Divorced bankers who have had their bonuses cut are trying to wriggle out of millions of pounds worth of maintenance payments they promised to pay their children and former wives. Dozens of ex-husbands in the City are going back to court to ask judges to reduce divorce settlements that were agreed in much rosier economic times.
Two of the City's leading law firms advising bankers and wealthy businessmen confirmed that they were helping husbands get better maintenance deals in light of their clients' reduced financial circumstances.
Sandra Davis, head of family law at Mishcon de Reya, told The Independent: "We have had a number of male clients who have been forced to renegotiate settlements where maintenance awards were substantial. These were based on projected bonuses and salary levels which have not been sustained in the economic downturn."
Ms Davis is known for having acted for high-profile wealthy clients including the late Princess of Wales, Sir Mick Jagger's former partner Jerry Hall and, most recently, in the early stages of Heather Mills McCartney's divorce.
Withers, another City law firm, is also representing several former husbands in the financial sector. Mark Harper, a family law expert with the firm, said: "There is plenty of litigation in this area. Divorced bankers on, say a £150,000 salary, who had relied on million-pound bonuses, are certainly trying to have their spousal maintenance reduced. This is more likely to be where a deal has not yet been formalised by a court order."
Julian Lipson, another senior partner with Withers, said inquiries from the City's high-earners about "maintenance variation" had doubled in the past few months. He compared their reduced earning capacity to that of Premier League football stars whose clubs were experiencing financial turmoil or relegation. "In some of the cases I have seen, the husband's maintenance is now punitive because he is now paying out more to his ex-wife than he is left with for himself after other reductions. This means that he is disincentivised and has little reason to work hard for his employer."
City divorces have involved record settlements. In 2007, a multimillionaire businessman, John Charman, lost a final appeal to prevent his former wife from keeping her £48m divorce pay-out, then the biggest awarded by a British court. Mr Charman, nicknamed the "King of the London insurance market", failed in his attempt to take the battle with his ex-wife Beverley to the House of Lords to reduce the award.
Despite arguments by Mr Charman that the original £20m he had offered was more money than a reasonable person could spend in a lifetime, the Court of Appeal threw out his challenge in May 2007, in a ruling that confirmed that the "equality principle" should govern the splitting of a couple's assets.
And Melissa Miller was awarded £5m from a marriage that lasted less than three years when the law lords said in 2006 that she had married with "reasonable expectation" of a wealthy lifestyle. Mrs Miller, an American, gave up an £85,000-a-year job and a home to settle down and start a family with her millionaire husband Alan, a top fund manager.
City lawyers said last night that so-called "clean break" divorces such as those of Ms Charman and Ms Miller's would be difficult to revisit because the original settlement would have taken account of a possible downturn in the markets. Ms Davis said: "Historically, the husband may have been prepared to give his wife a greater percentage of the copper-bottomed assets, taking for himself a larger percentage of the risk-laden assets for example options, shares or futures. But no longer. With values subject to increasing volatility husbands no longer feel confident of a future bumper payout."
Today hundreds of thousands of former spouses remain financially tied to one another by the ongoing payment of spousal maintenance. Ms Davis added: "Much like investments, maintenance payments can go up or down. We are now entering a period during which the wives of high earners are either going to have to adjust their expectations, or have them adjusted by the courts."Reuse content