiving the remaining 43%.  However since then it has, he says, reduced in value so that if he has to comply with the order he will be left with no assets and £500,000 of debt.

Mr Myerson is relying on the little used rule that if, after a final financial order within divorce proceedings, there is an event so catastrophic and unforeseen that it invalidates the whole basis upon which the original order was made then the order should be set aside and replaced with a more appropriate order.

The landmark case was the sad case of Barder v Barder. Mrs Barder was awarded the marital home in the divorce as she had the children to look after.  Unfortunately shortly after the order was made she killed herself and the children.  Faced with the prospect that the wife’s parents would effectively own the assets of the marriage when the husband still had a housing need of his own the court allowed his appeal

The question is, did the judges in Barder intend that case to be used where the market suddenly made an Order deeply unattractive to one party or another?

The wife will argue that in February 2008 the market decline had already set in - few will disagree with that.  She will say that the Husband accepted the risk that the value of his investments would go down – it is not unheard of – whilst standing to benefit if they went up.  The fact that the loss to the husband is of such a magnitude should not alter the basic presumption that assets that are naturally volatile run the risk that they will go up or down in value and so the Husband should take the rough with the smooth. One of the reasons he received 57% of the assets was because they were risk laden.

The Husband will no doubt point out that if the order has the effect of making him bankrupt not only may he be unable to implement it but that also, if he is made bankrupt, the Trustee in Bankruptcy may look to have it set aside… but that is another story.

The outcome of this case will be keenly observed.  There are many divorced spouses sitting in houses they are trying to sell, facing getting far less than they once thought.  In many cases the loss will be borne equally but in many other cases not.

If the Court grants Mr Myerson the relief he seeks the case may go to appeal.  The shock wave created by any such judgment would be felt far and wide – not only would we see more such applications but the precedent would have been set. Doubtless when roles are reversed and values start to increase we would see spouses who have felt short changed by increases in value applying for a further slice of the pie.

Watch this space.

Andrew Lee
Senior Associate Solicitor
Gregory Abrams Davidson

Andrew Lee is a member of the Advanced Family Law Panel of the Law Society and a recognised specialist in Financial Relief cases.