In Part I of this two-part series, I looked at recent developments in the area of setting aside financial consent orders dealing with nondisclosure and fraud. Part II covers situations involving new or supervening circumstances dealing with changes in asset values, death and remarriage.

Back to basics

Orders can, of course, be set aside where the whole factual basis on which the order was made has disappeared. In Barder v Caluori [1988] AC 20, [1987] 2 All ER 440 a consent order was made under which H was ordered to transfer his interest in the family matrimonial home to the wife. One of the primary reasons for this order was the wife had care of the children. Tragically, the wife killed the children and herself. On appeal to the House of Lords, the issue was whether leave to appeal out of time should have been granted. Lord Brandon said the court properly exercised its discretion to grant leave to appeal out of time on the ground of new circumstances and provided the following guidance on the conditions that should be met in such cases:

  1. that new events have occurred since the making of the order which invalidate the basis or fundamental function upon which the order was made, so that the leave to appeal out of time were given, the appeal would be certain or very likely, to succeed;
  2. the event should have occurred within a relatively short time of the order being made;
  3. that the application should be made reasonably promptly in the circumstances of the case; and
  4. the grant of leave should not prejudice third parties who have acquired in good faith and for valuable consideration interest in property which is the subject matter of the order.

There tend to be three main areas in which new or supervening circumstances have the potential to affect an order;

  1. cases where there are disputes as to the value of assets;
  2. death of the recipient;
  3. the wife's remarriage or cohabitation.

Value of assets

The general principle is summarised in Cornich v Cornick [1994] 2 FCR 1189, [1994] 2 FLR 530: where an asset which was correctly valued at the time of the order changes value within a relatively short period because of the natural processes of price fluctuation, leave to appeal should not be granted.

However, when a wrong value was placed on an asset at the time of order and had this been known a different order would be made then, providing this was not the fault of the person alleging the mistake, leave to appeal may be granted and the order set aside.

These cases are by no means consistent. The Court of Appeal tends to intervene and grant leave to appeal out of time where the value of a house is so much lower than the court valuation that the applicant could not be re-housed on the division of the proceeds of sale; eg, Hope-Smith v Hope-Smith [1989] FCR 785, [1989] 2 FLR 56. However, by way of contrast in B v B (ancillary relief: consent order: appeal out of time) [2007] EWHC 2472 (Fam), [2007] All ER (D) 404 (Oct), W sought leave to appeal on the ground, among other things, of an error in valuation. It was held there was no evidence of an incorrect valuation at the date of the hearing so her application was refused.

A recent example of such an application not being granted is Myerson v Myerson [2009] EWCA Civ 282, [2009] All ER (D) 05 (Apr). H was a fund manager. At the financial dispute resolution (FDR) hearing, the assets were valued at £25.8m, mainly comprising H’s shares in PCH. It was agreed W would receive £11m and H would retain £45.5m. At the time of the original order, the shares in PCH were quoted at £2.77m. There were implementation issues. The order required payment of the lump sum by instalments. The first instalment was paid.

At the date of compromise, the value of the husband’s shares in PCH stood at £2.99 per share, valuing H’s holding at £15m. Just one year later the shares were worth only 27.5p per share. The effect of the dramatic downturn in the value of the shares was that the order provided for 57% of the family assets to the husband and 43% to the wife had altered just nine months later to 14% to the husband and 86% to the wife. It was argued on behalf of the husband that the drop in share prices and house values constituted new events to satisfy the analysis of Lord Brandon’s judgment in Barder.

The Court of Appeal held that the cases where the court could set aside an ancillary relief order on the grounds of some dramatic subsequent change were few and far between and did not include the natural processes of price fluctuation, however dramatic. The court had regard to the judgment of Baroness Hale in Cornick v Cornick [1994] 2 FCR 1189, [1994] 2 FLR 530 Thorpe LJ’s judgment quotes at length from Hale J (as she then was): “On analysis, therefore, there are three possible causes of a difference of value of assets taken into account at the hearing, each coinciding with one of the three situations mentioned above:

  1. An asset which was taken into account and correctly valued at the date of the hearing changes value within a relatively short time owing to natural processes prior to fluctuation. The court should not then manipulate the power to grant leave to appeal out of time to provide a disguised power of variation which Parliament has quite obviously and deliberately declined to enact.
  2. A wrong value was put on that asset at the hearing which had it been known about at the time would have lead to a different order. Provided it is not the fault of the person alleging the mistake it is open to the court to give leave for the matter to be reopened. Although falling within the Barder principle it is more akin to the misrepresentation or non-disclosure cases than to Barder itself.
  3. Something unforeseen and unforeseeable since the date of the hearing, which has altered the value of the assets so dramatically as to bring about a substantial change in the balance of assets brought about by the order…”

Thorpe LJ said these citations clearly point to the dismissal of the husband’s appeal. However, he added that the judgment also failed on a number of additional grounds:

  1. The order was not imposed but was the product of the will of the parties.
  2. When counsel for the husband was asked what H’s target would be if an appeal were allowed, he replied H would probably seek repayment of all or part of the first instalment of the lump sum in exchange for transferring to the wife an unspecified number of his shares in PCH. Thorpe LJ did not think much of this. “When a businessman takes a speculative position in compromising his wife’s claims, why should the court subsequently relieve him of the consequences of his speculation by rewriting the bargain at his request?"
  3. He continues to enjoy control of the opportunities that go with it. Unusual opportunities are created for the most astute in a bear market.

