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Variations of Lump Sum Orders: Hamilton vs Hamilton Case

The case concerned a couple who divorced on 27 March 2008. There were two children who remained in the primary care of the wife, but they have continued contact with their father. In terms of assets, the wife had her own recruitment agency which was valued for the purpose of the proceeding at around £1.5 million and there was the matrimonial home. During the proceedings, the husband was obtaining benefits and litigated under a public funding certificate. It was alleged by the wife that he is a lifetime alcoholic, was in fact trading as a property developer under the counter and he had other hidden assets.

The finances were finalised by way of a consent order as follows:

The wife would pay for the benefit of the husband £450,000 in instalments: (Note: there were provisions for the wife to pay remaining sum if consent order void before last payment due)

  • £150,000 within 7 days of the date of the Order [this was in fact paid 26 October 2007 – prior to the date of the order]
  • £150,000 by 30 April 2008 [£90,000 approx. paid to H by rent 2008, but £60,000 remained unpaid]
  • £50,000 by 30 April 2009 [unpaid]
  • £50,000 by 30April 3020 [unpaid]
  • £50,000 by 30 April 2011 [unpaid]

Simultaneously with the payment of the first lump sum the former matrimonial home was to be transferred to the wife. There was also to be a clean break in life and death

The Husband received the first instalment in accordance with the consent order but due to the decline of the wife’s business and the tough economic climate, the husband only received half of the second instalment.

There was then an unsuccessful appeal of the consent order by the wife but the husband still didn’t receive the money and commenced enforcement proceedings and served a statutory demand on his wife. The wife countered by issuing proceedings arguing that the order was plainly one lump sum payable by instalments and therefore variable by the courts. The wife also issued  a claim under schedule 1 Children Act 1989 to retain her former matrimonial home until couples children had finished full time education.

Law

Pursuant to section 23 of the Matrimonial Causes Act 1973, a party may agree to pay:

  1. A single lump sum
  2. A single lump sum by instalments
  3. A series of lump sum payments

The important distinction between the ways in which lump sum payments can be payable is that lump sum payments by instalments can be varied and a serious of lump sums cannot be varied. In accordance with a principle enshrined in Coleman v Coleman [1973] Fam 10 and confirmed in de Lasala v de Lasala [1980] AC 546 the Court may only make capital orders on one occasion.

Section 31 MCA 1973 deals with the Court’s powers to vary a lump sum payable by instalments. It provides so far as relevant

(1) Where the court has made an order to which this section applies, then, subject to the provisions of this section….the court shall have power to vary or discharge the order or to suspend any provision thereof temporarily and to revive the operation of an y provision so suspended.

(2) This section applies to the following orders, that is to say –

(d) any order by virtue of section s23(3)(c) or 27(7)(d) above (provision for payment of a lump sum by instalments);

(7) In exercising the powers conferred by this section the court shall have regard to all the circumstances of the case, first consideration being given to the welfare of any child of the family who has not attained the age of eighteen, and the circumstances of the case shall include any change in any of the matters to which the court was required to have regard when making the order to which the application relates….

It is clear from the wording of the statute that powers granted under section 31 permit the court to do justice in light of circumstances prevailing when the variation application comes before the court.

In the case of Hamilton the wife applied to vary the order on the basis that it was an order for a lump sum payable by instalments and was variable under s 31 (2) (d). The wife sought relief from her obligations to pay any remaining sums relying on Tilly v Tilley and cases such as Myeian v Myeian

Proceedings

First Instance

Parker J held that the order was for payment of money over a period of time could only ever be an order for a lump sum payable by instalments within s23 (3) (c) and therefore variable under section 31. Due to the wife’s current financial situation, the judge varied the order by deferring the payment of the remaining sums whilst adding interest

Court of Appeal

The husband appealed to the Court of Appeal, arguing that this order was an order for a payment of a series of lump sums and therefore not variable. In a point of law, the husband argued that Parker J was wrong to conclude that any order for payment of lump sums over a period of time must be a lump sum payable by instalments and therefore variable.

Baron J agreed with the Husband on the point of law, saying that s23(1)(c) gave the court discretion to order a lump sum or lump sums at one time, and that orders made under this section were not variable. Baron J said Parker J was wrong to conclude that any order for a payment of lump sums over a period of time was for a lump sum by instalments.

On analysis of the original order, the Court had that it had been an instalments order. Where there was a disagreement as to the terms of the Order, the court had discretion to examine how the financial order was created.  In conclusion, it was held that this was an agreement to pay a lump sum by instalments of which the court has the power to vary.

However, Baron J found that Parker J was entitled to find that the parties had agreed a lump sum payment of £450,000 to be paid in instalments over time, and consequently had been right to say this was an instalments order, capable of being varied. In addition, given the circumstances in this case, Parker J had been well within her discretion to vary as to the timings of the payments, taking into account the needs of the wife and her children.

Hamilton v Hamilton is the first case in which the Court of Appeal has considered this principle and was described by Mrs Justice Baron, as the paradigm case which clarifies the law in this regard.

Implications

This judgment is a clear warning for family law practitioners that a lump sum payable over a period of time could be open to an application for variation.

In terms of future guidance, Mrs Justice Barons gave strong advice, concluding that: ‘….in future, parties may consider a recital at the beginning of an order which sets out the basis of the agreement in terms of potential variation would put disputes like this beyond doubt’.

 

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