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Enforceability of Family Agreements
David Burrows argues there is a de Lasala fulcrum in relation to the enforcement of agreements in family proceedings.
© Jordan Publishing Limited 2008
In 'Family Agreements after Morgan v Hill and NA v MA' [2007] Fam Law 828, which looked at Morgan v Hill [2006] EWCA Civ 1602, [2007] 1 FLR 1480 and NA v MA [2006] EWHC 2900 (Fam), [2007] 1 FLR 1760), I argued that there is a de Lasala fulcrum (de Lasala v de Lasala (1979) FLR Rep 223) in relation to the enforcement of agreements in family proceedings: 'The critical point for most is the point at which the agreement passes from enforcement between the parties in contract only, to enforcement under a court order and beyond'. That article should perhaps have taken two points a little further:
- (1) It did not specifically acknowledge the distinction in treatment in this area between married couples and unmarried parents of children (whether or not they live together).
- (2) It did not specifically consider the comments of Thorpe LJ in Xydhias v Xydhias [1999] 1 FLR 683 (Xydhias) (at 691) that 'the compromise of an ancillary relief application does not give rise to a contract enforceable in law' (a view now held to be 'too wide' by a differently constituted Court of Appeal in Soulsbury, see below). Since my 2007 article, the jurisdiction of the courts to enforce ancillary relief and other family agreements has been extensively considered in October 2007 in Soulsbury v Soulsbury [2007] EWCA Civ 969, [2008] 1 FLR 90, at para [45] and, by inference at least, in December 2007 in Haines v Hill and Another [2007] EWCA Civ 1284, [2008] FLR (forthcoming).
Soulsbury: An ancillary Relief Agreement?
In Soulsbury the Court of Appeal was concerned with a former wife (W) who had agreed to forego further maintenance for herself in consideration of her former husband's agreement that he (H) would leave her £100,000 on his death. He made a will, but then - on the point of death - he remarried, thus revoking that will. He made no other will. The judge at first instance decided the case on contractual principles: that W would make no further periodical payments claims in consideration of H agreeing to pay her the lump sum on death.
The estate repudiated the agreement and relied on it being unenforceable on principles applicable in ancillary relief proceedings (Xydhias) or void as being an agreement to oust the court's jurisdiction (see Hyman v Hyman [1929] AC 601). Ward LJ disposed of the Hyman argument: the agreement crystallised on death (see para [22]) and there had been nothing to stop W applying to the court while H was alive. Had she done so she would merely have lost the right to payment of £100,000. Longmore LJ refers to W's position here as the 'classical unilateral contract' (per Carlill v Carbolic Smoke Ball [1893] 1 QB 256) of the 'walk to York' kind. Once the promisee starts the walk or foregoes periodical payments then the promisor cannot withdraw the offer. There is no obligation on the promisee to walk all the way to York, or not claim periodical payments, but if this happens the promised reward cannot be claimed.
Ward LJ then considers the wider 'Xydhias argument' (para [23] onwards). He conducts an extensive review of recent case law on enforceable agreements between husbands and wives, starting just before the present matrimonial causes legislation reached the statute book (Gould v Gould [1970] 1 QB 275) and including, for example, Amey v Amey [1992] 2 FLR 89, where an agreement (without a court order: the wife died before the order could be obtained) between husband and wife was ordered to be enforced. From these cases Ward LJ concludes (at para [35]) that there is nothing that 'suggests that an agreement containing financial arrangements between spouses and former spouses with the intention of creating legal relations between them and which is not contrary to public policy cannot be enforced in the civil jurisdiction of the courts'. He then moves on to Xydhias, and takes the view that Thorpe LJ's conclusion in that case - that parties to an agreement to compromise an ancillary relief 'application cannot sue for specific performance' - is too wide. In Smallman v Smallman [1972] Fam 25 the Court of Appeal had held the opposite, summarised by Ward LJ (at para [45]) as follows: 'even an agreement subject to the approval of the court is binding on the parties to the extent that neither can resile from it'. Ward LJ could not, he said, ignore this finding.
