Guernsey Law Reports 2007–08 GLR 127
D v. D
ROYAL COURT (Collas, Deputy Bailiff): September 20th, 2007
Family Law—financial provision—maintenance agreement—ratification by court—court’s approval required under Matrimonial Causes (Guernsey) Law 1939, art. 27 only for agreement reached during marriage not after divorce
Family Law—financial provision—enforceability after divorce—agreement may be made enforceable by incorporation into order of court—sufficient if substantive terms clear and only details of implementation (including financing) remain to be finalized
The petitioner husband applied for the enforcement of an agreement made with the respondent, his wife, making financial provision following divorce.
The principal asset was the jointly-owned former matrimonial home, which had been valued substantially differently (to the extent of about £25,000 on a £300,000 property) by the parties’ respective estate agents. A compromise was nonetheless agreed, by which the parties agreed that the home should be transferred into the wife’s sole name, she would live there with their child, and she would pay a lump sum of £100,000 to the husband. A draft consent order (containing minor amendments) was prepared but the wife’s advocate delayed confirming it on the ground that the wife’s finance “was not in place.”
A further valuation of the property was then obtained by the wife’s bank which was £30,000 less than her own valuation and £55,000 less than the husband’s, with the result that the bank was unwilling to lend her the amount she needed to be able to buy out the husband’s share. She therefore proposed that the house be sold on the open market and did not wish to proceed with the compromise agreement.
The husband, as a preliminary matter (on documents alone and without oral argument), sought the court’s approval for the agreed compromise, submitting that (a) they had reached agreement on its terms, even though it did not amount to an enforceable agreement in law; and (b) they had reached the agreement before the wife had raised the issue of finance and finalizing it had not therefore been made subject to her obtaining funds.
The wife submitted in reply that (a) the court could not enforce the agreement without further hearing as by the Matrimonial Causes (Guernsey) Law 1939, art. 27 it was required to give approval to the terms of the
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agreement; (b) in any event, no final agreement had been reached and the proposed consent order had not been made; and (c) the court should have regard to her reason for not reaching a final agreement, since it would be unfair to her not to do so.
Held, dismissing the husband’s application:
(1) The court was satisfied that the parties had reached an agreement, even though it did not amount to an agreement at common law, since its substantive terms were clear and only the details required to put it into effect (including its financing) remained to be finalized. The court had no power, however, to approve it under art. 27 of the 1939 Law, since that provision was concerned only with agreements made during the marriage and not with those made after divorce (para. 9; para. 11).
(2) It would nevertheless be possible to make the parties’ bargain legally enforceable by converting the agreement into an order of the court—but it would be premature to do so at this stage without hearing evidence. The court needed to have regard to all the circumstances of the case, including the terms on which the negotiations took place and the basis on which the agreement was ultimately reached. It would, as the wife had argued, be unfair to her to disregard her reason for withdrawing from it and, similarly, it would only be proper to give the husband the opportunity to argue, if he wished, that it was not the true reason, or that another satisfactory lender could be found. All the evidence of the negotiations, proposals and objections was admissible—but, if the court were to conclude on the basis of that evidence that the wife in fact withdrew because she could not raise the funds needed, it would be highly unlikely to approve the terms of the agreement (para. 10; paras. 17–18).
Cases cited:
(1) C v. C, C.A., Judgment 44/2005, July 20th, 2005, unreported, referred to.
(2) Edgar v. Edgar, [1980] 1 W.L.R. 1410; [1980] 3 All E.R. 887; [1981] 2 FLR 19, considered.
(3) Xydhias v. Xydhias, [1999] 2 All E.R. 386; [1999] 1 FLR 683, followed.
Legislation construed:
Matrimonial Causes (Guernsey) Law 1939, as amended, art. 27: The relevant terms of this article are set out at para. 9.
art. 46: “Where a decree of divorce or nullity of marriage or judicial separation has been granted, the Court may, if it thinks fit . . . as regards real and personal property in which each or either of the parties to the marriage has . . . an interest . . . direct that their interests in such property shall be vested solely in the one or the other of the parties or shall be divided between them . . . and order that one party shall pay to the other for his or her absolute benefit such gross sum or shall secure to the other for his or her benefit, such
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gross or periodic sum or both for any term not exceeding the life of the party in favour of whom the same is secured as the Court may direct, or may refrain from making any order as to payment or security.”
A.N. Brown for the petitioner;
Mrs. F.J. Haskins for the respondent.
1 COLLAS, DEPUTY BAILIFF: This is my decision on a preliminary point, based upon the very helpful written submissions received from counsel and without having heard oral argument.
2 A final order of divorce was granted between these parties on August 17th, 2004. By application dated October 25th, 2006, the petitioner applied to the Royal Court seeking a lump sum by way of ancillary relief.
3 Thereafter, the parties negotiated settlement terms and the petitioner contends they have reached a concluded agreement which should be given legal effect without any further hearing in order to save time and costs. The respondent says she is unable to proceed on the agreed terms. The court always encourages parties to seek to save costs, especially in cases such as the present where the matrimonial assets are modest.
4 The principal asset is the former matrimonial home. The value is not agreed. Each of them has filed a Form A in which the petitioner valued it at £300,000 and the respondent at £275,000. (In November 2004, two estate agents estimated £260,000 and £280,000.) The outstanding mortgage is about £45,000, so the equity was thought to be about £242,000 based upon the average of the recent valuations. The only other assets are the balances in the parties’ respective bank accounts which total a little more than £10,000.
The negotiations
5 I will summarize the factual background briefly. The matter had been listed for an FDR hearing on April 12th, 2007. Two days before, the respondent’s advocate wrote to the petitioner’s advocate in an open letter proposing that the former matrimonial home be transferred into the respondent’s sole name; she would live there with the child of the marriage; and she would pay a lump sum of £100,000 to the petitioner.
