Re-inventing the wheel? The new approach to variation of lump sums in financial remedy and the overall capital division was 58/42 in favour of the Husband, who was to retain the most valuable asset, namely the family business, a private limited company providing school meals. The modest departure from equality was said to be justified by virtue of the nature of the asset to be retained by the Husband i.e. a private limited company rather than cash or property (raising the issues of risk and liquidity in a business asset). In addition, there a modest non-matrimonial dimension to the business which was not quantified but was said to have been taken into account in that small departure from equality. Juliet Allen Pears Readers will be familiar with the collection of draft orders promulgated by Mostyn J, which have for some years now been the required format for final and interim orders in financial remedy, and will recognise the following recital which we all have all obediently been inserting into any final order which requires payment of multiple lump sums: “Declaration regarding lump sum order(s) The parties agree and declare that the lump sum order set out in paragraph [para number] below should be considered to be [a series of lump sum orders] / [a lump sum order payable by instalments].” Well, based on a recent Judgment by Mostyn J himself in BT v CU [2021] EWFC 87, it would be reasonable to conclude that the inclusion of any such Declaration in the future may be completely pointless. BT v CU concerned an application by a Husband pursuant to FPR r. 9.9A to set aside the final financial remedy order on “Barder” grounds. The facts of the case were straightforward. In October 2019 District Judge Hudd had ordered the Husband to pay to the Wife a total of £950,000 as a series of lump sums: £150,000 initially followed by £200,000 each year thereafter for four years (ending in 2023), plus additional provision by way of pension-sharing and tapering spousal maintenance in lieu of interest on the lump sum. The total assets were £4.75m
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A few months after the final order was made, COVID arrived in the UK and schools were closed, significantly impacting the family business. On 27 April 2020, the Husband applied on Barder grounds to set aside the order on the basis of the impact of COVID on the business following the school closures. The issue listed for determination before Mostyn J was whether COVID was capable of being a Barder event and whether the Husband had established grounds to set aside the final order. Mostyn J delivered a detailed Judgment which covered a range of topical issues, from whether COVID could be a Barder event (TLDR: “probably not”, but will depend on the specific facts of the case) through to the Thwaite jurisdiction (TLDR: Mostyn J plainly disagrees with the recent authorities which have supported the existence of a separate “Thwaite” jurisdiction which enables the court not merely to refuse to enforce an executory order, but to make in its stead a completely different one). For the purposes of this article, however, it is Mostyn J’s findings about the variability of lump sums which are of interest. In the Judgment, Mostyn J undertakes a review of the origins of the lump sum provisions in the Matrimonial Causes Act 1973, going back to consider the recommendations of the Law Commission from 1969 which informed the lump sum provisions in the Matrimonial Proceedings
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and Property Act 1970 Act which is turn was the basis of the equivalent provisions in the 1973 Act. Having reviewed all the original material, Mostyn J concludes that contrary to the longstanding conventional wisdom, lump sums by instalments are not variable as to quantum, only as to the timing of the instalments. He goes on to say, at para 86: “On this analysis, there is not much difference between the variability of a lump sum payable by instalments and the variability of a series of lump sums. The timing of the payment of individual lump sums in a series can be altered under the inherent jurisdiction of the court as explained in Masefield v Alexander. However, the amount of the instalments cannot be altered. It is not possible later to vary the payment schedule to provide for the overall amount to be spread over a longer period in smaller instalments. In contrast, a lump sum payable by instalments can be varied in that way… Mostyn J goes on boldly to conclude that “there have been a number of cases which I respectfully suggest have misread the relevant provisions and have assumed that an order under s 31(1) and (2)(d) Matrimonial Causes Act 1973 could vary the overall quantum of a lump sum which is payable by instalments” and comments that “.. a practice has developed of framing what to all intents and purposes is a lump sum payable by instalments, as a nonvariable series of lump sums.” Mostyn J goes on to indicate his view that the question of whether the order is for a lump sum by instalments, or for a series of lump sums, has to be decided objectively by looking at the nature of the lump sums, rather than simply accepting at face value what the court and the parties have called it: i.e. you cannot change the fundamental nature of the lump sum via the inclusion of a Declaration in the Recital: “Objectively, and notwithstanding the camouflaging language, this was a lump sum payable by instalments. If the award is a pay-out under the sharing principle, but spread over time to soften the blow to
