A contentious issue arising from the financial consequences of a divorce is asset valuation. In the last couple of years, two particular factors have made this task even more challenging: uncertainty in the way in which the family courts have been developing and applying the principles to be followed; and the uncertainty and dramatic reversal of fortunes caused by the recession.

"It’s not hard to make decisions when you know what your values are,” (Roy Disney, nephew of Walt Disney).

“Certainty is the mother of quiet and repose; and uncertainty the cause of variance and contentions,” (Edward Coke, English jurist).

One of the most important and often most difficult issues that arises when dealing with the financial consequences of a divorce is that of asset valuation. In the last couple of years, two particular factors have made this task even more challenging: uncertainty in the way in which the family courts have been developing and applying the principles to be followed; and the uncertainty and dramatic reversal of fortunes caused by the recession.

It is settled case law that the court deals with the assets as they are at the time of its decision. Behind that apparently simple principle, however, lies much room for negotiation and argument. For example, the spouse who improves his or her financial position significantly where there is a long time between separation and the court decision may succeed in arguing that such an increase should be left out of account as it results from his endeavours after the “marriage partnership” came to an end.

Alternatively, the spouse who dissipates family resources by making reckless investments or overspending on a new partner may find himself penalised by an add-back of the wasted money. The attitude of the courts to these issues is far from settled and the credit crunch has added a further volatile ingredient to the mix, as three recent cases illustrate.

In Myerson, the parties reached a settlement in February 2008 under which Mr Myerson agreed to pay a total of £9.5 million (around $14.1 million) in cash to the wife - £7 million within a couple of months and the balance in four annual instalments of £625,000 each, starting a year later. At the time of the agreement Mr Myerson’s company shareholding was worth just over £15 million.

Subsequently, the share value collapsed and Mr Myerson argued that the original order should be set aside, claiming that the unprecedented financial downturn rendered the whole settlement unfair. He argued that he should have back all or at least a part of the £7 million he had already paid. The Court of Appeal disagreed and held him to the deal. The court said that he had agreed a settlement that left him “captain of the ship”. He was astute and had taken a commercial decision. It was clear that values could go down or up, but even very substantial changes did not justify unpicking an order, particularly one that had been agreed. When there is a final order it should not be re-visited other than for the most exceptional reasons. To re-open an order because of the economic downturn would be opening the floodgates.

It is to be noted that Mr Myerson had also made an application to be released from the £2.5 million that had not yet been paid, but this was settled by agreement, so we do not know how the court would have decided it. The fact that this separate application was open to him was one of the factors referred to by the Court of Appeal when dismissing his claim to re-visit the £7 million payment.

In G v S in 2009, the wife applied to set aside an order made (not by consent) in 2006. The forensic accountants had wildly different views of the value of the husband’s company shares. His valuer said £3.75 million and hers £27.2 million. The wife got all of the realisable assets and £900,000 secured on the shares, to be paid when they were sold. A year later the business sold for £130 million. The court said the order should stand. It is to be noted that in this case the couple had been separated for 10 years by the time of the hearing.

The above two were cases where a reduction or increase in value occurred after the order had been made. Contrast this with the very recent case of Marano decided on 23 February. Mrs Marano is the daughter of the founder of the company that held the rights to the frisbee and the hula hoop. Mr Marano is a property developer. In June 2007, shortly after they separated, his investment in his property company was worth more than £80 million. By the time the case came to be heard in the High Court in March 2009 the value had been completely wiped out and his property interests were substantially underwater. Although, if he bailed out, he was protected by limited liability, he would have a US tax bill to pay of £10 million.

The High Court judge made an order that included a payment of £5 million from Mrs to Mr Marano representing half the notional tax bill. On appeal, Mrs Marano argued that it was completely artificial to take a snapshot value of the business when it was clear that Mr Marano had absolutely no intention of selling up, when the covenants on these commercial properties were strong and when prices would inevitably rise again. The Court of Appeal could find no fault with the original judgment and the payment of £5 million stood. Interestingly, there was evidence that by the end of December 2009 the value had risen to between £3.1 million and £12.5 million, but in keeping with usual principles the court refused to allow that fresh evidence to be admitted. It was not relevant to whether the original order was flawed.

So what lessons are to be learned from these cases? First, unless there has been some material non-disclosure, even dramatic changes in value will not entitle you to re-open a final order. But, where values change during the course of a case, they will be taken into account. It is clear that these problems will continue to arise whilst the economic outlook remains so uncertain and whilst the courts struggle to take a consistent line when trying to achieve the holy grail of a fair outcome.