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06 FEB 2019

Analysis: Changing financial settlements

Analysis: Changing financial settlements

According to Stuart Clark and Emma Chowdhury, of the International Family Law Group, the English Family Courts strongly encourage any financial order made upon divorce or civil partnership dissolution to be final, as in not changeable after the event. This applies equally to orders reached by consent as it does to orders imposed by the court following a contested final hearing.


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That all said, the Court can, under a variety of circumstances, change the final order. There are broadly five ways in which a final financial settlement can be changed:

  • Variation under section 31 Matrimonial Causes Act 1973;
  • Setting-aside the order owing to non-disclosure, fraud or undue influence;
  • Setting-aside the order owing to new and subsequent events;
  • Setting-aside the Court’s decision after it has been made but before the order has been sealed; and
  • Setting-aside the order after it has been made but before it has been implemented.

Variation under s.31 Matrimonial Causes Act 1973

People’s lives move on, circumstances change and what may have been an appropriate financial order at the time of a divorce may no longer be appropriate. In those instances, the Court has the power to vary final financial orders years after the original order was made.

This does not mean that the applying spouse can start from scratch and disregard the initial order, but neither can the responding spouse cling to the original conditions if the circumstances have changed. The Court will take into account changes in circumstance since the initial order and has a broad discretion to make a new order.

Which orders can be varied? This power is often used to change maintenance provisions, but this is not exclusive. There is seemingly conflicting law regarding the circumstances in which an order can be varied in this way, so early advice is crucial.

The court will consider all the circumstances. The purpose, rationale and governing principles behind the original order will be considered alongside the new current circumstances. The court is not restrained by the terms of the original order. 

Meeting the respective needs of each spouse remains a guiding principle. To take the extremes: a former spouse who is paying maintenance but who falls on hard financial times will not be expected to continue payments to their former spouse who has new-found wealth or a significant income. The order will be varied accordingly. Both payer and payee are subject to scrutiny.

Cohabitation or re-marriage often prompts a variation application.  Whilst the re-marriage of the spouse receiving spousal maintenance automatically ends their entitlement, the Court will not automatically vary just because the recipient is cohabiting. The Court will look at the practical arrangements. Cohabitation or remarriage by the paying spouse is also, of course, relevant. However, the “new” spouse should not be given priority over the interests of the recipient.

You can find more information in our iGuide on ‘Variation of Financial Orders’ here.

Non-Disclosure, Fraud and Undue Influence

A final financial order, even one which has been made by consent, can be re-opened and reviewed if there has been a failure to provide pertinent full and frank financial disclosure in the lead up to that order being made, or if one spouse has acted fraudulently or has exerted undue influence. If this comes to light then the original order can be varied, suspended or rescinded.

The leading case in this area (known as Sharland) involved the failure by the husband to disclose to the wife and to the Court the knowledge he had of an impending purchase of a company for a price well in excess of the value attributed to that company at the final hearing of financial matters.

A high level of material non-disclosure, fraud or undue influence is required. Minor non-disclosure is not sufficient and so, for example, the failure to disclose an asset which is relatively small in the context of the overall assets, whilst improper, is not so egregious as to warrant the re-opening of a financial order.

Non-disclosure of a substantial asset or key facts which underpin the rationale behind the financial order is required. This can include hiding issues which may affect the value attributed to certain assets. But also, non-disclosure of known future events such as the sale of assets, re-marriage, new employment. Fraudulent behaviour and exerting undue influence or duress (including emotional or financial duress) on a spouse to sign up to a consent order can also give rise to the order being re-opened.

For consent orders especially, it is common to talk about the non-disclosure, fraud or undue influence “vitiating the consent” of the counter-signing spouse. Essentially, the court will want to know whether the behaviour by one spouse overbore the will or consent of the other spouse.

The leading cases are incredibly fact-specific, and it is not possible to set out here what may or may not constitute behaviour which may be sufficient to re-open an order. If you think that you may have suffered as a result of your former spouse’s behaviour in this respect, please contact us on the below details.

