Birch v Birch

The Supreme Court considered whether the court has jurisdiction to release a party from an undertaking given in the context of a matrimonial financial consent order and how that jurisdiction relates to the statutory power to make or vary an order for sale under section 24A and section 31 of the Matrimonial Causes Act 1973. The court reaffirmed that an undertaking is a voluntary promise which cannot be 'varied' but from which the court can grant release, and that the court has a general discretionary jurisdiction to release a party from an undertaking in the interests of justice. The majority held that the wife’s undertaking could have been framed as an order for sale under section 24A and that the jurisdiction to release such an undertaking exists; the exercise of that jurisdiction must, however, be informed by the matters identified in section 31(7), notably the welfare of the children and any change of circumstances and prejudice to the other party. The Supreme Court allowed the wife’s appeal and remitted the matter for inquiry and determination on the merits by HHJ Waller.

Background and facts:

• By consent order dated 28 July 2010 the parties settled their financial claims on a clean-break basis. The matrimonial home, subject to an interest-only mortgage, was transferred to the wife and the husband was to be released from his mortgage covenants. The wife gave undertakings recorded in the recital, including that she would indemnify the husband in relation to the mortgage and, crucially, that if the husband had not been released by 30 September 2012 she would secure his release by putting the home on the market and selling it (para 4.4).
• On 18 November 2011 the wife applied (described as an application to 'vary' her undertaking) to postpone the obligation to secure the husband’s release by sale until their son’s twenty-first birthday (later clarified to 15 August 2019). She relied on the children’s schooling and inability to secure guarantees or employment enabling her to remove the husband from the mortgage.

Procedural history:

• District Judge Chesterfield (Watford County Court) concluded on 15 January 2014 that the court lacked jurisdiction to entertain the wife’s application and dismissed it.
• HHJ Waller on 12 May 2014 upheld that conclusion.
• The Court of Appeal ([2015] EWCA Civ 833) held that while some form of jurisdiction existed it was effectively formal or extremely limited and dismissed the wife’s second appeal.
• The wife appealed to the Supreme Court.

Issues framed:

• Whether the court had jurisdiction to hear an application to release the wife from her undertaking recorded in the consent order.
• How that jurisdiction related to the statutory powers in section 24A (order for sale) and section 31 (power to vary) of the Matrimonial Causes Act 1973.
• What criteria should guide the exercise of any such jurisdiction, including the relevance of change of circumstances, the welfare of the children (section 31(7)), and prejudice to the husband from continued mortgage liability.

Court’s reasoning and outcome:

• The majority (Lord Wilson, with Lady Hale, Lord Kerr and Lord Carnwath agreeing) explained that undertakings are voluntary promises which cannot be 'varied' but from which a party may seek release; the court has a discretionary jurisdiction to grant release in the interests of justice as recognised in Russell and subsequent authorities.
• The majority concluded that the wife’s undertaking could have been framed as an order for sale under section 24A and so is to be treated as equivalent for jurisdictional purposes to an order variable under section 31(2)(f); accordingly there is jurisdiction to hear her application. The court criticised the Court of Appeal’s reliance on Omielan to deny the existence of jurisdiction and held that Omielan had been wrongly characterised there.
• The majority emphasised that, although jurisdiction exists, its exercise may be limited in practice by considerations including whether there has been a significant change of circumstances, the welfare of minor children (first consideration under section 31(7)), and the extent of any prejudice to the husband from remaining liable under the mortgage covenants. Because the merits had not been heard below, the Supreme Court allowed the appeal and remitted the matter to HHJ Waller for detailed inquiry and decision on the exercise of the jurisdiction.
• Lord Hughes dissented. He agreed that jurisdiction exists but would have dismissed the appeal on substance, stressing the importance of finality and the clean-break policy of the Act and warning that too ready an ability to reopen deferred-sale or similar capital arrangements would undermine finality and deter useful deferred-sale arrangements.

Wider context:

• The court discussed the tension between the flexibility to achieve justice in matrimonial finance and the statutory and policy requirement of finality and the 'clean break'. The judgment considered at length how the principles in Thompson, Taylor, Dinch, Minton and related authorities inform the proper limits on varying orders for sale and on release from undertakings.

Appeal allowed. The majority held that the court has jurisdiction to hear an application for release from an undertaking given in the context of a matrimonial financial consent order and that the wife’s undertaking at para 4.4 could have been framed as an order for sale under section 24A of the Matrimonial Causes Act 1973 and was therefore amenable to consideration under section 31(2)(f) and (7). The case was remitted to HHJ Waller for a full inquiry into whether the jurisdiction should be exercised, having regard first to the welfare of the children, any change of circumstances, and any prejudice to the husband. Lord Hughes dissented and would have dismissed the appeal to preserve finality in capital settlements.

District Judge Chesterfield (Watford County Court) dismissed wife’s application (15 January 2014); HHJ Waller dismissed the wife’s appeal (12 May 2014); Court of Appeal dismissed the second appeal: [2015] EWCA Civ 833; Supreme Court allowed the appeal: [2017] UKSC 53 and remitted the case for rehearing on the merits by HHJ Waller.