Can a divorce financial settlement be reopened?
It is possible to reopen a divorce financial settlement, but extremely rare. In most circumstances, once a financial settlement has been officially recorded in the form of a consent order, the financial ties between the divorcing couple are broken and neither of them will be entitled to make financial claims in the future.
A precedent set during the case of Barder vs Barder (1987) means that a court may allow a financial settlement to be reopened if something later happens that alters the principle on which the original consent order was made.
Before the court will agree to reopen a settlement, four key factors need to be satisfied:
- A new event(s) occurs that invalidates the basis, or fundamental assumption, on which the original consent order was made.
- The new event(s) must have occurred within a relatively short time after the consent order was made.
- The request to re-open the financial settlement is made soon after the new event occurs.
- The appeal does not prejudice any rights to assets acquired by third parties (for example, if a house has been sold to an unconnected third party).
Case law in action: the case of Critchell v Critchell
Successful applications to reopen financial settlements are rare but they do happen – for example, in the case of Critchell v Critchell (2015).
The original settlement
When Mr and Mrs Critchell separated in 2010, Mr Critchell moved out of the family home, leaving his wife to live there with their two children. He then bought a new home for himself, using £85,000 borrowed from his father and a mortgage of £63,000.
According to their financial settlement (set out in a consent order), ownership of their family home was transferred to Mrs Critchell, who also took over responsibility for the mortgage. Mr Critchell was to have a charge over the house, like a second mortgage, for 45% of its net value. In other words, he was the nominal owner of 45% of the property, and he would receive that 45% when the first of the following events occurred:
- their youngest child turned 18 or completed full-time secondary education
- Mrs Critchell died
- Mrs Critchell re-married or co-habited with a partner for a significant period of time
- the sale of the property.
The order also instructed Mr Critchell to make nominal maintenance payments to Mrs Critchell.
The original settlement is appealed
A month after the court approved the consent order, Mr Critchell’s father died and he inherited £180,000. This meant that he could pay off the mortgage on his new home and no longer had to repay the £85,000 loan to his father.
Mrs Critchell applied to the court to appeal against the consent order. She argued that the death of Mr Critchell’s father had moved the goalposts. Mr Critchell’s circumstance were now quite different, so her case qualified for reopening according to the Barder vs Barder precedent.
The Court’s decision
The court agreed that her case met all the principles set out in the Barder case and referred it to the High Court.
The High Court agreed with Mrs Critchell and removed Mr Critchell’s charge over the former matrimonial home. Mr Critchell appealed to the Court of Appeal but they upheld the High Court’s decision and he lost his 45% charge over the house.
Critchell v Critchell: understanding the Court’s decision
The changes made to the consent order meant that Mr Critchell received nothing from the marital assets built up by the couple during their marriage, which at first sight might seem unexpected.
The original consent order was designed to enable Mrs Critchell and her children to continue living in the family home, and also keep 55% of the value of the house. Mr Critchell would receive nothing immediately, but in the future would receive payment for his share of the house, which would enable him to pay off most of the loan to his father. After that, both he and his wife would have similar levels of value in their homes.
The death of Mr Critchell’s father changed the situation. Mr Critchell no longer needed to repay the loan to his father and had also inherited enough to pay off the mortgage on his new house. The courts therefore upheld that Mr Critchell no longer needed the 45% charge over the former matrimonial home, and changed the settlement terms to remove it.
When a court works out a financial settlement, it starts from the assumption that the marital assets should be shared equally, unless certain factors come into play. The most important of these is “needs”. This means that the court must create a settlement that first ensures that the needs of minor children are met and then that the needs of both the husband and the wife are provided for.
The courts upheld Mrs Critchell’s application because they believed it was the best way to meet the needs of her children, and then hers and Mr Critchell’s.
It is very rare for a divorce financial settlement to be reopened and changed. However, the Critchell case shows that unexpected and significant changes, such as a sudden substantial inheritance, can occur in the weeks and months following a financial settlement order. If they do, an application may be made to the court to change the existing settlement terms.
Contact a divorce financial settlement specialist
If you need legal advice on arranging or challenging a financial settlement, call us now on 0800 422 0123 or contact us online for a free and confidential initial consultation. We have family law specialists in London, Manchester, Bristol, Cardiff, Birmingham, Southampton and Taunton.