Deal done…until it wasn’t: what to do next
What happens when a financial agreement is agreed, relied upon, and then challenged?
Associate Imogen Runacres explains what happens when a seemingly concluded financial agreement unravels, and explains how notice to show cause applications can be used to hold parties to the deals they have reached.
Couples can spend months negotiating and coming to an agreement about the division of their finances. Secure in the notion that they have come to a concluded agreement, they may take steps to start to implement that agreement by preparing drafts of the financial consent order, the D81 or pension sharing annexes. After the end of a long process, it might finally feel like there is a light at the end of the tunnel. It is therefore particularly galling when one party changes their mind and seeks to back out of the agreement. What can the other party do in this destabilising situation?
Fortunately, the family courts have powerful armoury for dealing with this scenario. If one party is resiling from an agreement, the party who wishes to rely on the agreement can issue a notice to show cause application.
Notice to show cause applications place the onus on the resiling party to explain to the court why they should not be held to the agreement reached. This is not an easy task, and they will need to show the court why they should not be held to the deal.
The reasons may include:
- fraud
- misrepresentation
- unforeseen and significant change in circumstances
- unfairness
- undue influence or pressure
- duress
- material non-disclosure
- no opportunity to take legal advice
How the courts respond
Crucially, it is not fatal if the resiling party has not taken legal advice – the applicant in the notice to show cause application simply has to show that the respondent had an opportunity to do so and chose not to.
Unless a significant ground is proven as to why a party should not be bound by the concluded agreement, the parties are likely to be held to it. This is consistent with the approach taken by the family courts in relation to ‘Xydhias’ agreements. A Xydhias agreement is when a couple have come to an agreement about their finances but the agreement has not been converted into a court order. Despite this, they may still be bound by the agreement.
In T v T [2013] EWHC B3 (Fam), Mr Justice Parker dealt with a notice to show cause application and concluded:
This was an agreement which was entered into, intended to be acted upon and acted upon [...] The parties have acted upon it, relied on it, and gained peace of mind from it […] In those circumstances the existence of the agreement must be regarded of magnetic importance.
It is important to note that notice to show cause applications can also be used if a party is seeking to resile from the terms of a pre-nuptial or post-nuptial agreement.
What is the procedure?
If the parties are not already in financial remedy proceedings, the party who wishes to uphold the agreement must file a Form A and then submit a notice to cause application using Form D11. The application should attach a copy of the agreement (e.g. a Heads of Agreement or draft financial consent order). The court will need to look at the correspondence between the parties which includes the without prejudice correspondence (which becomes ‘open’ when an offer is accepted) so this can be attached to the application as well.
The judge at the First Appointment will deal with the directions arising from the notice to show cause application. These directions would usually include the parties producing witness statements; the resiling party goes first to explain their case and then the party who wants the agreement to be upheld should then provide a statement in response.
Costs
Usually in family law cases, ‘no order as to costs’ is the governing costs principle, which means that each party pays their own legal costs. Notice to show cause applications are different as they are not no costs applications and the starting point is that costs follow the event. This means that strategic advice should be taken early on about the merits and nuances of these kind of applications.
Summary
The existence of this type of legal remedy should provide comfort to those who require finality and wish for the agreement they have reached to be upheld. Through a notice to show cause application, parties can ask the court to uphold agreements that reflect months of negotiation and mutual agreement.
About Imogen
Imogen Runacres is in the family and children team. She has considerable litigation experience, having prepared for and attended hearings in the Royal Courts of Justice and the Central Family Court.
Get in touch
If you would like to speak with a member of the team you can contact our family and children solicitors by telephone on +44 (0)20 3826 7520 or complete our enquiry form.
