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Family Law

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Court of Protection Practice and Procedure Conference 2016

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18 AUG 2015

Don’t promise what you cannot deliver when trying to settle a financial case on divorce

Don’t promise what you cannot deliver when trying to settle a financial case on divorce
In most of life, this is a good motto. But especially so when the financial picture involves third parties.

In the recent case of Birch v Birch [2015] EWCA Civ 833 the English Court of Appeal was asked to reconsider a financial promise which the wife had made, but could not easily keep.

Mr and Mrs Birch had 2 children, a daughter born in 2000 and a son in 2001. On divorce they had successfully negotiated their financial settlement in October 2010 and in particular they worked out what they wanted to do about the family home, then in joint names. The wife, by an undertaking, was to make the monthly payments to the mortgage lender and to 'use her best endeavours' to make the lender release the husband from the mortgage on the transfer of the house to her. If he was not released in the next 2 years, she agreed the house should be sold. Other arrangements were agreed, and the court order went on to provide neither should have any other claims against the other.

After a year, Mrs Birch wanted to change this. She could not get Mr Birch released from the mortgage, and so wanted vary the undertaking so that it did not take effect until the youngest child was 18 or either child completed full time education. She did not want to have to sell the house. In law, Mrs Birch could not apply to vary the order, as her rights to make any other claim had been dismissed.

It has become increasingly difficult to persuade mortgage lenders to accept such a transfer from joint names to one name, particularly where the future owner may not earn enough to pay the mortgage easily. There is usually a new mortgage, and the usual lending criteria apply (these have become stricter since the Mortgage Market Review in 2012). That is why good drafting will always have a long stop – often, as in this case, providing for the house to sell so that Mr Birch could know that his name would be off the mortgage.

In times of rapidly rising house prices, family lawyers often recommend using a Mesher order (Mesher v Mesher (1973) 1 All ER 126), which provides for just what Mrs Birch wanted. But this was not what Mr and Mrs Birch had agreed, and the Court of Appeal decided it could not change the order from what they had agreed into what she now wanted.

The refusal would have been given, on applying the law, in any event. But for family lawyers, we must also be aware that the judges particularly pointed to the fact that 'the undertakings now sought to be varied were part and parcel of a comprehensive consent order resolving the parties' financial affairs on divorce'. Finality in this area of law is very important, and if Mrs Birch had succeeded, the rest of the financial arrangements would have been affected.

It is very important therefore to make sure that if any third party is involved in any arrangement, or if your client is at all unsure in relation to any default regime, that you make all proper enquiries and get the response in writing (whether you are acting for the giver or the receiver of the promise/undertaking) so that you can give full advice.

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