The Supreme Court held that a family court can hear an application to release a former wife from an undertaking, given in a clean-break consent order, to sell the former matrimonial home by a fixed date if she had not by then secured her former husband’s release from the mortgage. By a majority it decided that this was a real jurisdiction, not a merely technical one, but it did not decide whether release should be granted. That question was sent back for a hearing on the facts.
The undertaking to sell
On 28 July 2010 the husband and wife compromised their financial claims in a consent order on a clean-break basis. The wife was to remain in the jointly owned home with their daughter, then ten, and son, then eight. The home was subject to a substantial interest-only mortgage. The husband was to transfer his legal and beneficial interest to her. In return she undertook to pay the mortgage instalments, to indemnify him, and to use her best endeavours to have the lender release him from his covenants. The crucial promise, in paragraph 4.4 of the recitals, was that if he had not been released by 30 September 2012 she would market the home and sell it.
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On 18 November 2011 she applied for what she called a variation of that undertaking. She said that she had expected a sibling to guarantee the mortgage, or employment that would allow her to become sole mortgagor, but that neither had happened. She asked for sale to be postponed until 15 August 2019, their son’s eighteenth birthday, so that the children need not leave local schools. The husband asked the court to rule, as a preliminary issue, that it had no power to hear the application. By the Supreme Court hearing in 2017 the merits had never been investigated. Five of the seven years she had sought had already passed in that dispute, so she presented the remaining request as one for two further years, covering the children’s A-level courses.
The courts below
On 15 January 2014 District Judge Chesterfield, in the Watford County Court, held that there was no jurisdiction and dismissed the application. On 12 May 2014 HHJ Waller CBE dismissed her appeal. On 31 July 2015 the Court of Appeal held that a jurisdiction existed, but only a formal or technical one, with extremely limited scope for its exercise, and that on what the court had been told there was no basis for exercising it. She appealed.
Release, not variation
Lord Wilson, with whom Lady Hale, Lord Kerr and Lord Carnwath agreed, first corrected the form of the application. An undertaking is a solemn promise which a litigant volunteers. The court cannot impose a change to it. A person who wishes to be free of it must apply for release, often offering a fresh undertaking in different terms. The court may accept that further promise, or grant release only if a different promise is given. The result may look like a variation, but the power is only to grant or refuse release. As Morton LJ had said in Cutler v Wandsworth Stadium Ltd, an application to vary an undertaking is wrong in form.
Why the power existed
The civil courts have long had power to release a litigant from an undertaking when justice requires it. A significant change of circumstances will usually be needed to persuade the court to exercise that power.
The Matrimonial Causes Act 1973 led to the same conclusion. Section 24A allows the court, when making a property adjustment order, to order a sale and to postpone its effect until a specified event. Section 31(2)(f) allows such an order for sale to be varied. Section 31(7) requires regard to all the circumstances, with first consideration given to the welfare of any minor child of the family. A change of circumstances is not a statutory condition, but Lord Wilson thought grounds for variation hard to conceive without a significant change.
The district judge and circuit judge had thought paragraph 4.4 could have been made as a conditional order for sale. The Court of Appeal disagreed, because the linked promises to pay the mortgage could not have been orders. Counsel for the husband accepted that this reasoning could not be defended. An inability to order payment did not prevent a conditional order for sale. Where an undertaking could have been an order, the power to release the giver should match the power to vary the order. In L v L, Munby J had held that a right to seek variation was not lost because a periodical-payments obligation had been expressed as an undertaking rather than as an order. Equivalence with a variable order for sale therefore confirmed jurisdiction.
The objection based on Omielan
In Omielan v Omielan, a wife sought to postpone a sale after the agreed trigger had occurred. Lord Wilson accepted that postponement had rightly been refused there. What he rejected was the suggestion that a court lacked power even to consider the request.
The majority rejected a test based on territories. Parliament had conferred a power to vary an order for sale, and a court could not declare part of it not to exist. The terms of a financial order are usually linked, and a section 24A order can be made only alongside a property adjustment or lump sum. A rough distinction between a minor change and a major one was not a proper test of whether the power existed.
What the remitted hearing had to examine
The husband had no share in the sale proceeds. His concern was that the lender could still call on him to pay and that the outstanding mortgage reduced his ability to borrow. The practical impact had never been investigated.
At the hearing, the court would give first consideration to the welfare of the children while they were minors. It would also consider changes since the undertaking and any prejudice to the husband. If he could show financial harm, the court could consider making provision for him from the eventual proceeds as a condition of release.
The dissent
Lord Hughes agreed that the undertaking could have been a section 24A order, and that the dispute concerned how the power should be exercised. He considered the majority’s approach too open. The 1973 Act favours finality in capital provision: periodical payments can be varied, but property adjustment orders cannot, and lump sums generally cannot unless payable by instalments. In Minton v Minton the clean break was treated as a central object of the modern law. Section 24A, introduced after a Law Commission recommendation, is an aid to carrying out a capital order, not a second opportunity to divide capital.
Lord Hughes would have asked whether a proposed change helped to carry the original order into effect or altered the substance of the parties’ capital settlement. In his view, the requested delay removed the certainty the husband had bargained for. He would have dismissed the appeal.
Verdict: The wife’s appeal succeeded by four votes to one. HHJ Waller was to hear her application for release from the undertaking. The Supreme Court did not extend the deadline, release the husband from the mortgage or decide the terms of any postponement.
Source: Birch v Birch [2017] UKSC 53