Please also take some time to read our previous article on this subject here.

New and Subsequent Events

There are instances in which a new event occurs very soon after the making of a consent order and which strikes at the heart of the order itself. The leading case in this field (known as Barder) outlines the four principles which guide when an application can be made to change the order:

  • The new event must affect the validity of the basis on which the order was made;
  • The event must have occurred shortly after the order was made (i.e. within a year);
  • The application must be lodged promptly; and
  • The granting of a new order must not prejudice a third party.

The facts of Barder were extreme and tragic. The wife, who was due to receive the former matrimonial home to live in with the parties’ two children, committed suicide and killed the children five weeks after the order was made.  On the husband’s application the court changed the final order so that the property would go to him rather than to the wife’s estate in death.

Successful applications under this category are rare. The new circumstances must have been unexpected at the time the order was made. The event must be very significant to change the outcome. The changes cannot just be uncertainties or known unquantifiable changes. So, a dramatic change in the value of an asset, a tax liability, unemployment or redundancy will not be enough. Previous examples of applicable circumstances are deaths of those named in the order or an unexpected inheritance.

Set-aside before Order is Sealed or Implemented

The final two circumstances in which a financial settlement can be amended fall into two similar headings, as follows:

  1. Amendment after a Judge has imposed the outcome but before the order reflecting that outcome has been drawn and sealed (known as the Barrell jurisdiction); and
  2. Amendment after the order has been made but before it has been implemented (known as the Thwaite jurisdiction).

As in circumstances where there has been non-disclosure, fraud or undue influence, these types of applications are rare.

The first heading usually arises where there has been a final hearing in relation to financial matters and the Judge has given judgment. As often occurs, there has then been delay before the order has been drawn and sealed. If during that period an event occurs, or something is discovered which would have affected the decision of the Judge, the outcome of the judgment can be altered.

The threshold is high, and the changes usually only occur in unusual circumstances. If you think that this has occurred, you should act quickly before the order is sealed to ensure that the Judge can take the new event or new discovery into account.

Previous examples of successful challenges have involved a high degree of unfairness which cannot be solved by any other means. It can happen when a Judge has made a serious error in law or if there has been a conflict of interests.

The second heading usually arises where there has been a change of circumstances after the order has been made but before it has been implemented. This commonly (but not exclusively) occurs where there is to be a sale or transfer of an asset, including, for example, real property, or where a lump sum is to be paid.

The threshold for alteration is again high; the change of circumstances must be significant. These circumstances often render it impossible for the consent order to be properly performed. Common examples include where the Court has ordered that a property is sold with a prescription for how the proceeds of sale shall be divided. If, subsequently, the property cannot be sold or can only be sold hugely below the anticipated selling price, then the court can intervene and re-frame the terms of the order.

The Court retains the power to amend the order only until the order has been implemented and not afterwards. This is often linked to provisions in the original order which state that the conflicting applications for a financial order will be dismissed upon implementation. The drafting of the order is often crucial and so is timing; applications to amend the order must be made at the right time, i.e. prior to the actual sale of a property in the above example.

Conclusion

Whilst the Court strives to impose finality, it is appreciated that mistakes, non-disclosure, fraud or undue influence occurs. Also, circumstances change. Unanticipated events occur. Lives move on.

The Court can intervene to change a financial settlement in limited circumstances. Timely professional advice is crucial and if you think you may have been affected in the ways described in this article, please contact us early and before taking any further action which might prejudice your ability to change the order.

If something seems amiss or if circumstances have changed you may be able to change your final financial order. It may be that one (or more) of the above avenues are available to you. We can help to identify which route to take and how to take it to secure a fair outcome.

Stuart Clark is a Partner at iFLG and Emma Chowdhury is a Trainee Solicitor at the same firm.

Stuart.clark@iflg.uk.com / emma.chowdhury@iflg.uk.com

The International Family Law Group LLP