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Divorce Jackpots Have U.K. Bankers Begging for Relief (Update1)
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By Caroline Alexander
March 31 (Bloomberg) -- Bankers and other high earners in the U.K. are asking to reduce their divorce settlements as the financial crisis shrinks their net worth, according to five family-law attorneys, including Julian Lipson of Withers LLP.
Brian Myerson, the former chief executive officer of Principle Capital Holdings SA, will learn as soon as tomorrow if a London appeals court will alter the terms of his divorce, according to the court calendar. Myerson is seeking to lower the lump sum of about 11.2 million pounds ($16 million) he agreed to pay his wife last year when they ended their 26-year marriage. The value of his share of the settlement dropped to 1.17 million pounds within 10 months.
“He made a commercial decision to put his money on red, and the spin of the roulette wheel came out black,” said Lipson, family-law practice group leader at Withers LLP in London, who isn’t involved in the case. “The judges may feel sorry for him, and it was an unfair transaction, but it was a decision he took.”
While Myerson will have a hard time winning, other high net worth individuals are having more luck renegotiating alimony payments out of court, the five family-law attorneys said. Lipson said his firm received three times as many inquiries as it would normally get in a year between November and December.
Record Award
The trend is being fanned by more than 100,000 job cuts in the European finance industry and bonuses dropping 60 percent since the crisis began, according to the London-based Center for Economics and Business.
If you are acting for someone who was earning 800,000 pounds and now earns 150,000 pounds, “you have a pretty good case for downward variation, and the lawyer of the wife would advise to negotiate,” said Jane Craig, family partner at Manches LLP in London.
England became one of the most lucrative jurisdictions in the world for high net worth divorces in 2006. Two landmark rulings entitled a spouse to a share of a former partner’s lifetime earnings, and allowed settlements to reflect a spouse’s expectation of a wealthy lifestyle.
Beverly Charman, ex-wife of Bermuda-based Axis Capital Holdings Ltd. CEO John Charman, won a record divorce award of 48 million pounds in 2006. She had argued that she needed 700,000 pounds a year to live in the manner she had become accustomed to over 27 years of marriage.
Changing Times
Lipson said he began noticing an increase in requests to change alimony payments last year. In better times, such appeals were rare because they didn’t justify the legal fees, he said.
“In previous years, husbands tended to make applications because the wife had got a boyfriend, was living with someone or had started working,” said Simon Pigott, a partner at Levison Meltzer Pigott in London. “It was uncommon that they made an application for downward variation because their incomes had fallen off the face of a cliff.”
If successful, the Myerson ruling could open the floodgates for similar appeals, the lawyers said. All five said that he faces an uphill struggle to change a settlement he agreed to.
“Courts are busy as it is without dealing with cases retrospectively, and they are also very concerned about ensuring there is as much finality as possible in each case,” said Ann Ison, partner at Hughes Fowler Carruthers in London.
Negative Equity
When the Myersons divorced in February 2008, Brian Myerson opted to give his ex-wife, Ingrid, 9.5 million pounds and a 1.5 million-pound beach house in South Africa, documents submitted to the Court of Appeals show. He was to keep the shares in his company, a London-based group of investment funds. The deal would have given Myerson 57 percent of the couple’s total wealth of 25.8 million pounds, versus 43 percent for Ingrid Myerson.
Myerson, 50, will be forced into negative equity of 500,000 pounds, while his wife will take 100 percent of the couple’s assets if he pays her all the money she’s due, Myerson’s lawyer, Martin Pointer, told the Court of Appeals on March 11.
Myerson was ousted last week by Principle shareholders, who also voted to liquidate the fund. Shares of Principle have fallen 76 percent this year. Ingrid Myerson’s lawyers argued in court filings Myerson’s stock portfolio could rise in value.
Philip Way, a partner at Mills & Reeve, who represents Myerson, wasn’t available for comment. Raymond Tooth, who represents Ingrid Myerson, couldn’t be reached by phone.
Extraordinary Event
Myerson’s case hinges on whether he can prove the financial crisis was an extraordinary event no one saw coming, according to Ison, who isn’t involved in the case. British family law holds that alimony is negotiable, while lump-sum payments, or capital orders, are final except in the event of an unforeseeable circumstance.
Jim Moore, another investor seeking a court-ordered adjustment to his divorce settlement, says he can’t afford to pay his former wife, Kim, the 4.7 million pounds he owes over the next three years. When the couple reached a deal last year, their total financial assets, based largely on property holdings, were worth 135 million pounds.
“His issue is to due to the fact that she received most of the cash and he received most of the properties,” said Murray Harkin, Moore’s spokesman. “It’s not that he doesn’t want to pay it at all, but he wants to have the amount reduced.”
Moore, 45, is representing himself, and a final ruling is expected in first two weeks of September, Harkin said. William Longrigg, a partner at Charles Russell in London who represented Kim Moore at a 2007 divorce proceeding, wasn’t immediately available to comment.
The recession is affecting how divorces are settled, and few couples are following the Myerson approach, in which Brian took all the risky assets, Craig said.
Spread the Risk
“There’s much more of a tendency of spreading the risk by allocating assets proportionately,” she said. “People aren’t putting all their eggs in one basket anymore.”
Cases are increasingly being resolved out of court, the lawyers said.
“The guys usually have good reasons for asking, and the wives have understood,” said Pigott, who says only two of his clients that requested new divorce terms were women. “They may have some argument about what level the payments should come down to, but the fact that they should come down isn’t the problem.”
Some couples seem to be taking all this into account and are putting off ending marriages, according to Lipson.
“For the financially weaker party, it is not a great time to get divorced because they will get less,” Lipson said. “For the stronger party, yes, they should get divorced now, but quite a lot of those people have a lot of other things on their plates to deal with.”
To contact the reporter on this story: Caroline Alexander in London at calexander1@bloomberg.net.
Last Updated: March 31, 2009 07:13 EDT |