6 On the morning of the FDR hearing, the petitioner’s advocate contacted the respondent’s advocate accepting the offer with a small proviso. Minutes later, the respondent’s advocate confirmed matters were agreed on that amended basis. Next, the petitioner’s advocate wrote confirming that settlement had been reached and advising that he would now prepare a consent order. The FDR hearing was vacated.
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7 On April 18th, the petitioner’s advocate wrote to the respondent’s advocate with, inter alia, a draft consent order. Five days later, the respondent’s advocate responded with amendments which included the insertion of a new provision that the respondent retain a Mini Mayfair motor vehicle with a four-digit registration number as her sole and absolute property. The following day, the respondent’s advocate wrote saying the matter could not proceed as planned on April 26th, 2007 as her client’s finance was not in place. The petitioner has drawn to my attention that the need for finance had not previously been mentioned and the original offer had not been made subject to finance.
8 On May 18th, the respondent’s advocate advised that an estate agent instructed by the respondent’s bank had valued the property at only £245,000, which was £30,000 less than her own estate agent’s previous valuation and £55,000 less than the petitioner’s valuation. Consequently, the bank would not lend the amount she needed. So, the respondent could see no alternative but to place the property on the market for sale to a third party. She was unable to proceed with the proposed settlement terms.
The law
9 The respondent relied upon art. 27 of the Matrimonial Causes (Guernsey) Law 1939, as amended, which provides as follows:
“No agreement for or in relation to separation between married persons which is made after the commencement of this Law while the parties thereto are resident within the Bailiwick shall have any legal validity in the Bailiwick unless it is sanctioned pursuant to a decree or pronouncement of judicial separation by a Court in the Bailiwick competent to make such decree or pronouncement.”
In my view, art. 27 is concerned with agreements made during the marriage, before a judicial separation has been pronounced, and not to agreements made after a divorce.
10 However, I do accept the principle that any agreement reached between the parties must also be approved by the court before it will have legal effect. As the English Court of Appeal held in Xydhias v. Xydhias (3) in a judgment delivered by Thorpe, L.J. ([1999] 1 FLR at 691):
“My cardinal conclusion is that ordinary contractual principles do not determine the issues in this appeal. This is because of the fundamental distinction that an agreement for the compromise of an ancillary relief application does not give rise to a contract enforceable in law. The parties seeking to uphold a concluded agreement for the compromise of such an application cannot sue for specific performance. The only way of rendering the bargain enforceable, whether to ensure that the applicant obtains the agreed transfers and
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payments or whether to protect the respondent from future claims, is to convert the concluded agreement into an order of the court. The decision of the Privy Council in de Lasala v. de Lasala [1980] A.C. 546, (1979) FLR Rep. 223 demonstrated that thereafter the rights and obligations of the parties are determined by the order and not by any agreement which preceded it.”
11 Xydhias is also authority for the proposition that a concluded agreement may have been reached between the parties to the former marriage, even though similar facts might not suffice to prove a contract at common law. Also, that there is a distinction between the substantive terms of an agreement in a divorce case and the detail required to put it into effect. Matters of security, time to pay and so forth are points of detail only. The leading case in this area is probably Edgar v. Edgar (2), which I have considered with great care.
12 It is important to look at the facts of each of those cases in order to see the nature of the agreement relied upon in each case. In Edgar, the parties had agreed and executed a deed of separation on April 1st, 1976 which was later varied for tax reasons, but otherwise relied upon by the parties until, in November 1978, the wife petitioned for divorce and applied for all forms of ancillary relief, even though the deed contained an acknowledgement by her that she would not seek any further provision from the husband.
13 In Xydhias (3), the district judge found that the parties had agreed terms, based upon the fourth draft of a consent order, shortly before the trial date for the hearing of the wife’s ancillary relief claim and as a result of the agreement the hearing date was vacated. The facts of the present case are very much closer to those of Xydhias than to the facts of Edgar (2).
Conclusion
14 In the present case there are two distinct steps I must consider: first, had the parties reached a concluded agreement; and, secondly, will the court give it legal effect?
15 In relation to that first step, it does appear that the parties had reached agreement. However, it is the second step that I believe presents a difficulty for the petitioner.
16 The court’s powers to order a re-vesting or distribution of property are contained in art. 46 of the 1939 Law. In exercising those powers, it is well established that the Royal Court will take into account all the circumstances of the case and have regard to the factors set out in s.25 of the Matrimonial Causes Act 1973 (see, for example, C v. C (1)).
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17 In my opinion, the circumstances of this case to which the court would have to have regard include the terms on which the parties were prepared to agree and the basis upon which such agreement was reached. It would be unfair to the respondent to disregard her reason for withdrawing the offer. If the petitioner wishes to argue that was not the true reason or that another bank would be prepared to lend the money required, he should have the opportunity to do so.
18 I therefore conclude that it would be wrong to make an order giving effect to the parties’ agreement without hearing evidence. The terms or proposed terms of the agreement and the basis upon which it was reached are in my view admissible in evidence. If, after hearing all the evidence, I am persuaded that the respondent withdrew from the agreement because she could not raise the funds required then it is highly unlikely that I would approve the terms of the agreement.
19 The respondent has urged me to take account of the need to ensure costs are not wasted unnecessarily. I am sure that is a fact that the parties would wish to take into account in their negotiations prior to the hearing. However, it does not alter the legal principles I must apply and does not change my decision.
20 I therefore dismiss the petitioner’s application to give effect, at this preliminary stage, to the terms allegedly agreed.
Application dismissed.
2009
Law Report
None
Guernsey Law Reports 2007–08 GLR 127