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Case study : Order for lump sum -v- undertaking to pay a lump sum
1. a. MCA s23 (1) (c) states the court may make:-
‘an order that either party to the marriage shall pay to the other such lump sum or sums as may be so specified’
b. And the more relevant provision in the subject case was s23 (3) (c) MCA:- 'an order under this section for the payment of a lump sum may provide for the payment of that sum by instalments of such amount as may be specified in the order …’
2. On divorce H wanted to sell his interests in two businesses and start life afresh, seeking as far as possible a clean break.
H agreed a sale of his business interests in a very limited market, with stage payments reaching as far as 2028/9. It was the best deal he could get in the circumstances.
The parties agreed a division of the assets, including W to retain the fmh, with a small mortgage. To equalise capital, W was to receive one half of the stage payments scheduled for 2024 and 2025.
3. Under the terms of the business sale agreements, if all or part of a stage payment was not met in any particular year, then the amount outstanding was divided between the remaining stage payments due in the remaining years. In theory therefore, part of a stage payment agreed in 2024 may not be paid until 2028/9.
4. An agreed order was submitted to the DJ as a lump sum order.
The judge rejected that part of the order saying:-
‘An order is meant to be clear as to what will happen and when. If the Respondent receives no payment in 2024 or 2025 but a big one in 2026, what happens? The payments to Respondent appear to be due to be paid in specified amounts and the uncertainty appears to be around inability of the purchaser to pay.I would prefer for the fixed dates and fixed amounts for payment to the wife with a provision that the Respondent may apply for a variation if the payments due are not received in full at the expected times.That at least places the court in the position of deciding.The clause as previously drafted is vague and inconclusive with no obvious means of resolving any dispute which may arise.’
5. The judge fixed a directions appointment. At first an agreed amended version of the order was put before the judge with an alternative for the payment of the lump sum by instalments to be contained in the order by way of H’s undertakings. The judge accepted the latter course with W’s claim for a lump sum being adjourned until all money due to W was paid.
Comments:
1. Both sub sections above use the word ‘may’ as opposed to shall. It was submitted to the judge that meant the court did not have to specify an amount in say pounds sterling, but the section gave the court a discretion to fix the amount by reference to a formula of words or a percentage, if say the payment was contingent on an event occurring, but the value not currently being known[1]. The judge did not respond to that point.
2. This case is a useful example of what was eluded to in Birch v Birch [2015] EWCA Civ 833 (CA)[2]. Mc Combe LJ said
‘… it is a recognised process of consent orders of this type to make arrangements, by way of undertakings by one or more of the parties, for matters outside the powers of the court under the 1973 Act. Such undertakings are “enforceable as effectively as direct orders”: see per Lord Brandon of Oakbrook in Livesey v Jenkins [1985] AC 424 at 444F – H, [1985] 1 All ER 106, [1985] 2 WLR 47. The undertakings are an essential part of the bricks and mortar with which the edifice of such financial orders are constructed.’
3. Whilst the original and secondary suggested wording of the order was rejected by the judge, there is an argument that there are different ways of including a lump sum as an order eg being calculated according to a formula or percentage for example.
