Partner Wayne Lynn looks at the issues underpinning The Supreme Court decision (Birch v Birch) to give a woman permission to challenge the Consent Order detailing the financial settlement agreed with her former husband.

In divorce proceedings, the main issues that need to be resolved are:

• To settle the living arrangements for any children; and/or
• To ensure that the terms of the financial settlement are resolved either by agreement or as determined by the Court.

What couples strive for is certainty, so that they know what their financial obligations are toward each other. Then they can move on with the rest of their lives believing that the Consent Order – a financial order made by agreement – is in full and final settlement of all claims that either party can make against the other.

There have been some reported cases where couples (for whatever reason) have not entered into financial orders at the conclusion of their divorce. This has potentially disastrous consequences when one former spouse emerges several years later seeking a Financial Remedy Order, which not only comes as a nasty shock to the other party, but may also be costly.

The case of Birch v Birch reminds us that even when an order is expressed as being in full and final settlement of all claims, there are nevertheless circumstances when the Court has the power to vary it. In particular, the Court has the power to vary:

• Maintenance Orders (save in circumstances where the original order is stated as being ‘non-extendable’)
• The payment of a lump sum by instalments
• A deferred lump sum payment to be paid out of a party’s pension scheme
• An order to settle property or to vary an existing settlement
• An order for the sale of property
• A Pension Sharing Order if the order is made before the Decree Absolute has been made.

In the case of Birch v Birch, the Court considered whether a promise to the Court made by one of the parties to the marriage (known as an ‘undertaking’ and which is as enforceable as an order), could also be varied. The facts of this case are:

1. The husband and wife entered into a financial Consent Order in July 2010 which provided that:

• The husband should transfer to the wife his interest in their matrimonial home, subject to the mortgage, so as to enable the wife to continue to live there with their two children
• The wife gave an undertaking to discharge the mortgage payments and to indemnify him respect of any liability
• She undertook to use her best endeavours to release him from the mortgage covenants
• She also undertook that, in the event that the husband had not been released from the mortgage by 30 September 2012, she would release him by placing the property on the market for sale and then selling it.

2. In November 2011 the wife applied to ‘vary’ her undertaking upon the basis that she had not been able to secure his release from the mortgage and would not be in a position to do so by September 2012. She sought to avoid the property having to be sold, arguing that the children were in schools close to the matrimonial home and that it would be gravely damaging to their interests were they to have to move home whilst still at school.

She wanted to have the undertaking varied so as to postpone her obligation to secure the husband’s release from the mortgage for a further 7 years i.e. until 15 August 2019, being the date of their son’s 18th birthday.

The husband, perhaps not unsurprisingly, opposed this and argued that the Court did not have jurisdiction to vary the undertaking itself.

3. The Court found that whilst it did not have the power to vary an undertaking, the Court nevertheless has the power to discharge the undertaking i.e. to relieve that person from their obligations.

So what are the criteria applied for the Court if asked to consider varying any of the orders referred to above?

The Supreme Court observed that unless there has been a significant change of circumstances since the order was made, grounds for variation of such an order (or for an undertaking to be discharged) seem hard to conceive.

In Birch v Birch the Court decided to order that the original Judge should decide whether the Court’s jurisdiction to vary the undertaking should be exercised, and commented that when deciding whether to release one party from an undertaking or varying such an order, the Court will need to consider the following factors:

• The welfare of any child under the age of 18
• The other relevant circumstances of the case which shall include any change in any of the matters which the Court was required to have regard when the original Order was made
• Whether, and if so to what extent, the husband has suffered and is likely to continue to suffer prejudice by remaining liable under his mortgage covenants
• If the Court finds that the husband has suffered and/or would be likely to suffer prejudice as a result of delay in selling the home, the Court might favour compensating him by asking the wife to make provision for him out of the ultimate net proceeds as a condition of her release from her undertaking.

The decision in Birch v Birch serves as a very useful reminder that so called ‘final’ orders may, in certain circumstances be varied. That said, the circumstances in which such orders will be varied, or where parties are released from their undertakings, will be rare. Whilst each case will turn on its own facts, the Court will require compelling evidence in support of the factors which may give rise to a variation – even then the decision will be weighed into the balance before a variation is granted.

However, the fact that certain types of order (or undertakings) may be varied means that couples who wish to negotiate a fair financial settlement will need to consider and anticipate future events, and that any financial settlement – however innocuous it may seem – should be considered with a specialist family lawyer.