Tweet
City bankers hit hard by the credit crunch are desperately attempting to renegotiate costly divorce settlements they can no longer afford, according to top law firms.
Family lawyers have seen a big increase in the number of high earners who want to cut maintenance payments to their spouses in the face of reduced income and smaller, or nonexistent, bonuses. Suzanne Kingston, partner in family law at Dawsons in London, said that inquiries about renegotiations, or applying to court to reduce the level of maintenance payments, have become increasingly common in recent months.
"When the economy first started to show signs of being in trouble, people were waiting to see if there would be a recovery. But since it promises to be a longer-term situation, we have been getting more queries, particularly since people have been receiving memos suggesting that they are unlikely to receive bonuses at the same levels as previous years," she said.
Divorces in the UK commonly include a split in marital assets in addition to maintenance payments - including childcare and school fees - and are seen as generous on the global stage.
The highest divorce payout awarded by a British court was £48m made to Beverley Charman in 2006 after her 28-year marriage to insurance broker John Charman ended. But renegotiation through the courts can be a long-winded and costly affair, with the process liable to take up to a year, said Kingston.
While many spouses are willing to renegotiate out of court in light of their former partner's reduced circumstances, others are less sympathetic. "Some people feel they simply can't exist on a lesser amount and those are the ones who will be fighting through the courts," she said.
Barbara Reeves, from the family law department of Mishcon de Reya, which acted for Princess Diana and Heather Mills, said many well-paid City clients had previously chosen to opt for large, clean-break settlements, on the understanding that they would not be liable for long-term maintenance costs.
They were now regretting the decision, she said. "When life is looking rosy, they think that they can recoup that money with bonuses over the next two or three years. People don't appreciate the risk in this kind of settlement."
Now the boom times were over, several clients were keen to reduce the size of the one-off payments. But the chances of successful renegotiation were "very slim, pretty much nonexistent", she said.
There is a wide variety of mechanisms for dealing with bonuses, with courts taking into consideration past earnings, including basic income and bonuses over a two- or three-year period.
Where individuals have been awarded a fixed percentage of a spouse's future bonuses, settlements are likely to be adjusted to a one-off payment this year, according to experts.
But some will still struggle to pay, said Christopher Butler, head of family law at Speechly Bircham. "Courts are going to have to be sympathetic, as some people's incomes - particularly those based on bonuses and company profitability - are going to be dramatically reduced.
"But the emphasis is going to be on the person who wants to renegotiate to prove that their income has diminished and is likely to remain so for the foreseeable future."
guardian.co.uk © Guardian News & Media Limited 2009 | Use of this content is subject to our Terms & Conditions | More Feeds
More...
