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Do Not Forget About Your Separation Agreement!

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A separation agreement can help regulate the financial arrangements between you and your spouse in the time between when you separate and when your divorce becomes final.

Suzy Hamshaw - Divorce Specialist, Family Law Expert and Financial Claims on Divorce

Suzy Hamshaw

Many couples wish to avoid an acrimonious divorce on the grounds of adultery or unreasonable behaviour and wait until they qualify for a divorce on the grounds of 2 years separation.

However, in the meantime they still wish to resolve their financial settlement and often any agreement is incorporated into a legally binding agreement known as a Separation Agreement with the proviso that the terms will be made into a court order dealing with their financial claims on the later divorce. Whilst a Separation Agreement can provide legal protection it is only a court order on the divorce that can provide finality in respect of the parties’ financial claims.

The recently reported High Court case of T v T [2013] EWHC B3 (Fam) is a useful reminder for separating couples of what can go wrong if they forget to embody their agreement into a court order.

The case makes interesting reading. The parties entered into a separation agreement in 1991. Both parties had independent legal advice and had provided full financial disclosure. Under the terms of the agreement the husband received a lump sum of £175,000 in return for transferring to the wife his interest in their two properties. This was to be in full and final settlement and there would be a clean break with no ongoing spousal maintenance between the parties. The agreement included provision for a divorce after two years separation and to invite the court to make an order dismissing all financial claims between them on the divorce.

The parties subsequently divorced in 1995 but the agreement was never made an order of the court. The wife gave no explanation for that failure, whilst the husband maintained that he had expected his solicitors to do so, and had always regarded the matter as resolved.

Some 20 years after the Separation Agreement the wife sought to pursue financial claims against her husband. Over that period the husband’s finances had prospered but regrettably the wife’s financial circumstances had deteriorated, to the extent that she was of the view that she was now in need (being left with only nearly £1million tied up in her house!). The wife sought spousal maintenance but for this to be capitalised into a lump sum.

In response to the wife’s application the husband made an application for the wife to show cause why the agreement should not be made an order of the court.

The wife argued that there had been material non-disclosure, she had been under pressure from the husband and that she had been bullied by her solicitor at the time into entering into the agreement.

The judge found that the evidence did not support these arguments. There was nothing to suggest that the agreement was not fair and that the wife had not been competently advised. The Judge’s approach was to ask herself: i) had the parties reached an accord by which they intended to resolve the matrimonial affairs, and ii) how have they conducted themselves?

The judge held that “this was an agreement which was entered into, intended to be acted upon, and acted upon. In those circumstances the existence of the agreement of the agreement must be regarded of magnetic importance.” The court was under no duty to examine their current means. The length of time since the agreement was entered into further secured it as it was never treated as a nullity or as redundant.

The husband’s application was therefore granted and a costs order was made against the wife. The husband’s costs were stated to be £74,734 but would be subject to assessment by the court. A very expensive lesson for the wife.

Those entering into Separation Agreements need to be aware that, whilst they have there uses, these do not bring finality and that only a court order can conclude the parties financial claims on a divorce. Those with Separation Agreements need to be sure that on any subsequent divorce the terms of those agreements are embodied into Consent Orders.

For expert and specialist advice please contact Suzy Hamshaw on 01635 521212 or suzy.hamshaw@clmlaw.co.uk

Written by Suzy Hamshaw

December 9th, 2013 at 9:28 am