Court Upholds Deferment of Payment

A businesswoman whose business fell victim to the recession has persuaded the family court that it would be appropriate for the settlement she had agreed to pay her ex-husband to be varied.

The total settlement was £450,000, made up of:

• £150,000      to be paid in 2007 (which was paid);
• £150,000      to be paid in 2008 (of which £90,000 had been paid); and
• £ 50,000      to be paid in each of the years 2009, 2010 and 2011 (all unpaid).

Unfortunately for the ex-wife, her recruitment agency business declined and went into administration, leaving her unable to make the payments to her ex-husband at the required times.

She applied for a variation of the order so as to reduce the payments she is required to make. When the court agreed to allow her to defer payments, her ex-husband appealed the decision. The matter ended up in the Court of Appeal. At issue was whether or not the original order could be varied. In essence, the presence of the parties in court stemmed from a disagreement about what the original order meant.

The ex-husband argued that the order was for a payment of lump sums by agreement and thus could not be varied by the court. The ex-wife argued that the order was for the payment of a lump sum by instalments and thus was capable of being varied. The Court of Appeal accepted that whilst an agreement for lump sums to be paid could not be varied, the original order was an arrangement to pay a lump sum by instalments and thus the timing of the payments could be altered.

The Court of Appeal ruled that the order made by the judge in the lower court must be undisturbed, despite criticising the judge’s reasoning. In her judgment, Mrs Justice Baron also concluded that ‘a recital at the beginning of an order which sets out the basis of the agreement in terms of a potential variation would put disputes of this type beyond doubt’.

Says Alan Kiddle, “Careful drafting of all legal agreements is critical if the possibility of a future dispute is to be avoided.”