Mr Justice Mostyn considered whether the Family Court has an almost unfettered discretion under section 31F(6) of the Matrimonial and Family Proceedings Act 1984 (MFPA 1984) to set aside any order of the Family Court where exceptional circumstances justify it. This case concerned an application to set aside a ten-year old final consent financial remedy due to a foreseeable change of circumstances where the facts did not otherwise constitute a Barder event and the order was not capable of being varied or discharged under section 31 of the Matrimonial Causes Act 1973 (MCA 1973).
Maria Scotland, barrister at 5SAH, considers the issues for Lexis Nexis:
What are the practical implications of this case?
Ten years after the High Court approved the parties’ final financial consent order dividing their marital assets equally on divorce, and seven years after a clean break was effected between the parties, the husband applied to vary the final consent orders, to set the terms aside and redistribute the wife’s wealth to achieve equality of assets at the date of the hearing. The husband was a successful property developer during the marriage and at the date of the divorce in 2010 the parties had over £12m. The husband’s case was that ten years after the divorce he was left with ‘just’ £1m, while the wife had about £8.5m, which he argued was unfair. The husband conceded that the facts of the case did not constitute a Barder event (per Barder v Barder (Caluori Intervening) [1987] 2 FLR 480), but argued that the emergence of the unified Family Court (but not the High Court) from the County Court on the 22 April 2014 had conferred on the Family Court a wide discretion to set aside a final financial order where it is just to do so under MFPA 1984, s 31F(6).
The husband’s application was dismissed on the basis that the set-aside power in MFPA 1984, s 31F(6) was not a brand-new break with the past ‘traditional grounds’ of set aside. If upheld this case would have served to be a watershed for all those parties to a divorce who many years later felt that the outcome of their final financial orders had been unfair. In particular, if properties taken on divorce later sold or were valued for less than expected this would have been the authority for setting aside the final financial order and redistributing current wealth. In the post coronavirus (COVID-19) world, this case could have seen the flood gates open!
What was the background?
This matter arose due to the parties’ marriage in 1987. They separated after 12 years of marriage in 2009 and were divorced on 30 September 2010. There were two children of the marriage, who were teenagers at the date of the divorce. The husband was 55 years old and the wife 53 at the time of the divorce. The husband was the traditional breadwinner, involved in property development, while the wife was the traditional homemaker. The parties’ marital wealth was over £12m. The parties agreed to divide their wealth broadly equally, which agreement was endorsed by the consent order of Baron J dated 24 June 2010.
The parties’ marital wealth fell into three broad categories: capital in properties; money owed to the husband from a company he was involved with; and the prospective proceeds of sale of two properties being developed by a company of which the husband was a director and shareholder.
The parties agreed that while certain properties would be transferred to either the husband or the wife, other properties would be sold, and the proceeds divided and the husband would pay the wife a lump sum in lieu of her share of the money owed to him. This left the issue of the two properties being developed by the husband’s company. The husband anticipated realising between £2–6m profit by May 2012. The actual profit depended upon the financing of the developments, dates of future sale and sale price. The parties agreed a mechanism whereby the husband was to pay the wife £1m on account and then a balancing lump sum on actual sales of the two properties. The financial order of Baron J left the wife’s claims to a lump sum open for the purpose of implementing the terms of the orders and undertakings relating to these two properties.
By 2012, the husband had only paid the wife £750,000 on account and had not sold the two development properties. The wife restored the final order back to court to enforce the terms of the original consent order. Her application was ultimately compromised by a (further) consent order dated 5 July 2013, with the husband agreeing to pay the wife a further £660,000. The 2013 order was expressed on a clean break basis and no claims were left open.
