Divorce lawyers to UHNWs expect a deluge of divorces in the wake of the pandemic. But their advice on how to achieve a good result hinges on whether their clients are the financially weaker or stronger party in a relationship
Every year, the Spear’s Research Unit carries out extensive research into the high-value family law sector and the elite group of practitioners who are tasked with dealing with the divorces of ultra-high-net-worth individuals (UHNWs). The insight and information gathered during this process underpins the annual Spear’s Family Law Index. It also provides a unique insight into the minds of this exclusive group and their clients.
Unsurprisingly, the consequences of the coronavirus pandemic were a leading theme in the practice of the lawyers we spoke to.
Half the family lawyers surveyed by Spear's say they have seen an increase in the number of divorces during the coronavirus pandemic.
‘The pandemic has been such an extraordinary moment – it’s encouraged everyone to reflect on their life and what is important to them. A natural casualty of that is going to be “am I happy in my marriage”?' says Davina Katz, founder of Katz Partners and a Spear’s Top Flight family lawyer.
The figure chimes with other reports. Law firm Stewarts reported a 122 per cent increase in enquiries between July and October 2020 compared with the same period in the previous year, and Citizen’s Advice reported a spike in searches for online advice on ending a relationship over the course of the pandemic last year.
Ayesha Vardag, founder and president of Vardags dubbed the ‘diva of divorce’ says her firm saw a 53 per cent decrease in reports of adultery from her clients over the course of the pandemic, but a 78 per cent increase in reports of ‘bad behaviour’, leading to a rise in enquiries.
'Most of those people who are going to be caught that way have already been caught, and there just hasn't been a chance to go out and meet people, whatever their habits are,’ Vardag tells Spear’s. ‘They haven't been meeting people at the squash club or meeting people physically at work or in bars after work, they haven't been able to sort of do the whole secret Tinder thing if that's their bag. So affairs have really gone down, whereas bad behavior on the other hand has really gone up.’
An overwhelming majority of lawyers believe that the aftermath of the pandemic – and the ending of restrictions in the UK – will coincide with an uptick in the number of HNW divorces.
Up until now, getting a divorce may not have been a priority or seen as a wise course of action for people grappling with the effects of the pandemic, or for couples with little choice but to remain living together. ‘People have been slower to make those decisions because there are other things going on in clients' minds,’ says one prominent family lawyer, echoing the sentiment of many respondents. ‘They’re having to think about furloughing their staff, what’s happening in their business.’
What’s important in high-value divorce?
In HNW and UHNW divorces, there is typically a financial imbalance between parties, so Spear’s asked leading family lawyers to name the two factors they believe to be most important for either side of the financial equation. Securing a favourable jurisdiction emerged as the most important factor for both the financially stronger (44 per cent) and weaker parties (42 per cent) respectively.
As our recent cover story shows, London has a reputation as ‘the divorce capital of the world’ thanks partly to the English legal system, which begins with the assumption that all assets will be split 50/50 between the two parties. This is in contrast with many jurisdictions, even those of England's Western European neighbours.
‘Securing the most favourable jurisdiction is make or break for the financially weaker party, says Ros Bever of Irwin Mitchell. ‘In many cases, the race to secure jurisdiction here is the first priority. In one of my cases, it was verging on catastrophic that the financially stronger party had already secured French jurisdiction and [without] a sensible and collaborative approach, the client would be in a very weak position.’
The issue of jurisdiction is set to become more important in the wake of the UK's departure from the EU, where a divorce filed in multiple jurisdictions must now usually be heard in the country to which the parties are most strongly linked.
‘One of the beauties of the European regime was that you had certainty,’ says Rachael Kelsey of SKO Family Law. ‘We have lost that certainty. So what you have now is that there will be disputes and question marks over what's the appropriate forum. There will then be disputes and question marks about who gets in first.’
Choosing the right solicitor is judged to be the second most important factor, named by 40 per cent of respondents for both the stronger and weaker party.
But getting a top-tier practitioner is expensive. Some 23 per cent of lawyers place the issue of securing the funds to pay for one one of the most important factors for the financially weaker party.
This issue is reflected in the growth of litigation funders – companies that offer to fund the cost of divorce proceedings, often with a loan. ‘The first step to freedom is having the financial resources to fight the litigation,’ says George Williamson, CEO of Level, a litigation funder. ‘If they're the ones paying or they're reliant on them, they've still got some element of control to their freedom.’
Fortunately, the Spear’s Family Law Index ranks and profiles the leading such solicitors and litigation funders.
Given the stakes for lawyers working on high-value divorces, unpicking the financial aspects of a case is deemed particularly important.
Some 33 per cent of lawyers believe that having a clear picture of a partner’s wealth is especially important for the financially weaker party. Accordingly, 23 per cent said that the distribution and structuring of one’s own wealth is crucial for the financially stronger party, making it the third most important consideration for that group.
Choosing the right time to settle (19 per cent ) and giving careful consideration to the full range of alternative methods of dispute resolution (19 per cent) were jointly ranked as the fourth most important consideration for the financially stronger party.