Concluding a financial agreement with a court order should achieve finality. However, with the unprecedented impact we are seeing as a consequence of the current COVID-19 pandemic, are there any options available to either vary an existing order or change the terms of an agreement already in place? Whilst businesses may be able to claim force majeure (an ‘act of God’) to avoid their commercial contracts, what is available to an individual going through a divorce and financial settlement?
In the most extraordinary circumstances, the case of Barder may be an available option. I have considered how a Barder application may work in an article found here: https://www.burges-salmon.com/news-and-insight/legal-updates/covid-19/covid19-setting-aside-financial-agreements-and-orders-in-family-proceedings/
But what if Barder is unlikely to succeed? A client may be in a situation whereby they have an order with, for example, an outstanding lump sum payment due which they can no longer make. The case of Hamilton in 2013 examined how a change in financial circumstances, post order, could result in a variation or amendment to any outstanding lump sum payments due.
‘Instalments’ or ‘Series of Lump sums’
The wording of the final order is vital.
For example, the parties agree the wife is to pay the husband £400,000. The wife cannot afford it all upfront so it is agreed she will pay in four £100,000 tranches.
One way to word the order is as payment by ‘instalments’. However, payments by instalment can be varied. The wife could ask for more time to pay or reduce the outstanding payments if her financial circumstances were to change. Payments by instalment may therefore leave the recipient (here the husband) vulnerable to variation.
The alternative is to draft the payments as a ‘series of lump sums’. In this case each £100,000 tranche is treated as separate lump sum payable on a set date. Drafted this way, as confirmed by the court in Hamilton, the payments cannot be varied. As a consequence, they offer the recipient (here the husband) finality and security.
Care should be taken when drafting and reviewing orders. A small change in wording could have big impact.
As well as the potential to vary lump sum orders, ongoing maintenance orders are always variable. If circumstances have changed such that maintenance is no longer affordable, perhaps because income has reduced or a party has been made redundant, then it is possible to vary the amount of maintenance payable.
A paying party looking to vary an upcoming lump sum payment or ongoing maintenance or a receiving party worried about the security of future payments, both capital lump sums or maintenance should take advice early and understand the options available to them.
By Richard Handel and Chris Salter