General principles—lump sum orders

The following Family practice note provides comprehensive and up to date legal information covering:

  • General principles—lump sum orders
  • Court’s powers
  • Remarriage
  • Delay
  • Interim lump sum orders
  • Lump sum orders in favour of a child
  • Statutory charge
  • Variation

General principles—lump sum orders

This Practice Note sets out the general principles to be applied by the court when considering whether to make a lump sum order within financial proceedings, including as to the impact of remarriage, any delay in making an application and variation. It also provides guidance on interim lump sum orders and lump sum orders in favour of children of the marriage or civil partnership.

Under section 23(1) of the Matrimonial Causes Act 1973 (MCA 1973) and Schedule 5 Part 1 to the Civil Partnership Act 2004 (CPA 2004), the court may make an order for such lump sum or sums as may be specified on the granting of a decree/order of divorce/dissolution, a decree/order of nullity or a decree of judicial separation or civil partnership separation order or at any time thereafter. The orders will not take effect until decree absolute/a final decree/order has been granted.

Only a single lump sum order may be made, although that order, where appropriate, may include provision for the payment of more than one lump sum, for example where one sum is to be paid immediately and a further sum to be paid upon the happening of a future event, or an immediate sum to be followed by a series of lump sum payments. In Hutchings-Whelan v Hutchings, McFarlane LJ (as he then was) stated in relation

to lump sum orders that '…it is important not to lose sight of the overall task of the judge which is to fix upon one single lump sum as being the fair and just outcome of the entirety of the proceedings’. There is arguably more flexibility as to a lump sum order in favour of a child, see: Lump sum orders in favour of a child.

Court’s powers

The court has the power to make the following lump sum orders:

  1. an order that either party to the marriage or civil partnership shall pay to the other such lump sum or sums as may be specified

  2. an order that a party to the marriage or civil partnership shall pay to such person as may be specified in the order for the benefit of a child of the family, or to such a child, such lump sum as may be specified

When preparing a financial order, care must be taken when drafting the time for payment of a lump sum, given that the order will only take effect from the granting of the final divorce or civil partnership decree/order. If no final decree/order has been granted, the lump sum should be stated to be paid within a specified period of days after pronouncement after the final decree/order. Where the final decree/order has been granted, the time for payment should run from the date of the order itself. See also Practice Note: Drafting the terms of a financial consent order and Precedent: Standard order 2.1—financial remedy order—omnibus.

Consideration should be given to the ability of the payer to raise the lump sum within the time specified in the order. The Court of Appeal held in Milton v Milton that difficulties in the mortgage market were insufficient justification for keeping a husband out of his entitlement for a long period by allowing a wife three years to raise the money payable under the order. The time for payment was reduced to one year, but if unforeseen future circumstances arose it would be possible for the wife to apply to the court for an extension of time. See also Hamilton v Hamilton as to the differences between a series of lump sums and a lump sum order payable by instalments and Practice Note: Lump sum orders by instalments.

An application for a lump sum may be adjourned where there is a real possibility of capital from a specific source becoming available in the near future and an adjournment is necessary to ensure that justice is done. Note however that in AC v DC (No 2), that approach was considered unattractive by Sir Hugh Bennett, sitting as a High Court judge, in the circumstances of that case (which involved the sale of a company), as it would introduce uncertainty. More exceptionally, the circumstances of the case may dictate that all capital claims are adjourned where it is foreseeable that at some stage in the future sufficient capital sums will be accumulated (see for example Quan v Bray). The adjournment of claims may be time-limited, as in AW v AH, where there was at least the possibility that the husband would ‘restore a measure of financial equilibrium in the future’, and the wife’s claims were adjourned with a cut-off point of seven years (see paras [123]–[124]).

Remarriage

The court cannot make a lump sum order in favour of a party who has remarried or formed a subsequent civil partnership, unless their application for a financial order was made prior to their remarriage or subsequent civil partnership. A claim for a lump sum order in the prayer of a petition may be a sufficient claim. See also Practice Note: Impact of remarriage, subsequent civil partnership, or cohabitation.

If acting for the respondent and there is any prospect of them remarrying or forming a subsequent civil partnership, it is important they are made aware that they must issue financial order proceedings before then. The usual practice is to issue an application in Form A. The pre-application mediation requirements will apply. See Practice Notes: Non-court dispute resolution—mediation information and assessment meetings (MIAMs) and Issuing financial proceedings in Form A (standard procedure).

Delay

If no previous orders for a lump sum or a property adjustment order have been made, there is no period of limitation within which the lump sum application must be pursued.

In Twiname v Twiname, it was stated that there are many obstacles in the path of a party who seeks a lump sum order years after their initial application was made, but limitation is not one of them.

In Hill v Hill, the wife was allowed to pursue a claim for a lump sum order 25 years after her divorce. However, the circumstances of this case were unusual in that the parties had resumed cohabitation during that 25-year period.

The leading case on delay is the Supreme Court's decision in Wyatt v Vince, where a wife’s appeal against an order striking out her application for a financial remedy under the provisions of FPR 2010, SI 2010/2955, 4.4 was allowed. The wife made her application for a financial remedy 18 years after the divorce following a short marriage. There was one child of the marriage and another child of the family. At the time of the marriage the parties had no financial assets. The husband subsequently established an extremely successful business career, owning a company worth at least £57m. The wife was in poor health and lived on a low income. For further details of the Supreme Court's decision, see Practice Note: Striking out a statement of case—Wyatt v Vince.

Following the Supreme Court's decision, the wife's application was listed for a financial dispute resolution appointment. A compromise agreement was subsequently reached and Cobb J approved the terms of a settlement that provided for the husband to pay the wife a lump sum of £300,000, in final satisfaction of her claims for all forms of financial relief. Additionally the wife retained the husband's payment on account of £200,000 towards her costs of the appeal to the Supreme Court, in addition to the award of £125,000 towards her costs made in December 2012. Cobb J confirmed that the sums were within the bracket conceived by Lord Wilson as ‘comparatively modest success’, and that they represented the amount that the parties had agreed was an appropriate award to the wife in the circumstances of the case. In relation to quantum the judgment also records that from the husband’s perspective, far from being an ‘appropriate award’, the payment represented the most cost efficient way of putting an end to the litigation. Cobb J specifically prohibited the publication of details of the wife’s outstanding indebtedness to her lawyers (despite the husband’s application that this information be disclosed). Consequently, it is not known how much the wife actually received towards the purchase of her mortgage-free property. See also News Analysis: Financial claims years after a divorce (Wyatt v Vince).

Interim lump sum orders

Pending the final determination of an application for a financial order, the court may make an interim order on such terms as it considers just. However, the Court of Appeal in Wicks v Wicks stated that it was unlikely that this conferred a power to make an interim lump sum order.

Lump sum orders in favour of a child

The court will only rarely make a lump sum order for the benefit of a child.

Any lump sum order made in favour of a child must be made before the child attains the age of 18, unless the child is or will be receiving instruction at an educational establishment, or undergoing training for a trade, profession or vocation (whether or not they are in employment), or there are special circumstances that justify the making of an order.

In Chamberlain v Chamberlain, the court stated that the purpose of a lump sum order made in favour of a child is to provide for the child during its minority when, had it not been for the fact that its parents had separated, it would have looked for financial support from both of them.

When considering whether such an order is appropriate, the court must consider the MCA 1973, s 25/CPA 2004, Sch 5, Pt 5, para 22 criteria. See Practice Note: Factors considered by the court on financial provision.

If it is considered appropriate to make a lump sum order in favour of a child, consideration must be given as to how the lump sum is

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