Financial Orders set in stone? Birch don't think so!

Struggling to figure out your finances during a divorce? You can apply for a financial order if you and your spouse are unable to come to an agreement. However, if you do agree then it is vital that you record the terms of your agreement into a financial consent order. A financial order is usually set in stone…until now. The case of Birch v Birch shows that after the original order was settled in 2015, the wife successfully appealed in 2017.

Background to Birch v Birch   

The husband and wife entered into a consent order in 2010 which stated that the husband would transfer to the wife his interests in the marital home so the wife would not have to change her lifestyle with her two young children and in return, the wife would pay the mortgage. The wife gave an undertaking to release the husband from the mortgage by 30 September 2012, and promised that if she was not able to do so, the property would be sold to achieve such a release.

By November 2011 the wife did not view it as possible to release the husband from the mortgage and made an application to the court to vary the order: that he would be released from the mortgage, or the property be sold when the youngest child reached 18, or both of the children completed their full time education.
The husband argued that the court had no jurisdiction to hear the application. Her application was initially dismissed in the Court of Appeal and she appealed further to the Supreme Court.

Supreme Court decision

In a majority of 4 to 1, the Court granted the wife’s appeal. The wife successfully argued that section 31 of the Matrimonial Causes Act 1973 should be applied, which deals with variations regarding maintenance. The wife argued that the court should take into account the children’s best interests.

Whilst Lord Hughes disagreed as he believed that an “acid test” would be carried out to determine whether the undertaking should be varied in substance or if it is a matter of implementing the financial order, the Court held that the lower Courts wrongly made the decision that the case was not under their jurisdiction because if the husband was released this means that a new undertaking can be given. Pursuant to section 31 of the Matrimonial Causes Act, the children’s best interests is what the judges took into consideration primarily, as well as significant changes in circumstances since the undertaking was given, including any damage the husband suffered.

What does this mean in practice?

Practitioners will need to be vigilant about what their client promises to the courts in future. In addition, questions such as how significant the change in circumstances needs to be in order to amend the order could arise.

Implication of the judgement

Such a judgement could lead to serious financial issues for the husband as he would still be subject to the mortgage despite no longer having an interest in the family home. In the future, this could result in the husband having difficulty to get a mortgage for himself as he would already have an existing obligation to pay the first one off.

While this ruling is significant because it clarifies a party’s ability to vary a financial order, it may now, after the Supreme Court’s decision, give rise to some uncertainty for some husbands and wives.

If you are going through a divorce and require assistance on financial orders, please contact Sheldon Henry, Senior Partner and Head of Family Law, on 0207 226 0570 or email sheldon@gelbergs.co.uk