Divorce & Family

I’ve got my divorce financial settlement order from the court so that’s it, right?

When financial settlement orders are re-opened

A divorce financial settlement is made by the court either as a consent order, if the Husband and Wife have agreed the terms, or by an order made at the end of a contested hearing if there is no agreement.

These orders are designed to set out the final settlement terms between the parties. However, there are circumstances where the settlement can be reopened and different terms substituted as the recent Court of Appeal case of Critchell v Critchell [2015] EWCA Civ 436 shows.

These orders are designed to set out the final settlement terms between the parties. However, there are circumstances where the settlement can be reopened and different terms substituted as the recent Court of Appeal case of Critchell v Critchell [2015] EWCA Civ 436 shows.

Where the assets held by a husband and wife include land and a farming business such an application to change the terms of a divorce financial settlement order could be extremely disruptive and damaging to that business.

When can divorce financial settlements be re-opened?

The rules under which a divorce financial settlement might be reopened were set out as long ago as 1987 in the case of Barder v Barder (Caluori intervening) [1987] 2 FLR 480. The first point to make here is that the court in this case made clear that the circumstances which would lead to the successful reopening of a case would be very rare and the court stressed that it was in the public interest for there to be finality in litigation. However, it was decided that it would be possible to reopen a settlement if the following four factors were satisfied:-

  1. New events had occurred since the making of the order which invalidated the basis, or fundamental assumption, upon which the order was made
  2. The new events have occurred within a relatively short time of the order being made
  3. The request to appeal the order is made promptly
  4. Allowing a party to appeal an order should not prejudice any rights in assets which have been acquired by third parties.

In the years since the Barder case was decided successful appeal applications seeking to reopen financial settlements have been rare but they do happen and this was the case with the recent Critchell case.

The facts of the Critchell case

Mr and Mrs Critchell married in 2001. They are both in their mid-forties and have two daughters aged 14 and 12. They separated in 2010 when the Husband moved out of the family home leaving the Wife living there with the children. He then bought a new home for himself using £85,000 borrowed from his father and a mortgage of £63,000.

In the court proceedings dealing with financial matters it was agreed that the only significant asset arising from the marriage was the jointly owned former matrimonial home with net equity of £175,000. The Husband’s home had little, if any, net value. The Wife was working part-time as a hair stylist and receiving working tax credits, child tax credits and child benefit. The Husband was a self-employed painter and decorator and his net annual income was estimated at £5,000 per annum, although he had been unable to work full-time due to an injury and hoped his income would improve soon. He was also receiving working tax credit and was paying some child maintenance through the Child Support Agency.

After an indication from a District Judge at a preliminary court hearing called a Financial Dispute Resolution Appointment settlement terms were agreed and set out in a Consent Order made by the court.

Under the settlement it was ordered that the former matrimonial home was to be transferred to the Wife subject to the mortgage, for which she would take responsibility. The Husband was to have a charge over the house, like a second mortgage, for 45% of its net value. This charge would become payable to him by the wife when the first of the following events occurred:

  1. the youngest child reaching 18 or completing full-time secondary education, whichever is later;
  2. the death of the Wife;
  3. the remarriage, or cohabitation for a period of 6 months in any 12 month period, of the Wife;
  4. sale of the property.

However, the charge was not to be exercisable without permission of the court whilst any child of the family still living at the house remained a minor or in full time secondary education. The order also made provision for the Husband to pay nominal maintenance payments to the Wife fora period of time.

Within a month of the Consent Order being made by the court the Husband’s father died and he inherited £180,000 and in addition no longer had to repay the £85,000 loan to his father. The Wife applied to the court to appeal the Consent Order. She argued that the death of the Husband’s father was a qualifying event under the Barder principles and that therefore the terms of the Consent Order should be reopened and varied. When the case came before the High Court HHJ Wright agreed with the Wife and varied the Consent Order by removing the Husband’s charge over the former matrimonial home. The Husband appealed to the Court of Appeal but that court upheld the High Court’s decision and so the Husband lost his 45% charge over the house.

Reasons for the decision

The courts agreed that all the principles set out in the Barder case were met by the circumstances in Critchell, including the death of the Husband’s father being an entirely new event occurring since the date of the ‘Consent Order which invalidated the basis and fundamental assumption on which the order had been made. It was therefore possible to reopen the Consent Order and to change its terms.

The changes made to the Consent Order meant that the Husband received nothing from the marital assets built up by the couple during the marriage, which at first sight seems unexpected.

When a court determines a financial settlement the starting point for the division of marital assets is that they should be shared equally, unless it is necessary to depart from equality when considering certain factors which are set out in law. The most important of these is “needs”. This means that the court must design a settlement which firstly ensures that the needs of minor children are met and then that the needs of both the Husband and the Wife are provided for suitably.

It was held in this case that the principle factor in the original settlement between Mr and Mrs Critchell had been meeting needs. The order was designed to enable the Wife to retain the former matrimonial home for herself and the children together with 55% of the value of the house. The Husband would receive nothing immediately but in the future would receive payment under his charge, which would enable him to pay off most of the loan to his father and thereafter the parties would both have similar levels of value in their homes. Following the death of the Husband’s father this structure for settlement no longer worked as the Husband did not now have to repay his father the loan and, in addition, had an inheritance more than sufficient to pay off the mortgage on his house. The courts therefore held that the Husband did not now need the 45% charge over the former matrimonial and therefore changed the settlement terms to remove it.

Conclusion

It is important to remember that the circumstances where a divorce financial settlement can be reopened and changed will always be rare. However, it is also important to bear in mind that unexpected and significant changes, such as a sudden substantial inheritance, can occur in the weeks and months following the making of a divorce financial settlement order, and this is perhaps more likely to occur in farming families than in other situations. The Critchell case shows that where this does happen there will be a risk of an application being made to the court to change the existing settlement terms.

Contact a specialist divorce lawyer

If you would like more information about nuptial agreements please contact Alastair MacLeod on 0345 209 1696 or alastair.macleod@clarkewillmott.com.

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