‘Til divorce us do part…
The first working Monday of the New Year is often referred to as “divorce day” in the press. Extended time with family can unleash resentment and compound long term problems. But is divorce a seasonal move and is Christmas really to blame? Karen Jones, Editor at Citywealth gets the expert update from family lawyers throughout the UK.
Ann Robinson, Head of Family at Blacks Solicitors in Leeds thinks there is more to it. “January is busy after Christmas but usually couples have actually separated earlier in the year and then action it later”. Robinson who advises on around seventy-five cases a year, says Covid has not helped. “A lot of marriages survived because of busy schedules and business travel. Experiencing lockdown, stuck in the same house, if cracks were there, then they were exacerbated into a tense situation.” Sarah Ingram, Partner at Winckworth Sherwood shares the same opinion, saying, “whilst there are more divorces between Jan to March the decision to act can take years, but most opt for the start of the year to go ahead.” She hasn’t seen a rise in divorce despite more enquires and also attributes this to the end of lockdown relieving the pressure. Helen Clyne, Associate Solicitor at Debenhams Ottaway agrees to an extent with the January rise. “Contemplating a divorce takes a huge amount of thought. It’s not something to do just because Christmas was bad. It’s so much more complicated than that. Problems are usually deep seated and continue for years.” However, a fresh start like the New Year can prompt action. It’s too early to tell what the effects from Covid will be. No doubt it has been a strain. People do try and save their marriages which means we might not see the lockdown effect for some time. Maybe there will be a final straw or continued stress will push people over the line. Things are not clear cut.” Victoria Cure, Associate at Carey Olsen Jersey Dispute resolution, Jersey says “Jersey mirrors the UK, and we see similar patterns, but this year Covid has made people assess their entire lives and what they want from life, so I see divorce as just one slice of the pie.”
Others think September is busier, because a return from summer holidays causes reflection and looking ahead to a long Christmas when disputes over children can arise. It’s more likely to get emotional in a new separation when it’s the first solo Christmas and the divorce is not finalized.
Taking the strain
On the mental health side of divorce, Jonathan Edgeley, Founder at Montrose Advisory, who offer health and wellness guidance which includes mental health, retreats says he has supported UHNW divorcees through the court process to help with the emotional and physical onslaught. “People can underestimate the fall out: the distress, feeling overwhelmed or staring into the unknown, wondering what will happen on the other side.” He says his job is to maintain someone’s equilibrium, so they don’t drink too much or do other things that become detrimental like drugs. He says for many it can bring on a huge sense of freedom but for others they feel powerless and if people are predisposed to addiction or mental health issues a divorce will bring those to the surface. He says often there can be a slow deterioration in mental health, thinking less of ourselves or having a glass of wine a night that might go to a bottle. He says guilt with children is also huge.
Business divorce – family businesses
Robinson, who has a client base of solid Yorkshire wealthy family businesses, says ‘Business divorce’ is a common theme in her work. Blacks solicitors has a strong corporate team so we specialize in divorces for family businesses. “Lots of our clients are SME’s, often a husband and wife team, owning the shares and most have been advised to put them into joint names for tax purposes. So, I help to unravel it all.” However, she says it becomes like, “Solve one problem and you create another.” Adding, “Often one party is more instrumental in the divorce which also raises trust issues like breaching fiduciary duties.” Robinson who, when working with SME’s, gets valuations of businesses and looks at extraction of capital so that business owners can go their separate ways and the business can continue.
Ingram who personally manages around 10 UHNW divorces at a time says, “Furlough schemes have been propping up businesses, so people think carefully about divorce because they are not sure what their business will be valued at. Things might be worth more in a year as Covid settles down. Covid had an impact because there were basic problems like supply issues.” She says “Business people are often more strategic about divorce so a recession could be a good time because company values are lower. However, if the other side realizes this, it can be blocked.”
Cure says of business divorces that asset valuation became a problem during covid. She says “Strategy isn’t a preserve for divorce, it’s just the domain of business, it’s the way people think. People take a long time to decide on a split and the financial split is a big part of the consideration. One element people are concerned about is ‘what will my life look like afterwards and will my standard of living drop?’”
Running up a down escalator
PFDR hearings or private financial dispute resolution involves barristers direct and/or a private judge being engaged instead of going through the public court process. The main reason to do so is to speed up the process and have privacy however it does cost more and there can still be problems. PFDR was used by Angelina Jolie who took this route during her divorce from Brad Pitt, however during the process Jolie removed the judge citing business conflicts.
