Financial consent orders
Many couples manage to reach an agreement regarding the division of their assets between themselves, particularly where their finances are relatively straightforward. This of course has the benefit of dealing with matters swiftly and avoids the court process and associated legal fees.
However, parties should always ensure that any agreement is recorded in a consent order and sealed by the court. Without taking this step, the agreement can be rendered meaningless and leaves the parties exposed in a number of ways.
If you think you might need a consent order, and want to discuss this, get in touch today or call 0203 983 1818.
What is a consent order?
A consent order is a document that sets out the financial arrangements agreed between parties upon divorce. Such an order will deal with the division of all of the assets and liabilities, including property, pensions and personal possessions. Where appropriate, it will set out the level and duration of any child and spousal maintenance as well as provision for other expenses such as school fees, medical insurance and life insurance.
In the event of a clean break (where all financial ties are severed), a consent order sets out the division of property and includes clauses that bring the financial relationship to an end. When it is necessary for the parties to have an ongoing financial relationship (for example, due to the need for spousal maintenance to be paid), the order sets out the mechanism for this going forward as well as the date or event upon which this financial relationship will conclude.
Why should I obtain a consent order?
There are two main issues that can arise without a sealed consent order.
Firstly, either party is open to pursue further financial claims later down the line. This was demonstrated by the Supreme Court’s 2015 decision in Vince v Wyatt:-
The parties married in 1981 and were of modest means during the course of their relationship. They had one child together and Ms Wyatt’s daughter from a previous relationship was treated as a child of the family. The parties separated in 1984 and eventually divorced in 1992. During this 8 year period, Ms Wyatt had limited financial assistance from Mr Vince. Whilst the court was unable to obtain records dating back this far, it had no reason to believe that Ms Wyatt’s claims against Mr Vince had been dismissed (as they would be within any consent order providing for a clean break). Mr Vince went on to develop a very successful green energy business during the 1990s and subsequently became a multi millionaire. Ms Wyatt brought a claim for financial relief in 2011 and after many hearings and appeals, the Supreme Court determined that her claim could proceed. Ms Wyatt was eventually awarded a lump sum of £300,000 plus a total of £325,000 towards her legal costs.
It is worth noting that in addition to these sums, Mr Vince will have borne his own legal costs as well as the the stress of five years of litigation against someone he had divorced over 20 years prior. Therefore, failing to obtain a consent order can lead to litigation many years, or even decades, after parties have divorced.
The above illustrates that even if parties are of limited means at the time of divorce or if an order is very simple and merely involves them retaining their own assets, it is still important that an order is obtained to incorporate the necessary clauses that prevent further claims from being brought.
Secondly, if one party seeks to renege on the agreement, there is little redress open to the other party by way of enforcement. For example, if a party stops paying spousal maintenance and there is no order to back up this arrangement then options are limited. Parties can effectively find themselves back to square one, needing to issue financial remedy proceedings to obtain an order setting out their respective obligations, taking both time and money.
As such, it is best to get matters finalised at the earliest opportunity to avoid, or at least limit, the possibility of future litigation.
How do I obtain a consent order?
Once an agreement is reached, this will need to be drawn up into an order by a specialist family law solicitor. It is highly recommended that both parties obtain independent legal advice on the content of the order. Once signed by both parties and their legal advisors, the order can be submitted to the court, along with a short disclosure statement in form D81. This includes details of both parties assets, liabilities and income, but does not require documentary evidence in support as would be the case within financial remedy proceedings.
Once submitted to the court, a judge will consider this snapshot of the parties’ financial position alongside the agreement reached, and assuming that they deem it to be fair, the order will be sealed. However, there is no guarantee that the court will deem an agreement fair simply because both parties consent to it. Above all, the agreement must meet the needs of the parties, with priority given to the needs of any minor children of the family. This reinforces the importance of obtaining legal advice on the order before it is submitted to the court as a solicitor will be able to advise whether the agreement is within the parameters of what a judge will consider to be fair.
If you think you might need a consent order, and want to discuss this, get in touch today.
No turning back…
Once a consent order has been sealed it is final and will become legally binding and enforceable upon the grant of decree absolute (see below). The importance of a properly drafted consent order coupled with independent legal advice therefore cannot be overstated. Parties need to be comfortable with what they are signing and satisfied that they can comply with any ongoing obligations. The benefit of this finality is that it ensures that neither spouse can renege on the agreement reached but naturally, this cuts both ways.
It is worth noting that provision for spousal maintenance always remains variable (by way of court application if changes cannot be agreed) and thus, either party can seek to vary maintenance, upwards or downwards, if there has been a change of circumstances (for example, a drop in the paying party’s income).
The 2018 Supreme Court case of Mills v Mills does however demonstrate that such an application cannot be used as a tool to reopen capital claims under the guise of a need for higher spousal maintenance.
The parties had divorced in 2002 and reached a financial agreement by consent. The wife received a £230,000 lump sum which would enable her to purchase a mortgage free property, thereby providing her with a home for life. The husband also agreed to pay annual maintenance of £13,200 per annum. The wife in fact utilised a mortgage to buy a more expensive property and over the course of the following 7 years sold and purchased a series of different properties. With each purchase the amount which she borrowed increased. In addition, she did not appear to reinvest the entirety of the sale proceeds from one property into the next. She sold her final property and moved into rented accommodation in 2009. Her capital continued to deplete over time, so much so that by April 2015 she had no capital and debts of £42,000. Due to the need to pay rent from income alone, the wife found herself with a shortfall between her income and outgoings. As such, she applied to vary her maintenance upwards, requesting that the husband discharge her monthly rental costs. The husband cross applied to vary the maintenance downwards. The first instance decision was that the maintenance should stay at the level as per the original the order. This was overturned by the Court of Appeal, however, the husband subsequently appealed to the Supreme Court who reinstated the initial decision. This was on the basis that the original order made provision for the wife’s housing need and therefore the husband should not have to make further provision for this.
Parties should take heed of the lessons from Mills v Mills when entering into a consent order, namely that once capital provision has been agreed and set out in a consent order there is very little scope for altering this via any means. As such, parties should think carefully before reaching an agreement and consider whether it is something that they are willing and able to stick to long into the future and factor this into their financial decisions going forward.
Practical considerations – divorce
A consent order cannot be submitted to the court until a divorce petition has been issued and the decree nisi has been granted. Therefore, it is important to get this separate process underway as soon as possible so that the consent order can be sealed at the earliest opportunity.
It is advisable to refrain from applying for decree absolute (the final stage of the divorce that legally dissolves the marriage) until the financial consent order has been sealed by a judge. This prevents a lacuna arising which would see parties no longer married but without financial arrangements in place. This is particularly important if one of the parties passes away before the consent order has been sealed. As set out above, the decree absolute is the final stage of the process as this means that the consent order is legally binding.
If you have any questions regarding the issues discussed in this post, it is essential you get specialist legal advice. Book your appointment with us today