This should have been the end of the matter. The husband went on to remarry in October 2015. The two properties were developed by the company of which he was a director, however, they but did not sell for the sale prices anticipated by the husband in 2013: one sold finally in 2016 for £3m less than anticipated while the second was repossessed by the bank. The husband was left with substantially less capital wealth than he anticipated in either 2010 or 2013. Seeking to achieve equality of the assets at the date of the hearing, ten years after the original consent order, the husband filed an application to ‘vary’ or set aside the 2010 and 2013 final orders, with the wife to pay him a £3,528,500 lump sum. His application was advanced on two bases:
- that the orders remained executory and so the court retained the power to vary them pursuant to Thwaite v Thwaite [1981] 2 FLR 280, and
- MFPA 1984, s 31F(6) provides the court with an almost unfettered power to set aside any order of the Family Court where exceptional circumstances justify it
What did the court decide?
Under MCA 1973, s 31, Parliament had made it clear that the only terms of a final financial order capable of later variation or discharge by the court were periodical payments or lump sums payable by instalments. In this way Parliament made clear in 1973 that final financial orders were final, save in limited circumstances. The court considered whether MFPA 1984, s 31F(6) provided a complete break from MCA 1973 and vested in the Family Court a wide discretion to set aside a final financial order where it was just to do so.
Mostyn J first considered the authorities post-1973, wherein seeking to strike a balance between the goal of finality of litigation and fairness a number of tightly defined situations had evolved in which final financial remedy orders, not capable of variation or discharge under MCA 1973, s 31 could nonetheless be set aside. In particular, he set out the ‘traditional grounds’ for set aside, summarised by Munby J (as he then was) in L v L [2008] 1 FLR 26 (at para [34]), ie:
- fraud or mistake
- material non-disclosure
- a change of circumstances which invalidates the basis or fundamental assumption upon which the order was made, ie a Barder event
- where the order contains undertakings, or
- if the terms of the order remain executory.
The court then considered the creation of the single unified Family Court from the County Court and the High Court on the 22 April 2014 and whether the emergence of the Family Court with the associated emergence from use of the general power to set aside a final order in the County Court under the County Court Rules 1981, Ord 37, r 1(1) and the Civil Procedure Rules, SI 1998/3132, r 3.1(7) to the new MFPA 1984, Pt 4A created new powers to set aside a final order.
The court considered the four appellate authorities after 22 April 2014 (ie, the creation date of the unified Family Court) and the Family Court’s exercise of MFPA 1984, s 31F(6), as follows:
- CS v ACS [2015] EWHC 1005 (Fam), [2016] 1 FLR 131, which concerned an application made on the traditional ground of non-disclosure
- Sharland v Sharland [2015] UKSC 60 [2015] 2 FLR 1367, which too was mounted on the traditional ground of deliberate non-disclosure
- Gohil v Gohil [2015] UKSC 61, [2015] 2 FLR 1289, again a case mounted on a traditional ground of non-disclosure, and
- Norman v Norman [2017] EWCA Civ 120, [2017] All ER (D) 178 (Mar), a case mounted on a traditional ground of non-disclosure, albeit the court described this claim as ‘utterly hopeless’
The review of these authorities after 22 April 2014 demonstrated that the set-aside power of the Family Court in MFPA 1984, s 31F(6) was not a brand new break from the past and that the traditional grounds of set aside prevailled. The husband’s application was therefore dismissed.
The court considered too, obiter, the fact that the husband had remarried in October 2015, which would have meant that had the court set aside the final financial orders he faced another judicial impediment by MCA 1973, s 28(3), which bars a party who has remarried from applying for financial orders.
Case details
- Court: Royal Courts of Justice.
- Judge: Mr Justice Mostyn.
- Date of judgment: 16 November 2020.
This article was originally published by Lexis Nexis PSL on 19 November 2020.
Maria Scotland practices exclusively in family law with a specialism in high end/ big money financial remedy applications and (private law) children work. She accepts instructions to act through a solicitor or directly from members of the public on a Direct Access basis. Maria is the joint head of the Family Team at 5 St Andrew’s Hill.
