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Redundancy and Divorce

Redundancy and Divorce

The Coronavirus pandemic has had a significant impact on so many aspects of our lives. It is estimated that more than 9 million jobs have been furloughed in the United Kingdom as part of the Government's job retention scheme. Despite this, we have still seen redundancy programmes in many businesses and, when the scheme comes to a close, it is expected that further redundancies will follow. A difficult time under any circumstances, redundancy (and redundancy pay) also has implications in divorce proceedings.

How does this interact with resolution of finances on divorce?

Where a maintenance Order is in place, it is important to realise that this is a variable Order. It is open to the payer who is facing redundancy to make an application to vary downwards the level of maintenance or periodical payments. The court may not immediately be persuaded to reduce the payments as the redundancy package itself is intended to compensate for loss of income and the court may regard it as a capital fund from which maintenance can be paid.

However with no alternative employment on the horizon and the redundancy payment running out, an application to vary maintenance downwards is the appropriate route along with an application to remit, or waive, arrears if they accrue.

It goes without saying that you should communicate with your (former) spouse about your financial difficulties so that they are not taken by surprise. They may agree to a variation after all.

Child support

Anyone subject to a child support assessment who has been made redundant should contact the Child Maintenance Service and ask for a reassessment on the basis of their altered circumstances.

In BB v Secretary of State for Work & Pensions 2019 UKUT 134 a mother appealed against the CMS's assessment on the basis that a redundancy payment of £110,300 (subject to income tax, save for the first £30,000) the father had received should have been taken into account. The first tier tribunal allowed the mother's appeal and directed the secretary of state to recalculate the amount of child support maintenance payable. The father appealed to the upper tribunal which held that a redundancy payment is not to be treated as part of a non-resident parent's current income for the purpose of assessing his child support liability.

Will your spouse have a claim against your redundancy payment?

The court would take into account all assets that are disclosable, whatever their source. One may be able to argue that a redundancy payment received after separation should be non-matrimonial and not be available for division if there are sufficient other assets to meet a spouse’s needs.

What if the redundancy was expected, the other spouse had a legitimate expectation of sharing it and it was paid the day after separation?

Cases turn on their own facts so one cannot say with certainty what the outcome might be in a particular case.

What if you feel that you are at risk of redundancy as you approach settlement of financial and property matters?

In theory, an application for an adjournment could be made until the position becomes clearer. In practice, applications for adjournment are rare and matters proceed on the basis of each individual case as it stands.

Does redundancy merit set aside of an order? Is it a Barder event?

In Maskell v Maskell 2001 EWCA Civ 858 the husband was made redundant and applied to set aside the order already made. Thorpe LJ said “Counsel for Mr. Maskell sought to go behind the order of District Judge Pearl, on the basis that it had been eroded by an unforeseen and fundamental supervening event, namely Mr Maskell's loss of employment some two months or so after the District Judge's ruling. In my opinion, counsel, who set the judge off on that trail, was pointing in the wrong direction. This was a long way from a Barder situation. There is nothing permanent about employment of the sort that Mr. Maskell held at the date of judgment before the District Judge. There are hundreds of thousands of breadwinners who have to face the challenge of the loss of what seems to be secure employment as a result of all sorts of events. It may be some major takeover or it may be that some shift in the international market destroys the security, not only of individuals but of whole communities. Judge O'Brien was undoubtedly right to deny Mr. Maskell a fresh hearing on the application on the principles in Barder”.

Gates Divorce and Separation
Inheritance Tax - Deed of Variation


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Tuesday, 17 May 2022

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