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The recent case of HAT v LAT [2023] EWFC 162 is the latest reminder of the importance of obtaining a financial remedy order reflecting a couple’s financial agreement on divorce, including a “clean break”.
Background
The recent judgment by Mr Justice Peel in HAT v LAT is an interim decision in a case involving parties who separated in 1994 and divorced in 1998. The couple entered into a deed of separation some 30 years ago, which provided:
- The husband paid £702,000 to the wife; and
- A clean break.
The husband made the payment to the wife, but the agreement was not converted into a court order, meaning there was no official “clean break”. In addition, the husband paid the wife maintenance up to the amount of £8,500 per month from 2002 onwards, and helped the wife to buy a home in London in 2009 (albeit with a declaration of trust in place).
When the husband stopped the payments altogether in December 2022, the wife applied to court to seek an additional £5m, interim maintenance and an order that the husband provide her with funds to cover her legal fees (a Legal Services Payment Order, or LSPO). The husband argued that the separation agreement should be upheld, and so no further provision was due to the wife.
Judgment
Whilst acknowledging that it is highly unusual for a party to make a financial claim when such a substantial amount of time has passed since the divorce (25 years in this case), the significance of the delay was minimised by the fact that in addition to the terms of the separation agreement, the husband had provided the wife with ongoing financial support (income and housing) for more than 20 years.
Peel J made several important observations:.
- The wife’s delay in making her application did not necessarily prevent her claim from being valid, although it would likely curtail the eventual sum awarded;
- The husband, by continuing to financially support the wife despite the clean break provision, had created a situation in which the wife had become dependent on him financially. This meant that she had an “arguable” case for financial support;
- Regarding interim maintenance, it would be unfair for this to be reduced or stop altogether – the wife was used to receiving this and had few resources to meet her needs (Peel J ordered that the husband pay £8,500 a month, less than the wife sought, but her outgoings could be reduced); and
- A LSPO should be made (£200,000 was found to be reasonable). It was fair in this case to include historic unpaid costs in relation to the proceedings – these needed to be cleared so that the wife could ensure continuity of legal representation and the husband had “abundant wealth” to meet the costs.
Comment
This interim decision highlights the difficulties that can arise if a clear financial order is not made at the time of divorce.
In this case, an official “clean break” was never achieved. This meant either party could apply to court for further financial provision in the future, as their claims against each other had been dismissed. Stating in the separation agreement that there was to be a “clean break” did not have the same effect as a court ordered clean break and put the husband (the financially stronger party) at risk in the future.
The passage of time may ordinarily have meant the wife had a much weaker argument when she brought her case, but monthly payments and housing support made voluntarily by the husband over 20+ years meant that court recognised the wife’s financial dependent. To the court, ceasing payments overnight would not be fair to the wife.
The key points for clients and contacts to consider are:
- A separation agreement is not automatically binding. The court can look beyond this and make further provision if a party’s needs require and a clean break has not already been achieved;
- A court-ordered “clean break” dismisses all future claims against arising as a result of a marriage and enables clients to move forward with a clean slate;
- Voluntary provision of further payments post-divorce, without a court-ordered clean break, risks creating a precent for future court-ordered support; and
- It is important to receive tailored legal advice at the time of separation or divorce, to understand the impact of your financial and legal decisions at the time and any implications for the future.
For more information, please contact Sarah Green.
With thanks to Megan Davies, Trainee Solicitor, Family team.
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