Partner Claire Dyer, head of our Family Law team, looks at some useful reminders following the recent High Court decision of Lewis v Cunningtons Solicitors [2023] EWHC 822 (KB).
The recent case of Lewis v Cunningtons Solicitors has caused lots of discussion amongst practitioners, but it also serves as a reminder of some important points to consider for those going through a divorce or dissolution.
In summary, the case concerns a professional negligence claim brought by a divorced wife, Mrs Lewis, against the solicitors she instructed to deal with her divorce over ten years ago. Mrs Lewis negotiated a deal directly with her husband without going through the process of full and frank financial disclosure. Full and frank financial disclosure is the process in which you exchange financial information with your ex-partner, with documentary evidence, so that you are both aware of one another’s assets, liabilities, income, and outgoings.
Without financial disclosure, it can be difficult for a family solicitor to provide tailored advice on whether a proposed agreement provides a fair and reasonable outcome. For that reason, in the case of Lewis v Cunningtons Solicitors, Mrs Lewis was asked to sign a disclaimer to confirm that she had been advised that there should be an exchange of full and frank financial disclosure but had chosen to go against that advice, and therefore had not been given any advice in relation to her financial settlement.
When preparing the Court documentation, it transpired that Mrs Lewis’ husband had a very large pension which was the most significant asset. At that point, notwithstanding the disclaimer, Mrs Lewis’ solicitors had enough information to advise Mrs Lewis of her claims in respect of her husband’s pension, and that the proposed agreement provided her with far less than what a Court would order. Mrs Lewis’ solicitors failed to provide that advice, and the proposed agreement was subsequently sealed by the Court. The financial order provided Mrs Lewis with just 10% of the overall assets. Mrs Lewis’ claim for professional negligence was successful and she was awarded damages of £400,000.
Key takeaways
- Pensions are important assets which should not be overlooked. In my experience, it is common for clients to overlook their pension provisions as they are more concerned with their immediate capital provision. It can be tempting to ignore pensions in the interest of swiftly concluding matters, however, pensions are important and valuable assets which provide income on retirement.
- The Cash Equivalent Transfer Value (CETV) of a pension does not always reflect the true value of a pension’s benefits, particularly where defined benefit/final salary pensions are concerned. In this case, the husband had a police pension with a CETV of £540,712.60. This was likely to be a defined benefit pension. For the purpose of Mrs Lewis’ professional negligence claim, pension actuaries were instructed calculate the true value of the husband’s pension. An actuary is an expert who can analyse the benefits associated with a pension to provide a more accurate value than the CETV, and advise on how the pension should be shared. The actuaries calculated that 50% of the husband’s pension benefits were worth in the region of £422,000 and £536,000 (depending on factors such as age of retirement), meaning the true value of the pension was double the CETV. We always advise that a pension actuary ought to be instructed when dealing with defined benefit pensions.
- If you are not satisfied with the advice you have received, or are in any doubt about your options, do not be afraid to seek a second opinion from a different law firm. Going through a divorce is very difficult and emotionally draining process which requires you to put a high level of trust into your lawyer to advise you on obtaining the best possible financial settlement. It is important that you understand the process and the options available to you. In this case, Mrs Lewis thought that:
- a) She could only choose one method to resolve her finances;
- b) There was no way to compel her husband to provide disclosure; and
- c) Her solicitors could not advise her at all once she had signed the disclaimer, regardless of the financial information available.
Taking each of these misunderstandings in turn:
- a) In practice, parties going through a divorce often use a blend of methods to reach a financial settlement. For example, you may start with direct discussions with one another, followed by mediation, followed by some negotiations in solicitor’s correspondence to finalise matters.
- b) As a very last resort, you can issue Court proceedings to compel your ex-partner to provide their disclosure. If there is repeated non-disclosure within Court proceedings, this can result in the non-disclosing party being subject to a fine, having assets frozen, or even imprisonment.
- c) Although Mrs Lewis had signed a disclaimer in relation to forgoing financial disclosure, when her solicitors became aware of the value of her husband’s pension, they had sufficient information and a duty to advise Mrs Lewis on the significant disparity between their respective financial provisions.
There are very limited circumstances in which you can return to Court to vary a financial order once it has been sealed by the Court, so it is important that you are satisfied with the terms of any agreed order, and that you understand what the future implications of the order will be once it has been implemented.
For further information or advice, please visit www.blandy.co.uk.
This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.
