Settle your case on a continuing maintenance basis, and it can come back to haunt you…

For many people, a financial settlement represents the final chapter in a divorce. Generally, it comes to all concerned as a huge relief. Parties can begin to rebuild their lives, putting the unpleasantness of a break-up behind them. For those who achieve a clean break settlement, it will most likely be the end. However, for those who continue to pay or receive maintenance, this is not necessarily the case.

Maintenance may be paid for a period of time, with the court reserving the power to extend that period - or not, as the case may be. Maintenance may cease on cohabitation and will automatically end on the recipient’s remarriage. In other cases, maintenance will have no cut-off date and will only be stopped on the orders of the court, or on the death of the payer or payee.

If one of the parties wishes to bring an open-ended maintenance order to an end, this may occur by mutual consent. Both parties may agree that the time has come for the order to cease, the recipient spouse being able to manage alone.

Solicitors are consulted usually when there is no such agreement, and one party does not want to end or reduce the obligation.

Variations of maintenance orders are expensive and risky. As with the original application for a capital and income award, it involves going through the County Court or Principal Registry in London. The costs will be high - and as a result obtained for either party is likely to be disproportionately expensive. In a straightforward case, it makes sense to negotiate or proceed via the Magistrates Court. This is a simpler and cheaper process. However, when larger sums of money are involved, an experienced Judge will be required to make the determination.

There aren’t any winners in a Maintenance Variation. I don’t recommend it unless it is absolutely necessary, and legal costs are not an issue.

This isn’t all. Section 31 of the Matrimonial Causes Act 1973 permits somebody who is in receipt of maintenance to apply for a lump sum of capital, instead of continuing payments. This capitalisation of maintenance can be a very attractive prospect. It can be particularly attractive when a recipient is involved in another relationship which, if it turned into marriage, would mean that the maintenance was no more.

In many such cases, a clean break was impossible at the time of the divorce, due to insufficient capital. Years later, the financial positions of both parties may have altered. A husband may have rebuilt his capital and be about to retire. If his overall income is about to reduce, he may well wish to hold onto all of his pension.

I advise those who prefer to pay maintenance to bear section 31 in mind. If they can afford a clean break settlement at the outset, this can be the best course to follow as there will be no ‘comebacks’ in the future.

Even so, some people prefer to pay maintenance. They reason that their former spouses are likely to remarry, whereupon maintenance will cease. They believe that on balance, maintenance is a more cost-effective option.

However, it is important to note that applications for an order under section 31 of the Matrimonial Causes Act 1973 are often made in response to an application to vary maintenance downwards or terminate it.

This happened recently in a case called Dixon v Marchant. The judgment was given by the Court of Appeal on 24 January 2008.

Mr Dixon had been paying maintenance since 1993. In 2005, as he approached retirement, he wished to vary his maintenance downwards. Negotiations ensued about paying a lump sum in lieu, under section 31.

His former wife consistently rejected any suggestion that she was cohabiting. Eventually, the parties settled. Mr Dixon paid his former wife £125,000 to end all liabilities for maintenance. This was probably not as much as she might have achieved in court.

Within a few months, the former Mrs Dixon remarried and became Mrs Marchant. Mr. Dixon applied to the court for the return of his £125,000, claiming that this event was what lawyers call a “Barder” event and as such, he was entitled to the return of his money.

A “Barder” event is something with which I am familiar, having been involved in one of the reported cases on the subject (SvS (2002) 1FLR 992).

Such a case concerns a new event that would have materially impacted on the original settlement. The event occurs within a relatively short time after an award has been made, leave to appeal is made very quickly after the supervening event has occurred. It is also a requirement of such an event that if an order is set aside, no third parties will be adversely affected.

The evidential bar is high. It is vital that any “Barder” case must be dealt with very promptly as soon as the new event occurs, as a delay can be fatal to the case.

In S v S, I represented Mr. S. The late Mrs Justice Bracewell held that the groundbreaking 2000 decision of the House of Lords in White v White was indeed capable of being a “Barder” event. However she found that Mrs. S’s own lawyers should have been aware that the decision was shortly to be made. Instead, they had advised Mrs S to agree to an earlier settlement, calculated on different principles, without waiting for the judgment to come out. As a result, Mrs S’s award was well over £1million too low. My client successfully defended her “Barder” application and did not have to make up the difference. He was fortunate.

By a 2:1 majority, the Court of Appeal this year in Dixon v Marchant found that Mrs Marchant’s remarriage was not a Barder event, and that she could keep her settlement. Lord Justice Ward found that there was no basis at all that the deal would founder, if the wife remarried. Lord Justice Collins concurred.

Lord Justice Wall disagreed. He delivered a judgment with which I agree. He went through the “Barder” conditions, applying them to the facts of this case. They all appear to fit. I think Mr. Dixon was unlucky.

There are a number of other reported cases about Barder events. I think this is a tricky and very interesting subject. The case of Dixon v Marchant also struck me as interesting for other reasons. It raises the question of whether Mr. Dixon was right to try and reduce his maintenance in the first place. The stakes were high, because both parties were at risk of paying all the legal costs involved. Litigating about principles does cost dear.

If you are about to settle your case on a continuing maintenance basis, bear in mind that section 31 of the Matrimonial Causes Act 1973 can loom large years down the line. It can come back to haunt you - or hand you a tidy little windfall as good as a first-class win on the Premium Bonds.