DN v HN

An agreement reached during financial remedy negotiations is not enforceable as an ordinary contract where it forms part of, or is sufficiently linked to, the compromise of the financial remedy claims. The position differs where the parties have made a separate and distinct agreement before any compromise is reached, and enforcement would not undermine the principles governing financial remedy settlements. In an application for a mandatory interlocutory injunction, the court considers the claimant’s prospects of establishing the right at trial and which course carries the least risk of injustice if the court is wrong. A high degree of assurance is relevant, but an injunction may still be granted where the balance of likely injustice supports it.

The wife and husband were engaged in financial remedy proceedings. Before their financial claims were compromised, they agreed that the husband would provide funds enabling the wife to purchase an alternative family home. Contracts were exchanged, but the husband withheld the completion funds pending agreement of the terms of the financial remedy order, particularly security for a later lump sum.

The wife issued a Civil Procedure Rules 1998 Part 7 claim alleging contract and trust-based rights, and sought a mandatory interlocutory injunction requiring payment of £8.49 million plus interest and fees. The central issue was whether the property-funding agreement was an enforceable agreement distinct from the later financial remedy compromise.

1. Nature of the agreement. The court treated the primary issue as whether the February agreement was an element of the financial remedy compromise or a distinct agreement. Under Edgar v Edgar [1980] 1 WLR 1410 and Xydhias v Xydhias [1999] 1 FLR 683, ordinary contractual principles do not apply to an agreement resolving or compromising financial remedy claims. Such an agreement is not enforceable as a contract.
2. The February agreement was distinct. It was reached before any compromise of the wife’s financial remedy claims and contained separate terms for funding the exchange and completion of the property purchase. The later agreement providing for the £33 million lump sum, including £10 million referable to the property, did not alter that conclusion. The February agreement was not sufficiently linked to the compromise process to make contractual enforcement inappropriate.
3. The wife therefore had a high degree of assurance of establishing at trial her right to enforce the February agreement. The court also considered the least risk of injustice if its assessment proved wrong. Refusing relief risked rescission of the purchase contract, forfeiture of the £1.6 million deposit, loss of the mortgage offer, substantial wasted expenditure and a possible capital gains tax liability. Payment would leave an asset whose value would be taken into account in the financial settlement and would cause no material injustice to the husband.
4. A mandatory interlocutory injunction was accordingly justified. The husband was ordered to pay £8.49 million plus interest and fees by midday on 19 August 2014.