Tough economic times can make breaking up hard to do

An effective solicitor/client partnership can limit the amount of time spent on a case, but some aspects of matrimonial law are affected by uncontrollable factors – a source of frustration for many. Clients need to consider their legal costs, the value of any settlement, and the impact on future financial plans.

The longer a marriage, the higher the level of financial entitlement, in general terms. In cases involving many or complex assets, the position is not necessarily that straightforward.

This is particularly relevant in the current political climate, with volatile markets and fluctuating asset values. Economic instability can lead to different financial outcomes when it comes to financial provision on divorce. Our legal system perhaps isn’t equipped to adjust accordingly. Or is it?

Financial provision on divorce is governed by the legislative framework set out in the Family Law (Scotland) Act 1985. Section 10 contains the concept of the “relevant date”, defined as the earlier of the date on which parties separate, or service of a summons in a divorce action.

This date is important as it locks in the value of what’s to be divided. If the economy is struggling, it could mean the couple’s assets are worth much less than expected. Couples can’t just pick a date that works best for them financially.

However, if the value of the assets has dropped and one person can’t afford to pay the other their share, the court can sometimes allow payments in instalments or take into account what someone can reasonably afford, known as “resources”.

So, what, if anything, can Scottish family lawyers and their clients do to adapt if separating in a volatile economic climate? It can be possible to invoke so-called “resources arguments” to address the fair division of assets.

The court can consider resources in determining that a capital sum should be paid over in instalments, for example. In the aftermath of the last recession, family lawyers advanced arguments around the falling value of assets and the need to balance the scales, with limited success.

The Scottish Courts tended to the view that the value of assets can only be acquired at the relevant date (subject to the legal exception in situations where an asset is to be transferred between spouses, in which case the current or appropriate valuation date can be used).

For example, in a recent case, a man was allowed to pay his ex-wife for her shares in their family business in four separate payments, as he didn’t have the money upfront.

In some circumstances, the best thing to do may be to bide one’s time until the economy has bounced back before taking steps to resolve the issue of financial provision.

There are no guarantees, but unless there are overwhelming reasons to justify proceeding without delay it can be sensible to hold on – notwithstanding the Scottish concept of the relevant date.

More thoughtfully constructed arguments around resources can facilitate outcomes that take into account the fluctuating nature of assets. Care and thought applied to timing, and the amount of time spent constructing arguments, can go some way to creating a sense of control.

Ultimately, pragmatism must reign if separating spouses are to extricate themselves from a marriage in a cost-effective and manageable way.

Amanda Masson is Head of Family Law, Wright, Johnston & Mackenzie LLP