Thorpe LJ granted the application for permission to appeal but dismissed the resulting appeal in a unanimous decision of the Court of Appeal.

Death of the party

Similar principles apply in the case of the death of the party. Logic might cause one to think that where the basis of an order was the provision of a home for one party, the death of that party would invalidate the whole order. In Reid v Reid [2004] 1 FLR 736 the consent order had awarded W £99,000 on a clean-break basis. She had disclosed the fact that she suffered from ill health. However, 15 days after the decree absolute, she died. H sought leave to appeal out of time. The court held that her death, two months after the order, was a new event and attracted Barder principles. The husband’s needs had not been fully met by the order and the wife’s death had invalidated the parties’ perceptions of her needs. The husband would receive a lump sum of £37,000; the estate’s arguments based on entitlement and contribution were not appropriate where the assets were limited.

In Amey v Amey [1992] 1 FCR 289, [1992] 2 FLR 89, there had been an agreement between the parties which they intended to have approved by the consent order. However, before the court approved the order, the wife died. H sought to set aside the agreement. It was held that the mere fact of the wife’s death was not sufficient the agreement had been a fair distribution of assets on the basis of W’s entitlement and the only ground for setting it aside would be that death had undermined the fundamental assumptions on which the order was made.

In Richardson v Richardson [2011] EWCA Civ 79, [2011] All ER (D) 86 (Feb), the order was set aside. In this case the parties were 70 years old and had been married for 46 years. The husband and wife had for many years been partners in a property and hotel business. The net value of the assets was confirmed to be almost £11m and the gross value of the assets was £40m. The order made by consent was that the wife received 47.5% of the matrimonial assets. However, in July 2004 (ie, five years before the consent order) a little girl fell of a first floor window at one of the partnership properties sustaining severe brain damage. On 25 September 2009 the consent order was made. Just less than two months later, the wife died of a heart attack. On 18 December the husband became aware for the first time that the insurer had avoided the policy, leaving his business liable for a claim. Therefore, on 10 February 2010, H notified W’s solicitors of his intention to appeal out of time. The Court of Appeal held that the husband was entitled to assume that he was covered by the insurance policy, and that therefore “the revelation in December 2009 that the insurer had avoided the policy is a vitiating event which in principle entitles him to relief”. The appeal court granted him relief by dividing the potential liability for the claim equally between the parties. Munby LJ who gave the leading judgment said: “The magnetic, indeed, overwhelming factor in this case which in my judgment dominates above all else is that the wife by her labours over many years both as wife and as the husband’s business partner had earned her equal share in the matrimonial assets…This was a wife who had earned her share and was entitled to have that recognised by the Family Division, as it correctly was by Judge Raynor. What I have called the underlying realities are highlighted by the fact that if she had died shortly before rather than shortly after the hearing before Judge Raynor it is idle for the husband to imagine he could have escaped a very substantial claim by the estate in the Chancery Division. The husband is not entitled to reopen the order because of the unexpectedly early death of the wife. The reason for the order being set aside was the insurance liability had arisen after the order had been made.”

Remarriage or cohabitation

This was always a particularly difficult area. In Livesey v Jenkins [1985] AC 424, [1985] 1 All ER 106 the fact that W failed to disclose to the husband her intention to remarry undermined the basis upon which the order was made and was sufficient to enable the court to set it aside. This is not always the case. In Williams v Lindley [2005] EWCA Civ 103, [2005] All ER (D) 158 (Feb), the consent order in favour of the wife providing for a 70/30 split in her favour had been made after the wife had denied any relationship with a particular man, her former employer for whom she was acting as housekeeper. Not long afterwards she married the man in question. The circuit judge refused the husband’s application for a re-hearing but it was subsequently allowed by the Court of Appeal.

This case, at first blush, is not easily reconciled with Dixon v Marchant [2008] 1 FLR 655, [2008] EWCA Civ 11, where a husband claimed he had been led to make a consent order capitalising the wife’s periodical payments by her assertion that she was not cohabiting and did not intend to do so. His appeal was dismissed. How can these two decisions be reconciled? Close analysis of the judgments does explain the difference between the two cases.