In the end, the court found that this was not an agreement for 'compromise of an application for ancillary relief' and therefore that it was enforceable as a contract in any event. Much of what is said by Ward LJ may therefore be said to be obiter on the subject of agreements to compromise ancillary relief proceedings; although since the estate had argued the case from ancillary relief law, a detailed response from the court was inevitable.
Haines v Hill: Bankruptcy and Consideration for an Ancillary Relief Order
In Haines v Hill the issue of an agreement or court order in ancillary relief proceedings came before the court in the context of the fact - accepted by both parties - that 'a settlement or transfer of property', under Matrimonial Causes Act 1973, s 39, is a 'transaction' for the purposes of Insolvency Act 1986, s 339. Section 339(2) enables the court to restore the position preceding the transaction (ie to set aside the transaction), where, as the Chancellor of the High Court explains (at para [5]): (1) the transferor becomes bankrupt; and where the transaction either (2) gave him no consideration or (3) was at an undervalue. Even if these conditions are met, (4) there remains a discretion in the court as to whether to make an order (Re Paramount Airways Ltd [1993] Ch 223).
In Haines v Hill a district judge in ancillary relief proceedings had transferred the parties' former matrimonial home to the wife on terms that it gave her a benefit of around £120,000 from the husband (H), in satisfaction or partial satisfaction of her financial claims. H was adjudged bankrupt a month after the ancillary relief order became effective. H's trustee applied to have the order set aside as for no consideration or at an undervalue under s 339(3). The district judge in bankruptcy refused the application, but Judge Pelling QC sitting as a deputy High Court judge granted the trustees' application under s 339(3).
The Chancellor reviewed a variety of case law and other material. In Re Pope ex parte Dicksee [1908] 2 KB 169 the 'transaction' was the wife's agreement 'to refrain from taking proceedings in the Divorce Division' in exchange for which she received 'a permanent allowance for maintenance' (a telling addition, perhaps, to the enforceable cases referred to under Soulsbury, above). In Re Abbott (A Bankrupt) ex parte Trustee of the Property of the Bankrupt [1983] Ch 45 (Abbott) the Divisional Court of the Chancery Division refused to set aside a consent ancillary relief order: the wife had been a purchaser for valuable consideration; and in Harman v Glencross [1986] Fam 81, the Court of Appeal refused to ignore the wife's ancillary relief claim as against a charging order application: it was not inevitable that the wife's claim would fail as against that of the husband's creditor. In both these cases it was held that the wife had provided valuable consideration for her agreement, 'even though the consideration provided by [the wife] is not measurable in money' (para [14]).
Consideration and the role of Xydhias
Xydhias had been cited to the court; but the Chancellor (with Thorpe LJ sitting, as it were (judgment was reserved), alongside him) concluded that although 'the jurisdiction of [the court] cannot be ousted by the agreement of the spouses ... equally such an agreement is not devoid of any legal effect' (para [31]). Thorpe LJ does not return to the controversy raised by his dictum (referred to by Ward LJ above) in Haines v Hill. (Whether it is of relevance that His Lordship professed himself in 'full agreement' only with the judgment of the Chancellor, which he had read in draft, but not that of Rix LJ, is not known).
The Chancellor had already expressed his judgment in terms of the ability of a spouse to apply for a property adjustment order as having value and that therefore it constitutes consideration (paras [29]-[30]). Rix LJ emphatically returns to the question of consideration, with a brief reference to Xyhdias. He sets out his conclusion that the appeal should be allowed in overtly contractual terms. Just as a claim in contract or tort may be difficult 'to measure in financial terms', the compromise or release of such a claim is plainly consideration in money's worth, and measurable as such'. It can 'be assessed in monetary value, even if such compromise is itself subject to the supervision and ultimately the imprimatur or not of the court' (para [77]).
