How Do You Challenge a Financial Consent Order?

How do you challenge a Financial Consent Order?

Consent Orders and other financial settlement orders made in family proceedings are designed to be final. For this reason judges are very wary of allowing any challenges against them on appeal. There is even a school of thought that Consent Orders themselves cannot be appealed against, simply by virtue of the fact that the people involved have agreed them.

I have had countless enquiries over the years as to whether a client has a good case to re-open a Consent order or final financial order. I have to say that those with a chance of success are few.

What does the Law say?

In order to challenge a Consent Order, you need to attack the basis upon which it has been made. Usually the attack can be made for one of the following reasons:

1. Non-disclosure of relevant facts
2. Fraud & Misrepresenation
3. Supervising events; or
4. Undue influence

I deal with each of these under separate headings below.

In addition to being able to prove one of the above grounds, you need to be aware of the following:

• DELAY

A delay in making your application to set aside or appeal against the Consent Order can be fatal. It is universally acknowledged that the application must be made promptly, ie as soon as the applicant becomes aware of the facts. Certainly it must be done inside a year. In practice therefore, an applicant is allowed a little time for investigation, but then they must bite the bullet and apply to court. There have been cases of material non-disclosure which have been proved, but the applicant failed to set aside the order because they had waited too long after they became aware of the new facts, before doing anything about it.

• VARIATION

There is no court power to vary a lump sum once it has been ordered. Only if the lump sum is payable by instalments may an application be made to vary the instalments.

• PROPORTIONALITY

Whilst you may be able to prove your case, you will not succeed if to do so would not make a material difference to the current circumstances of the parties, ie the benefit to you is just too small to make a difference. Also the court will bear in mind the costs of litigating the issue. If the legal costs would wipe out the amount in dispute, the case will not be allowed to proceed.

•  SET ASIDE OR APPEAL?

Generally, for events arising at or before the order was made, apply to set aside.

For events arising after the order was made, you will need to apply for the court’s permission to appeal after the time limit to appeal has expired. This is called “applying for leave to appeal out of time. Usually you have 21 days from the date that the judge makes the order, but this varies for different courts and level of judge, so check time limits carefully.

Grounds for Set Aside

1.Non-disclosure of relevant facts

This usually falls into two areas:

• material financial non-disclosure,
•  non-disclosure of marital/cohabitation intentions.

In financial non-disclosure, it is generally one party failing to tell the other party about a new job offer which would have meant a large pay rise (Bokor-Ingram [2009] EWCA Civ 412), or not informing the wife of a true value of assets (Kremen v Agrest 2012 EWHC 45 (Fam)).

I had a case last year where I acted for the wife who found out about a very substantial dividend payment to her husband, made within a very short time of the order, and hidden by him. She succeeded in obtaining a large payout.

In terms of marital or cohabitation intentions, the most celebrated of these is Jenkins v Livesey (1985) AC 424 HOL. Here the wife did not disclose her intention to marry, and that fact would have made a significant difference had it been known at the time the order was agreed. The court set aside the order.

2. Fraud & Misrepresentation

This can also come under the non-disclosure heading, but clearly fraud is going to set aside an order.

The misrepresentation can be unintentional. For example, I had a case where the husband had disclosed the value of his pensions. Later it transpired that the valuation was wrong; a mistake made by him. The parties jointly applied to court to have the original Consent Order and Pension Sharing Order set aside, and the judge co-operated with this.

3. Supervening Events

There are cases where something so significant happens, hot on the heels of the order, which has the effect of undermining the entire basis upon the original order was made.

The most famous case in this category is Barder v Barder (Caluori intervening)(1987) 2 FLR 480. Here the wife had secured an order transferring the matrimonial home to her as she was the primary carer for the children. Within a matter of weeks she killed herself and the children, leaving the house in her Will to her mother. The mother applied to enforce the order, and the husband sought leave to appeal against the order out of time.

He succeeded. The order was to provide a home for the wife and children. By the mother’s actions that goal was frustrated. The Law Lords were very clear as to what constitutes a “Barder” event:

• New events have occurred since the making of the order which invalidate the fundamental basis upon which the order was made;
• These events are so significant, that any appeal would be very likely to succeed;
• The new events should have taken place within a year of the order being made;
•  The appeal must have been lodged promptly; and
• The appeal must not prejudice an innocent third party who has acquired an asset involved in the proceedings.

There are many parties who have tried and failed to establish a Barder event. Each case must be considered carefully on its own merits.

One of these is the Court of Appeal decision in Myerson [2009] EWCA Civ 282, where the husband tried to overturn a Consent Order because the recession had had a dramatically negative effect on the value of his shares and assets. He said the fall in his wealth was so drastic that he was now unable to fulfil the terms of the order and pay the required lump sum to his wife. The Court gave a firm indication that such applications do not satisfy the test and would be unlikely to succeed.

The court set out how the law approached this sort of supervening event, and the categories into which a case must fall in order for it to be considered under Barder principles:

1)      An asset correctly assessed at trial changes in value a short time later owing to “the natural processes of price fluctuation”; but judges should not be tempted to vary an order on this ground when they patently do not have the power to do so;

2)      Mistaken valuation of an asset at trial, which if correctly valued would have led to a different result. Provided this is honest, a court can reopen the order;

3)      Something unforeseen and unforeseeable has occurred since the trial which has altered the asset value so dramatically so as to skew the balance of assets as between the parties. A court could reopen an order in these circumstances but these cases are “few and far between”.

The court said that the quite astonishing 90% drop in the Husband’s share price was a “natural process of price fluctuation” and is not enough to reopen an order.  It might be said that that the Court of Appeal  misjudged the effects of the current economic climate, which was so serious as to require a quite unprecedented £3.4 trillion rescue package to stimulate the world economy by the G20 that same week.

The Court of Appeal decision restated current law whereby judges are wary of reopening orders, save in the most exceptional of circumstances. This is where the opinions of the legal profession and the public at large diverge. Most fair-minded people would consider that a dramatic change in fortunes of one spouse very soon after a divorce settlement should lead to a reassessment.

4.Undue Influence

A very recent matter of NLW v ARC [2012] EWHC 55 (Fam) came before Mr Justice Mostyn in the High Court, who granted permission to the wife to appeal a consent order in financial proceedings on the basis of undue influence and non-disclosure.

Conclusion

Judges do not want to ‘open the floodgates’; a rather hackneyed expression to signify a fear of what considerable litigation might follow if a certain route is taken on an appeal decision. The fear is that many spouses will rush to court to undo their agreements and orders.  The Court of Appeal in Myerson and many other cases make a general policy decision as to the attitude of the courts and lay down a warning to others who think they might have a stab at this.

Successful cases are exceptional.

However, no two cases are the same, and each case deserves proper attention and consideration before dismissal. We are aware that sometimes new evidence can be found which may change the outcome. It is always worth looking at matters afresh.

©Punam Denley

pd@blanchardslaw.co.uk