Can A Divorce Settlement Be Reopened?

It is extremely difficult to reopen a financial settlement once it has been concluded and sealed by the Court.  There are, however, certain exceptional circumstances when a financial settlement will be reopened by the Court:-

  1. The Court has the power to vary a financial order made in divorce, where there has been a material change in the spouses’ circumstances, or
  2. If there has been material representation ie dishonesty or fraud involving in particular failure to disclose matrimonial assets in the proceedings.

In addition, following recent case law it is essential that failure to disclose would have made a material difference to the agreement reached or the order imposed by the Court.  This article seeks to explore this issue further.

Material change in circumstances

In most circumstances, once a financial settlement has been officially recorded by way of a consent order, the financial ties between the parties are fixed and neither of them will be entitled to make financial claims in the future.

However, a financial settlement may be reopened if something later happens that alters the principle on which the original consent order was made i.e. where there has been a material change in circumstances. In order to consider whether an application to vary a financial order should be made, four key factors need to be satisfied:

  1. New events have occurred since the order was made, that invalidates the basis, or fundamental assumption, on which the original consent order was made.  For example, one of the parties receiving a sudden substantial inheritance, or one of the parties dies.
  2. The new events must have occurred within a relatively short time after the consent order was made. There is no fixed guidance on a deadline by which the new events must have occurred, but this most likely must take place within a few months of a financial order being made by the court.
  3. The request to re-open the financial settlement is submitted to the court soon after the new events occur.
  4. The appeal does not prejudice any rights to assets acquired by third parties. For example, if a house has been sold to an unconnected third party.

Cases in which these factors can be argued are extremely rare.  Apart from the death of a party to an order, various other events have been argued to qualify in satisfying these conditions including changes in the value of assets, cohabitation or remarriage of a party.  However, relatively few have been successful – orders are supposed to be final and the circumstances therefore must be exceptional for them to be reopened.

Obligation to provide full and frank disclosure in divorce proceedings

There is a well-established requirement to provide full and frank disclosure by parties in financial remedy proceedings ancillary to divorce.  A party must make full and frank disclosure of all material matters for the Court to lawfully and properly exercise its discretion to make orders compromising each party’s claims against one another.

A party might be able to make an application to the court to vary a financial order if they can show that there has been a failure to disclose material financial information (or information that was fraudulent in nature) and as a result a significantly different order may have been made had the Court had all of the material facts at the time of making the order.

Historically, the hurdle was a high one to cross with courts determining that notwithstanding significant dishonesty consent orders should stand if they were in the right ballpark.

Supreme Court Landmark ruling in 2015

The issue was then considered in the cases, Sharland v Sharland and Gohil v Gohil which both involved wives trying to set aside the financial settlements from their divorces. In both cases each husband was accused of failing to disclose the full details of their financial affairs and each wife argued that the financial settlement would have been different if these details were made available during negotiations or court proceedings.

Both cases involved the Supreme Court considering judgments made by the Court of Appeal not to reopen the financial settlements.

In Sharland, despite the husband’s deliberate and dishonest non-disclosure, the Court of Appeal made this decision notwithstanding evidence that the husband had been deliberately dishonest in his disclosure at the time that the financial settlement has been negotiated on the grounds that the non-disclosure was not material, as it had not resulted in an order significantly different from that which the court would otherwise have made at the conclusion of the proceedings.

In October 2015, the Supreme Court gave a landmark judgment on these cases and ruled that the Court of Appeal was wrong in coming to this conclusion allowing Mrs Sharland and Mrs Gohil to revisit their financial claims. The decision was made on the basis that both wives have been denied a fair hearing on the issue of matrimonial finances as a result of their respective husbands’ fraud.

The cases are landmark cases as they establish the legal principle that it should be assumed that in the event of fraudulent non-disclosure by one party during the course of negotiating a financial settlement then the consent order will be set aside upon an application to the court to do so by the other party.  The only exception to this principle that we would anticipate is where the failure to disclose is immaterial and/or would genuinely have made no difference to the outcome of the financial settlement.

In summary, it is rare for a divorce settlement to be reopened.  The court will consider reopening a divorce settlement only in exceptional cases either where a spouse has failed to provide full and frank disclosure about their wealth and income in divorce proceedings or there has been a material change in a spouse’s circumstances since the agreement was reached.

Spouses should always be encouraged to provide full and frank disclosure in divorce proceedings if they wish to secure an agreement which cannot then be re-opened at a later stage. It is in the interest of the party considering hiding his or her true position, financial or otherwise, to avoid the expense and embarrassment of such non-disclosure being brought to light at a later stage. The risks to the non-disclosing party also include the possibility of being convicted of a crime under the Fraud Act 2006. Clearly, any perceived benefits of hiding assets from the Court are outweighed by the serious risks of being caught.

Of course, the right to reopen settlements set out above relates to the capital issues arising out of the divorce settlement.  It is always possible to go back to Court to vary an existing maintenance provision either upwards or downwards if there has been a change of circumstances.   So, for example, if there is an ongoing obligation to pay maintenance and the payer has a material increase in their wages or finances generally, then it is open to the recipient to apply to the Court for a variation upwards.  If that same party who is paying the maintenance has a huge windfall ie winning the lottery, the pools or a buyout of their company for a substantive sum, then an application can be made by the recipient, not only for an increase in the ongoing maintenance, but for that maintenance provision to be capitalised as a one off payment.

Such capitalisations often occur with the Court taking into account specific and accepted tables for calculations, known as Duxbury calculations to establish a sum based on the maintenance payments which would be necessary to provide the recipient for the rest of their lives.  Of course, these payments factor in that at the end of the period no monies will be left.   In other words the recipient benefits from receiving the monies now.

If a party’s finances have dramatically changed or if the payer of a maintenance provision’s circumstances dramatically change so that there is a huge drop in their income or they lose their job, then similarly they can apply to the Court for the maintenance payments either to be reduced or cut off altogether.  Further, in relation to child maintenance, this can also be varied by a change of circumstances through the Child Maintenance Service.

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