(i) Dixon v Marchant

In Dixon, the parties married in 1979. It was the second marriage for each of them. On 4 February 1993 an order was made by the district judge that H should pay W a lump sum of £40,000 per annum and periodical payments at the rate of £15,000 per annum, during their joint lives or until her remarriage or further order.

In August 2005, H’s solicitor wrote to the wife informing her that he was about to draw down his pension and his income would be reduced accordingly and that he had grounds to make an application to vary the maintenance. Mr Dixon asked for details of her current financial position and, in particular, he asked “are you still cohabiting?”. Her response, through solicitors, stated that her financial position was “very modest” and that “our client is not cohabiting and does not intend to cohabit”. H’s solicitors were not satisfied and thought that W had had a relationship with a man named Derek since 1993. On 3 November they reiterated H’s position stating “when the original order was made…Mrs Dixon was having relationships with Derek” and that “this remains the case after all these years”. H offered to compromise the case if she would accept a lump sum payment of £75,000. W’s solicitor said in response: “Our client has done all she can to advise that she does not cohabit and enjoys her own independence. She has no wish or desire or intention to cohabit or remarry, particularly after two unsuccessful marriages. While Mr Dixon and her friend do enjoy each other’s company and get on well, they do not wish to cohabit with one another.”

Ultimately, an agreement was reached that W would receive a lump sum of £125,000. However, in August 2006, W and Derek visited a friend who was dying of cancer. Part way home they stopped off for a meal. W said “we thought it was necessary to think about something other than what we have just seen, so we ordered a bottle of wine and just talked. Some way through this process Derek looked at me and said ‘life is too short, will you marry me?’ I was a little taken aback but not by what he said and almost immediately said ‘yes’.”

The Court of Appeal felt the crucial question was whether there was a fundamental assumption made in this case. In the terminology of Barder, there would have to be an assumption that for an indefinite period - measured in years rather than months or weeks - the wife would not remarry. It must be a common assumption held by both of them, not a unilateral assumption of only one of them. Ward LJ concluded: “I am quite satisfied that there was no basis or fundamental assumption, even a tacit one that the deal would founder if the wife had remarried within a relatively short time after the agreement. The risk of re-marriage was one the husband had to accept. I would dismiss the appeal accordingly.”

Wall LJ dissented, but Collins LJ agreed with the leading judgment and said: “It has often been said that the application of the Barder principle is exceptional, and I am satisfied that the use of that expression is not simply lip service to the principle. The reported cases with very few exceptions, apply the principle strictly and with good reason... the facts of this case...fall far below the necessary standard.”

(ii) Williams v Lindley

In Williams v Lindley the parties were married on 21 June 1984. In 1998 the wife commenced employment with a Mr and Mrs Lindley providing homecare to Mrs Lindley, who was an invalid. Mrs Lindley died in April 2000. Mr Lindley was roughly 28 years the wife’s senior. The parties separated on 15 August 2001 when W moved into Mr Lindley’s home with both the children. Following the death of Mrs Lindley, the wife had been employed by Mr Lindley to keep the house. In the ancillary relief proceedings H asserted that the relationship between the wife and Mr Lindley was much more than that of employer and housekeeper.

At the FDR, Miss Gregory who acted for W, stated that the relationship between W and Mr Lindley was no more and no less than a contract of employment. The indication given by the deputy district judge was that W should receive a larger share of the presently available capital foregoing any pension sharing order. The case was compromised promptly giving Mrs Williams a 70:30 split of the available capital. A consent order was drawn up and sealed on 14 November 2002. The evidence of W and Mr Lindley was that they did not announce their engagement until February 2003 and then only to the children. The marriage between W and Mr Lindley was celebrated on 8 May 2003 prompting the husband’s application to set aside the consent order on 17 June.

The circuit judge refused the husband’s appeal. The husband appealed to the Court of Appeal which said the judge should have focused only on the importance of the supervening event and the effect it would have had on the first hearing if it had been foreseen. It was known that the wife no longer needed to provide a home for herself and the younger child; she lived with her husband in a suitable home where her tenure was secure as Mr Lindley has left it to her in his will. Nor did she need to earn her living. Thorpe LJ said the result announced by the circuit judge on 9 June 2004 was unjust. This was a plain case for the grant of needs. The main foundation of the lump sum order was the wife’s urgent need to re-house herself and the children if she were not to have the family home. That foundation was destroyed in fact within one month by the wife’s engagement to Mr Lindley.

Conclusion

It is difficult to draw any firm conclusions from these cases as they are very fact specific. Clearly the Court of Appeal in Dixon was very influenced by the trial judge’s finding that this was not a planned re-marriage. There was no evidence that W intended to deceive her ex- husband. In Williams the main foundation for the lump sum order of £125,000 was the wife’s urgent need to re-house herself and the children if she were not to have the family home. That foundation was destroyed within one month by her engagement to the rich Mr Lindley.

This article was first published in New Law Journal, “Setting Aside (Part II)", NLJ 8 March 2013, p.252