Weekly Family Law Update May 24, 2023

Court holds financial agreement to be unfair

Obviously, when a couple divorce they should make every reasonable effort to resolve financial arrangements between them by agreement. This not only will mean that there are less legal costs involved, but it will also help parties to move forward in a more amicable way, especially when children are involved.

Indeed, the court will expect them to do so, and will expect them to voluntarily disclose details of their means to the other party, so that an agreement can be reached.

Accordingly, the law generally encourages agreements, and will expect the parties to keep to any agreement that they have reached, even if it has not yet been finalised by being made into a court order.

But a recent High Court case demonstrated that there are circumstances when the court will agree that someone should not be held to an agreement that has not been made into an order.

Repudiated agreement

The case concerned an agreement that the parties reached on 10 February 2022.

The agreement provided, amongst other things, that the Wife would receive £173,240, being the retained portion of the net proceeds of sale of a jointly owned investment property, and would be paid two lump sums totalling £362,000.

A draft court order in the terms of the agreement was drawn up and signed, but no order was ever made.

On 22 February 2022 the Wife repudiated the agreement, and wrote to the court asking for a hearing to determine whether the agreement was fair, as she claimed it did not meet her needs. She later added to this unfairness ground an allegation that the Husband had failed to make full disclosure of his means, which she argued should act to negate the agreement completely.

The court, however, made an order that the agreement was not negated by the Husband’s non-disclosure; that it was fair; and that it should be made an order of the court.

The Wife appealed against that order, to the High Court.

Unfair agreement

The Wife argued that her appeal should be allowed on a number of grounds, two of which were allowed by the High Court.

Firstly, that the court had failed to properly assess how the Wife’s financial needs could be met through the agreement and failed to take into account her liabilities. In other words, that the agreement was unfair.

The second ground of the Wife’s appeal related to her allegation that the Husband had failed to make full disclosure of his means, specifically that he had not disclosed an inheritance worth at least £4 million. Obviously, if the Wife had known about this then she would not have entered into the agreement.

The High Court agreed with the Wife that the approach of the court below to the non-disclosure had been wrong. The court below had found that there had been non-disclosure by the Husband, but that the Wife knew the amount that he was likely to inherit, and therefore the non-disclosure made no difference to the outcome.

The High Court did not accept this. The Wife had no more than a vague belief that the Husband had inherited a sizeable estate. The Husband had failed to make full disclosure as he should have done, and the victim of such a fraudulent deception did not have a duty to make her own enquiries to find out about the inheritance, thereby saving herself from the effect of the Husband’s deception.

In the circumstances the High Court allowed the Wife’s appeal and set aside the order of the court below. The Wife’s claims for financial remedies for herself would have to be re-tried.

And that was not the end of it. The High Court also ordered that the Husband should pay the Wife’s costs, both of the hearing in the court below and of the appeal.

Of course, none of the above should discourage anyone from trying to resolve financial matters on divorce by agreement. But it should encourage anyone involved in such negotiations to make full disclosure of their means, and to ensure that the agreement is fair.