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26 May 2023

We have separated our finances – do we need a court order?

In her latest article, Samantha Fletcher describes the difficult and often costly situations that divorcees leave themselves open to when no financial order is obtained following a divorce, even when an agreement on finances has been reached privately.

The introduction of no-fault divorce[1] brought about a very welcome change to matrimonial law. As a result of the change in the law, couples no longer need to apportion blame or allege fault in order to be granted a divorce.

The aim of the new law is to reduce acrimony which, in turn, may encourage more divorcing couples to try and reach an agreement between themselves in relation to the finances.

However, it is very important to remember that you and your spouse remain financially tied to one another even after the divorce is final, unless there is a court order in place dealing specifically with the finances.

We have agreed how we will separate our finances and we will finalise our divorce, why do we need a court order?

It is a common misconception that, once there is a final order in respect of the divorce, this also brings to an end your financial claims against each other. This is not the case, as the matrimonial finances need to be dealt with separately to the divorce process.

By virtue of the marriage, in principle, both parties are entitled to make a financial claim on divorce against the other in relation to capital, pensions and income.  However, many couples do not issue court proceedings and instead are able to resolve their financial affairs by agreement.  This may be through direct negotiations or through any one of a number of alternative dispute resolution methods such as mediation or inter-solicitor negotiations.

It is important to note that unless your agreement has been embodied in a court order, those financial claims will remain ‘open’ indefinitely.  This leaves a risk of a possible financial claim being brought against you by your former spouse and storing up problems for a later date – even many years later.  In the case of Vince v Wyatt[2], the parties married in 1981 and had a child in 1983.  The following year Mr Vince moved out.  When they separated, neither had any money or assets of significance.  Their divorce was finalised in 1992.  In 1996 Mr Vince founded a wind energy company which became hugely successful and was valued at £57M.  Ms Wyatt applied to the court more than twenty years after they separated for financial support.  The case proceeded to the Supreme Court who confirmed that there is no time limit to bring a financial order after divorce.  This case demonstrates that even if there is little to divide, it is still important to obtain a court order.

An informal agreement that you have reached directly between you is not legally binding – even if it is in writing – unless it is formalised as an order. If you have reached an agreement between you it is possible to ask the court to convert the agreement into an order which formally sets out the financial agreement you have reached and this is known as a ‘consent order’.  It is important to note that the judge retains discretion over whether to make the order or not.  In most instances, the order will be made unless it is manifestly unfair.

What is a consent order?

A consent order is the document used to record how you have agreed to separate the matrimonial finances. It can deal with what will happen to the family home, how assets will be divided, periodical payments, payment of lump sums, division of chattels, what is to happen to pensions and so on.  A consent order must be approved by the court to make it legally binding and enforceable. It is not necessary to be engaged in court proceedings to submit a consent order – this can be done as a standalone exercise.

If a consent order has been approved by the court, if one party later fails to comply with the order or tries to ‘backtrack’ on the agreement reached, the other party is then able to apply to court to enforce the terms of the consent order. An informal agreement that is not recorded in a court order cannot offer this protection.

It is therefore extremely important that a consent order be drafted carefully to not only record your financial agreement; but to also ensure that neither of you will be able to make a financial claim against the other in the future and also to address the practicalities of implementing the order, such as the timings and logistics. These aspects are often overlooked when parties have reached an agreement informally. A consent order provides certainty and finality.

We have agreed not to make any claims against each other’s finances, do we still need a court order?

Even if neither of you intend to make a claim against each other’s finances, you still need to ensure that you have a consent order drawn up and approved by the court.

This is referred to a ‘clean break’ consent order which records the fact that your financial claims against each other stand dismissed and crucially, severs your financial ties now and in the future.  As illustrated by the case of Vince v Wyatt (above), it is essential to formalise this in an order.

The consent order recording the ‘clean break’ will alleviate any uncertainty and provides you both with security moving forward that there is a final financial order in place.

Do I need to attend court in order to obtain a consent order – what is the process?

The documentation can be submitted to court without the need for an attendance.  If the court approves the consent order recording your financial agreement as drafted, it will not be necessary for you to attend court as this exercise is dealt with on paper.  If the court has questions about the proposed agreement these will normally be dealt with in writing.

It is important to note that a consent order can only be lodged at court when you have reached the Conditional Order stage of your divorce. Therefore, the usual process is to get the divorce proceedings underway in the first instance and, while the divorce application is progressing separately in the background, to address the finances.

When filing the consent order with the court, both parties must also complete a prescribed form[3] setting out a summary ‘snapshot’ of their respective financial positions. This information is used by the judge to consider whether the order is fair in the circumstances.  If the judge is satisfied that the order is fair, then he or she will approve the proposed settlement which will then be converted to a sealed order of the court.

The court order will become legally binding once the judge has granted the final order of divorce and the terms of your agreement can then be implemented.  If the terms are not implemented, then it is possible to make applications to enforce them.

The family team at PHB are experts at negotiating financial settlements and drafting consent orders in the most complex set of circumstances. 

If you have any questions regarding the financial claims arising following a divorce or preparing a consent order, please do not hesitate to get in touch with a member of team who would be happy to guide you through the process.

[1] Introduced by the Divorce, Dissolution and Separation Act 2020

[2] [2015] UKSC 14

[3] Form D81

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Samantha Fletcher
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