Beware of not obtaining a court order when settling your finances

In a recently reported case (HAT v LAT [2023] EWFC 162), the Wife applied for a full financial relief order with interim periodical payments (also known as maintenance pending suit) and a legal services payment order nearly 30 years after the parties had separated and entered into a deed of separation (the “Deed”). Ultimately, given that the parties did not convert the Deed into a legally binding court order, Mr Justice Peel made an order for maintenance pending suit and a legal services payment order for the Husband to make such payments to the Wife.

Background

The parties separated in 1993 after a nine-year marriage.  They did not have children.  The Decree Absolute was pronounced on 3 November 1998.  A Deed was entered into on 16 February 1994 by which the Husband would pay the Wife £702,000 on a clean break basis.  However, the parties did not convert the Deed into a legally binding court order. 

Interestingly, the Wife says she does not remember entering into the Deed despite instructing solicitors at the time and it bearing her signature.  The Husband complied with the Deed, paying the Wife £702,000 and implementing other provisions.  The Husband says he “has a memory of a consent order”, whereas the Wife said that “my financial claims were not dealt with at the time of our separation”.

Despite the Deed, for over 20 years, the Husband provided ongoing financial support to the Wife, which included paying her utility bills and a monthly allowance, as well as a loan subject to a declaration of trust to enable her to buy a property in London. In July 2022, the Husband reduced her monthly allowance from £8,500 pcm to £5,000 pcm, and in December 2022 he ceased making any payments to the Wife.

The Husband was very wealthy, had remarried and had three children with his current wife, whereas the Wife had modest financial resources.  The Husband accepted that he had the means to meet the Wife’s maximum claim (c.£5m): a relinquishing of the loan under the declaration of trust so that the Wife would own the London property unencumbered and a capitalised maintenance sum.  On 30 May 2023, the Wife made an application for maintenance pending suit at £9,344 pcm, inclusive of health insurance, backdated to the date of the application and for a legal services payment order of £227,321 to the FDR.

Effect of the delay

A delay in bringing a claim for financial remedies is not in itself a jurisdictional or procedural bar to making a claim.  A delay does not automatically, on the merits, disentitle the applicant to financial relief, but it will be a factor when weighing up the section 25 criteria. Furthermore, a delay does not prevent the court from making interim orders.

The judge considered that the Wife’s claims were not doubtful or speculative, although they were likely to be significantly curtailed by reason of the Deed and the subsequent passage of time.  Nevertheless, the Wife had received financial support from the Husband for over 20 years (since separation) and had grown accustomed to that regular support, which according to the Wife she was promised (by the Husband) would continue indefinitely.

Maintenance pending suit

The judge decided that it would be unfair for the Husband to stop altogether, or significantly reduce, an established income stream in circumstances where the Wife had minimal liquid resources to meet her needs and he considered that the Husband should be making interim financial provision at a similar level (to the payments received by the Wife in the 20 years since separation) pending fuller consideration. The judge ordered the Husband to pay £8,500 pcm to the Wife, backdated to the date of the application, until the parties reach settlement or the court makes a final decision.

Legal services payment order

The Wife’s solicitors would not enter into a Sears Tooth arrangement (whereby the solicitors are paid from the financial award at the conclusion of the case), and she was unable to secure monies from litigation funders.  The judge considered it unreasonable for the Wife to sell the London property or put a charge over it to secure funding.  Therefore, a legal services payment order of £200,000 was made to ensure equality in legal representation.

Conclusion

It is not uncommon for couples who divorce to reach an agreement as regards their finances but fail to record the terms of that agreement in a legally binding consent order (which is approved by the court).  This case demonstrates the importance of finalising a consent order and, crucially, lodging it with the court for formal approval from a judge.  In this case, the judge noted that “If a consent order comes to light, then W’s financial remedies application automatically falls away. If not, she is entitled in principle to proceed with her Form A […]".  This should serve as a cautionary tale: had there been a court order mirroring the terms of the Deed, the Wife would have been prevented from bringing any claim at all for financial relief some 30 years after the parties separated.  In its absence, and in light of the Husband’s actions in making voluntary maintenance payments to the Wife in the intervening period, her application was considered afresh, and she was successful in securing a substantial interim award for both maintenance pending suit and her legal fees.  Divorcees, beware!