Done deal? What makes a financial settlement on divorce binding?

A leading case that addresses the status of agreements between separating spouses or civil partners is the case of Xydhias v Xydhias:  

In this case the principal terms of the financial settlement were agreed while the outstanding points yet to be negotiated were minor. However, the husband in the case then decided to resile from the agreement and to vary the terms of the lump sum payments. He argued that unless all the material terms are agreed – or unless the contract has an agreed mechanism for ascertaining what is not agreed – there is no contract. Here, the court did not agree with the husband’s position and upheld the principal term of the initial agreement – finding that the parties had clearly wished to conclude an agreement before the court was called upon to decide the issue. Since then, Xydhias agreements have been cited in various case law.  

So, what is a ‘Xydhias’ agreement? 

• An agreement that arises when the general terms of settlement have been reached in proceedings for a financial remedy. 
• Even if the specific terms of a draft court order have not yet been agreed and one party tries to back out of the agreement, a court may be prepared to make an order in the terms reached, or decide on the unresolved implementation issues or other minor issues. 

This position was then reiterated in the case of Rothwell v Rothwell where the Judge confirmed the principle that: 

“as a matter of general law, there is no doubt that once the parties have arrived at a compromise of litigation, the court will uphold and enforce that compromise, absent some vitiating element”.  

So, practically speaking, what can you do to ensure your agreement is binding? Make sure you: 

1. reach an agreement on all of the key terms – it doesn’t matter if some minor details remain, but you must have finalised all of the main provisions; 
2. have evidence to show what the terms actually are – if in doubt, put it in writing and both sign it; 
3. have evidence to show that you and your spouse agreed; 
4. have evidence to show that you relied on the agreed terms i.e. did you take any steps because you thought you had an agreement – such as preparing the Consent Order or starting to implement some of the terms (though see the note below about the timing of implementing the agreement), and  
5. avoid delays in applying for your Consent Order to be sealed (see below).  

In terms of the process, once an agreement is reached on the financial settlement, a document called a Consent Order is sent to the court along with a brief summary of your respective finances (both capital and income). The Consent Order is a written record of the full agreement, with all of the details that you and your spouse have agreed. Once you have this approved by the court and a final divorce order is made, your finances are resolved and your claims against each other are closed. 

However, the court can raise queries when a draft Consent Order is submitted and could request parts of the drafted order to be amended or reviewed. The court may also, in certain circumstances, refuse to approve a Consent Order. The reason for this is that the court must consider whether the order is fair in all the circumstances and particularly that it meets financial needs.  

It is possible to implement the terms of the agreement in advance of the Consent Order being approved. However, as the court has discretion to approve the order (or not!), then the safest position is that you should not start implementing (i.e. complying with the terms of the Consent Order) until:  

1. a financial settlement has been agreed;  
2. the terms have been incorporated into an agreed and signed Consent Order;   
3. the Consent Order has been lodged at court, and 
4. the Court has considered and approved the order.  

Therefore, the most important point to remember is to ensure you have a ‘Xydhias’ agreement at the very least if you are going to start implementing the agreement before your order is sealed and don’t do anything that cannot be changed or undone (in case the court seeks to amend some of the terms agreed). 

There may be a number of reasons why there is a delay between you and your spouse reaching agreement and this being approved in a Consent Order. This might be because the Consent Order can only be submitted to the Court for approval once the conditional order of divorce has been pronounced. It might be because you need some more information to confirm some of the details, or simply because it can take time to agree and finalise a Consent Order. Whatever the reason, it is important that you ensure that you have a clear agreement on the main terms, following the tips above, to avoid a further dispute arising.