Robinson who is awaiting a valuation on a multi-million pound divorce is evangelical about PFDR and thinks it’s the way forward. She says the starting point is deciding who is going to be your judge because they could be pro wife or pro husband. However, she adds that the barristers and judges she has engaged are all well respected and this bias problem has not occurred. The rub is: “You aren’t bound by anything that is said. If you don’t like it, you can change back to the courts, but you will waste your money”, she warns. “We run beside the court process and there is a backlog in the courts currently. They are under-funded leaving couples waiting for their hearings. With a private hearing, there is a quicker date; no queue and you can have them for as long as you want (to pay for). Our judge is setting aside one day to read and one day to see us. Courts cannot offer this. They just don’t have the resources.” She says the cost, dependent on who is used will be around £2,500 – £5k per day.
Ingram says it’s the only way to have privacy. “If you settle at that meeting its all kept behind closed doors. Clients don’t know how things will be once things go to court despite warnings, they are always surprised at how bad things can get. PFDRs are an excellent way to save on stress.”
Clyne agrees and says these types of hearings have benefits. “Courts are so stretched; judges might not be available or can’t read the papers or consider things carefully. At short notice cases are pulled with a day to go which is very disappointing. With a private judge, you choose the date and location, and they are completely focused, and the divorce is considered carefully. The downside is the price for a day which is around £3-5k and if you don’t settle though then you need a court hearing (directions hearing) within the court process, so it brings additional costs.” However, she says if clients spend money on a private judge, they are usually more invested in the concept so settling is much more likely. The hearing is usually much sooner as well which saves months of other costs being run up. She also adds a local anomaly that is different from her experience in London, in that in St Albans people are more eager to settle and less litigious and go to court less.
Cure says “We often have barristers from England come over to Jersey which has been quite a big shift in the last year. Relatively recently one judge worked at Carey Olsen, and she championed a court led PFDR to act like a private judge. In low value cases its valuable. She adds “It’s very easy to get court hearings in Jersey which means we don’t have problems with judges’ adjournment.”
Most agree there is a definite change in approach in the way disputes are resolved and a move away from proceedings in court including many options for alternative dispute resolution which has increased in the last eight years. Courts can be a problem if a judge specializes in children not finance so they don’t always work. It is also possible to refer to a private FDR judge if a problem occurs, so using an intermingled approach with part court and mediation. However, despite the progress it doesn’t mean the end of litigation. Litigation is here to stay because some cases have to be litigated for instance where there is non-disclosure of assets on one side.
Ingram adds “Arbitration is all private with a judge. People are suddenly more interested because of court delays and Sir Andrew McFarlane, the current President of the Family Division, and Head of Family Justice is also offering £500 vouchers for people to mediate. It has turned out to be a promising idea. Family courts are in crisis: they are running up a down escalator.”
No fault divorce – “There is always blame on both sides.”
On no fault divorce which was first proposed in 1996 and becomes law on April 6th (2022), it is set to take away the need to blame one party, Robinson says however “It won’t make much difference to financial settlements. It’s just the facts for the breakdown. Many people will agree to a two-year separation anyway which is the current requirement but then they still fight on the finances.” Robinsons says her job is to help people stop spending time, money and effort on things that won’t make a difference. Cure says, “I support no fault divorce aswell because, the current system encourages finger pointing.” She says, “The tone is tougher anyway especially for fault-based Jersey divorces and they can be unnecessarily combative which is just unhelpful.”
In terms of length of a divorce Robinson says “On average it’s about a year but some last more than two years. However, she says she did one this year under the online procedure and it was done in three months.” This is the new online portal the Courts introduced in September. “It’s easy for people to start the divorce process themselves, they get the link and create an account and submit their petition. That’s the divorce part done but the financial procedure is a separate portal. This has also become quicker.”
Ingram says no fault divorce is helping the tone of the divorce. “Currently people get distracted by the story they have put together for the petition which can take a turn for the worse or turn into a vendetta as in Owens v Owens. In that case Mrs Owens said Mr Owens had behaved in such a way that she could not reasonably be expected to live with him. However, she couldn’t provide examples and it lead to a refusal to grant the divorce. Ingram says sometimes its Inevitable people will not win but they just want to prove a point.” Clyne agrees, “I am also supportive of no fault divorce. The reason to divorce is complicated and not just about attributing blame. So, I think possibly its artificial the current concept having to attribute blame. There is always blame on both sides.”