The concept of consideration must be seen in the light of Pope and Abbott; and accordingly 'the compromise or release of, or forbearance to press, a valid claim [eg under Matrimonial Causes Act 1973, s 24] can provide good consideration' (para [79]); 'and it is that right which is compromised and ultimately released in return for the property adjustment order of the court' (para [80]). The judge finds 'nothing ... contrary' to this analysis in Xydhias; but asserts the 'importance of the parties' agreement, subject to the court, as restated in Soulsbury' (para [81]).
The Chancellor did not consider it necessary to resolve 'the legal effect of an outofcourt compromise' since, he said (without explaining further), it was not a transaction for the purposes of s 339. What the court must do is to look at the economic realities 'by reference to the value of the money or property ordered to be paid or transferred ... to the applicant' to determine the position under s 339(3) (para [35]). In Haines v Hill W did give consideration, so s 339(3)(a) could not apply; and the value of that consideration was not less, 'whether significantly or at all' than the consideration provided by the bankrupt, so nor did s 339(3)(c) apply (para [40]).
Are Family Agreements Enforceable?
The law, it is therefore submitted, cannot have intended that a married person should be in a worse position than any other individual who makes a contract merely because, in the case of a married person, they have the additional layer of security in terms of enforcement but only where there is a court order. That is not the conclusion anticipated by Lord Diplock in de Lasala. Similarly, it seems unlikely that the law would have placed the spouse of a bankrupt who compromises ancillary relief proceedings (see consideration of Pope) or whose spouse dies before court order (Amey v Amey [1992] 2 FLR 89) in a better position than the spouse in a solvent marriage or one in a marriage that is not terminated by death. There is no discernable logic in such a proposition.
In passing, it may be noted that Matrimonial Causes Act 1973, s 34 provides that maintenance agreements, unless 'unenforceable for any other reason [shall] ... be binding on the parties to the agreement' (s 34(1)(b)). A maintenance agreement is 'any agreement in writing ... containing financial arrangements' (s 34(2)). The court can make an order that 'alters' the agreement (s 35(2)), thereby first having impliedly to find the agreement binding; and if it is binding, why would it not then be enforceable? The argument comes in a full circle.
It is not easily conceivable that the law would intend that a family case resolved by agreement between unmarried parents would give the unmarried parent an enforceable contract where a married parent would have no such protection in contract law (see, for example, Morgan v Hill [2006] EWCA Civ 1602, [2007] 1 FLR 1480). A childless couple can certainly set up an enforceable agreement. If they have children, an agreement as to periodical payments is permitted (Child Support Act 1991, s 9(2)) and such agreement will only be void if it seeks to exclude operation of the Child Support Act 1991 (s 9(4)); and capital agreements can be made and varied by court order (Children Act 1989, s 15 and Sch 1, para 10).
Finally, it will be recalled that substantial parts of ancillary relief orders are not, in law, part of the order (for example agreements or 'undertakings' to repay a mortgage or set up a life insurance policy): they are set out in a preamble to the order because the court has no power under Matrimonial Causes Act 1973 to make such 'orders' (Dinch v Dinch [1987] 2 FLR 162); and they are not therefore enforceable under the matrimonial jurisdiction. It would be truly surprising if these agreements, where part of the settlement of an ancillary relief case, could be enforced but the balance of the agreement (because covered by Matrimonial Causes Act 1973, ss 21-24D) could not be in the absence of a court order.
'The agreement of the parties': de Lasala
The conclusion can be deduced from Lord Diplock's words in de Lasala (as explained by Haines v Hill and Soulsbury, whether obiter or not) that arrangements agreed between spouses 'once they have been made the subject of the court order no longer depend upon the agreement of the parties as the source from which their legal effect is derived. Their legal effect is derived from the court order'. This does not deny legal relations to spouses who have reached agreement. It merely gives an additional protection where there is a court order. As Ward LJ puts it in Soulsbury (at para [45]): 'even an agreement subject to the approval of the court is binding on the parties to the extent that neither can resile from it'. Nor, says the Chancellor in Haines v Hill, is 'such an agreement ... devoid of any legal effect' (at para [31]).
Article published by LexisNexis.