Series or Instalments in Consent Orders
What is the difference between “series of lump sum orders” vs “lump sum orders by instalments” in Consent Orders?
Many have a preconceived notion that going to Court and being heard by a Judge is the “right” way to sort out your finances on divorce. However, in reality, the Court should be the last resort if it can be avoided.
With the current backlogs in our Court system and most importantly the high costs that come with Financial Remedy Proceedings, we advise now more than ever to consider alternative dispute resolution which result in an Order by consent (if it is appropriate and both parties are agreeable). This gives both of the parties a greater autonomy over the outcome, resulting in an agreement which both can live with and keeping the tensions low.
Whether you have discussed your finances at length with your partner and came to an agreement together, attended mediation, or came to an agreement through solicitors, it is important to note that it is not legally binding until that agreement is considered and approved by the Court. This is what makes a Consent Order.
Why you might choose to pay an agreed settlement over several payments rather than one lump sum.
One of the main objectives of the Court when resolving matrimonial finances is to try and separate the parties’ finances and sever their bonds as much as possible so that both may move on with their independent lives. This is called a clean break.
It is often the case that a Consent Order involves a one-off payment from one party to another- a lump sum.
Where an agreement has been reached for one party to pay the other a significant amount of money but there is insufficient available capital immediately, or it would not be practicable to release this capital, it might be appropriate for either a series of lump sum payments under section 23(1)(c) of the Matrimonial Causes Act 1973 OR for this one lump sum to be paid over a number of instalments under s23(3)(a) of MCA 1973. But what is the difference in law between a series of lump sums and a single lump sum paid in instalments?
Risks of lump sum orders by instalments.
It is essential for any order made to be clear as to the intention behind the agreement as could be seen in the case of L v L and which was revisited in Hamilton v Hamilton.
Although it may seem like an appealing arrangement, giving the payer more breathing space and giving the receiver a larger settlement than may otherwise be possible, it does come with its own risks to both.
If the agreed Order is a lump sum payable by instalments the parties run the risk of it being open to be varied (changed) by the Court later down the line if any issues arise. Variation can be a risk to the payer by allowing the receiver to have second bite of the cherry and having their liability increased, or on the other end of the scale the receiver risks their claim being dismissed with parts unpaid.
Whereas a series of lump sums is not capable of variation and provides more certainty. However, it is more restrictive with its strict deadlines for the payments to be made by giving the payer no flexibility.
In case of Hamilton v Hamilton an issue cropped up where the paying spouse (Wife) paid the first instalment as agreed, only paid a part of the second instalment and refused to pay the remaining three. When the receiving spouse (Husband) subsequently applied for enforcement of these payments the Wife countered this by applying to the Court to remove this liability. In the end the Court varied the Order for the Wife to pay the remaining instalments together with interest accrued on top but gave her a significantly longer period of time to pay this.
The initial Judge in this case found that an order for payment of money over a period of time could only ever be an order for a lump sum payable by instalments and could always be varied. Even though the Court of Appeal disagreed with this noting that there are differences between the two types of payments, they upheld that in this case despite what the wording may have been the original order had been an instalments order and as such was open to variation.
As such when considering a Consent Order, it is vital to bear the above in mind when multiple payments are involved. If a series of lump sums are indeed agreed, Mrs Justice Barons advised it may be worth including a recital within the order which addresses any possibility of variation in the future in order to try and avoid arguments about it at a later stage.
As drafting Consent Orders can be very complicated, we strongly suggest detailed advice would be needed in relation to entering into any such agreement. For further specialist advice on divorce and finances or any other separation matters, please contact us on 01908 787900.