Silver splitters
Silver splitters refers to older adults who want a divorce. Clyne says she has had a few cases, “It’s heartbreaking because they are ending a long marriage, but why shouldn’t they? People are living far longer and have more wealth.” Robinson, adds, “on the issue of tech, I deal with all clients by email. A few years ago, everything was by post to older clients, but this has now changed. As soon as the pandemic hit everything went online. The norm is by Microsoft teams now.” She has done quite a few divorces for people in their later years or retired. More often second time divorces. “Very wealthy people are usually more reluctant to split their assets with someone who is in a second marriage for say just for five years.” Ingram adds the reason for older adult divorce is mainly that people retire and don’t have anything in common.
Trends – enforcement
Ingram says there are lots of Russians doing divorce payment top up which means a review of their current arrangements and generally, “enforcement to get settlements paid”. High profile cases have included Lady Barclay awarded a settlement of £100m because of “reprehensible” behaviour from Sir Frederick Barclay. Tatiana Akhmedova was awarded £453 mn from Farkhad Akhmedov, then she hired the British equivalent of the U.S. Navy’s SEAL Team 6 to seize his $500-million superyacht. Richard Rogan, a financier was nearly sent to prison for failure to pay a £2.6mn to his ex wife. However, Ingram says prison rarely happens because ‘you can’t earn money in prison’. Scott young a Scottish property developer was sent to prison because he failed to disclose his assets but ultimately killed himself. “They also bankrupt themselves to get away with paying,” says Ingram. This was the case with business man James Stunt who was married to model and socialite, Petra Ecclestone. “The Courts have admitted that getting paid is still hard. It is especially difficult if they go abroad. There is lots of concern. It is not good for the English courts,” Says Ingram.
Digital divorce
As Robinson mentioned above the new online portal the Family Courts was introduced in September. Ingram says of it “It is helping but doesn’t seem to be speeding things up; I still have to chase things up. For people who can’t afford legal advice its a good idea. However, all online offerings are not equal. There are varying levels of quality where some petitions have been refused because they were not submitted properly because staff are not legal professionals. It can be hit and miss. It should be good but isn’t.”
Clyne says the online portals are a bit clunky and temperamental, but it is the way forward. “Having something centralized is useful and I don’t have to do divorce petitions now, clients just do it and submit it. They don’t need a lawyer but do often want us to check the application, then use us for the more complicated financial split.” Cure adds, “Using tech over Covid made life easier getting advice from UK counsel.”
Pre-nups
Cure says a difficult divorce can take upwards of four years but says they are not usual; “Carey Olsen Jersey Dispute resolution are usually brought in because a divorce is not amicable.” It is not surprising then that Covid spurned more interest in pre-nups as couples had more time to consider their futures. Family lawyers say anecdotally they have been inundated with requests. Ingram says, “For some couples its an easy solution, it’s no problem in France where they are used to the concept.” Other reasons to get prenups are if it is a second or third marriage. Cure says “families with multiple marriages are definitely using prenups more.” Reform was another issue thought to be needed for co habituating couples because “it can be tricky when relationships end with no claims to pursue.”
Tax
Tax like prenups can often be the more clinical side to divorce. Robinson says, “The problem with divorcing is that married couple tax allowances will be lost and selling properties means paying capital gains tax.” One recommendation for older adults is to consider a post-nup. It means no divorce, divided assets, but staying married so they don’t lose their tax benefits.” Sam Hart, Associate Partner at Claritas Tax says “Getting married is good tax planning advice but the point of divorce is splitting the assets to be fair. Ultimately, it’s about limiting tax so that there is more money in the pot to split. She says the advantage of marriage is that assets go tax free to the spouse. Then they make gifts to children. Second marriages are complicated and there are more problems if there are different children from different marriages. One way to do things is to use a Life Interest Trust where the beneficiary uses a property during their lifetime but on their death, it passes to a third party.” Sam also says think about dates, “it’s better to dispose of assets on the 6th of April than in March to give yourself a clear run”.
Single joint expert
For SME’s with a divorce there can be a split of shares to benefit from reliefs if you fit under the criteria. So, both of you must work for the company which means it’s important not to sack your spouse. She says, “People can get very petty.” Sam advises, “Look at the whole thing first and see how to minimise taxes to maximise the pot so rather than saying half the house is yours say what is the value and is there anything else I could give you instead.” She says, “Some people hire a Single Joint Expert, which does mean a fee, but they review assets before getting to the financial separation stage to help with this negotiation. A single joint expert can sit with both sides and review the tax liabilities of any changes or disposals.”
So although divorce day in itself may not be the sensation it is made out to be, more a case of low news stories, divorce is a deep topic with much contemplation that can be made difficult or easy depending on your planning and capacity to curtail your emotions. Jonathan Edgeley, Founder at Montrose Advisory, coaching and care can definitely help you with the fall out.