(Ex) Love in a Cold Climate?
13/02/2009
In these turbulent economic times matrimonial financial court orders or agreed settlements embodied in such orders may have become unsuitable to the needs of one party to the former marriage and/or to the means of the other. Clients will want to know from their legal advisers in what circumstances a court order can be reviewed and, if it has become inappropriate, can be varied. By "financial order" we mean an order for payment of a lump sum, a property adjustment order, a pension sharing order or an order for periodical payments. The first three are payments of a capital nature, the last of income and this latter includes a pension attachment order.
In limited circumstances the court may set aside a financial order (including one made by consent where a supervening event (known as a "Barder event") has occurred after the making of the order which would, if known about at the time, have had a material effect on the order. An example might be a catastrophic fall in asset values. But, the event must be unforeseen by the parties. In a recent case a wife’s remarriage shortly after the making of an order was held not to amount to a "Barder event". Also, a very short space of time only is allowed to elapse between the order, the supervening event and the application to set aside, so this remedy will not be available in most cases.
Apart from the above the power to vary an order is contained in section 31 of The Matrimonial Causes Act 1973. The court is directed in exercising its powers under that section to have regard to the welfare of any child of the family under the age of eighteen and to any relevant change in the circumstances of either party. In a section 31 case the power to vary is limited only to an order for continuing periodical payments (including pension attachments). If the court decides it is appropriate to set a time-limit on the payments, or terminate them immediately, it may order the payer to pay an additional lump sum in lieu of further income payments.
How do these powers fit in with the changed world of the recession, or perhaps depression, where asset values have fallen and unemployment has increased and there is fear for the future?
Clean break orders became fashionable in recent years and have been encouraged by the courts. By this we mean the cutting of future financial ties between the parties so that they become independent of each other. This may involve splitting assets, if sufficient exist, to cover each parties' needs (including those of any dependent children) or one party (usually but not, of course, necessarily the wife) receiving additional capital in lieu of continuing periodical payments. The husband would hope to restore his capital out of increased future income, including bonuses. But there is no power to vary a clean break order. Thus where, for example, a party has agreed to part with extra capital in return for the certainty of a clean break order and so has also avoided the possibility of the other asking for an increase, or their being ordered to pay a further lump sum in future, such a deal might now seem to have turned very sour indeed. If (dare it be said) the husband then loses his job he cannot come back to the court to vary the order since it cannot do so. Better perhaps to agree to a continuing periodical payments order when at least the possibility exists of asking the court to review and perhaps decrease or suspend it. The attitude of the court to this will naturally depend on all the circumstances of the case.
So, conventional wisdom may now be stood on its head - the clean break previously favoured by the husband may become more attractive to the wife; the earner may fear to part with extra capital in case of future job-loss or some other adverse change in circumstances and the non or lesser earner may be looking to pick up extra capital as a protection for the future. (The gender terms are naturally used for convenience).
The bonus culture has been much in the news and no doubt will continue to be so. City workers are especially likely to suffer. Where the paying party's contract of employment entitles him/her to a bonus payment, the practice has grown up of including in financial orders the requirement that a proportion of each years bonus shall be paid to the spouse receiving payment. This is treated as part of the order for periodical payments and so will be capable of variation. The likelihood is that future bonuses will be reduced or disappear altogether. In that case the banker’s spouse would be advised to consider applying for a single increased payment if a substantial bonus is paid this year.
Hard times put stress on relationships. The parties may wish to separate but falling house prices and other factors may make it difficult to do so. Even where assets and income may seem sufficient, the greatest care must be taken in negotiating financial settlements. Given the court's limited power to vary them once made the parties' interests are best served in obtaining appropriate professional advice at the outset.
For advice on matrimonial financial orders please contact Karen Wallace (wallacek@s-yj.co.uk)
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