Interpretation of a financial order
A financial remedies order should, of course, finalise financial/property proceedings between a husband and a wife. Once the order has been made, each party should know where they stand. However, there remains the issue of the interpretation of the order, and this could potentially substantially alter the position, with the result that the parties, or at least one of them, do not stand where they expected to be.
All of this was demonstrated in the recent Chancery case Derhalli v Derhalli.
Notice to vacate
The case concerned a consent order made in September 2016. The order provided for the immediate sale of the former matrimonial home. Until the sale, the wife continued to live in the property, with the two (grown-up) daughters of the marriage. Unexpectedly, the home did not sell for a considerable period of time. About six months after the consent order was made, the husband served on the wife a notice to vacate the home within twenty-eight days or, alternatively, to pay a market rent for the home assessed at £5,000 per week. The wife did not vacate the property and did not pay rent. The husband, therefore, issued proceedings in December 2017, claiming possession and damages for use and occupation at that rate.
The home was eventually sold in March 2019.
As indicated, the case turned on the interpretation of the consent order. At first instance, the judge found as follows:
“Upon its true construction, the meaning and effect of the Consent Order is that on and from the date thereof the [wife] occupied [the property] as a gratuitous licensee terminable on reasonable notice where-after she would be a trespasser liable to pay damages for use and occupation thereof until delivering vacant possession thereof”
In other words, the wife had to pay to the husband damages for the use and occupation of the property from (I assume) the date of the husband’s notice, until the date of the sale. The wife appealed.
Interpretation of financial order
The appeal was heard by Mr Justice Fancourt. He reviewed the relevant clauses of the consent order and found that:
“It is clear, in the light of those provisions, that the home was to be sold as soon as possible and that the [wife] would have to move out of the home on completion of the sale, but that in the meantime she would pay all the outgoings for the property. Pursuant to the consent order [and a prior agreement] £600,000 had been paid to the wife in June 2016, £5.8 million was paid after the decree absolute on 11 October 2016, and those monies were taken or remained offshore. A further £2.25 million was to be paid twenty-five days after completion of the sale of the home and half the net proceeds of sale were to be paid to the wife within fourteen days of the sale.”
OK, so what was the position of the wife pending the sale? Mr Justice Fancourt disagreed with the first instance judge. He made a number of findings, including:
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That “the idea that after two years of separate living the [wife] would be obliged to move out with the daughters of the marriage before a sale shortly took place so that the [husband] could move in or rent the house, seems a very peculiar idea indeed.”
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That “the terms of the order, considered as a whole, do, in my judgment, strongly indicate that it was understood that the [wife] could remain with her daughters until the home was sold.”
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That “the judge was… wrong to conclude that the [wife] was a gratuitous licensee before the consent order was made. Before and after it, until the decree absolute, the [wife] had statutory “home rights” to remain in occupation.”
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That “the overriding factors, in my judgment, are the provision for the immediate sale and the sharing out of the proceeds of sale and the fact that the [wife] was, and had been, living in the house with her daughters, and the [husband] had been living elsewhere. The [wife’s] liability for the outgoings reflected an understanding that she was to continue to live there until the sale took place. The obvious answer to the question, when would the [wife’s] rights to occupy the house cease, is when it is sold and when she is obliged to move out”.
In short, the wife was not a ‘gratuitous licensee’, and accordingly, the appeal was allowed.
This must be the correct decision. The circumstances of one party remaining in the former matrimonial home until it is sold are very common, and many financial remedy orders contain similar provisions. To interpret them as meaning that the occupying spouse is liable to pay rent to the other spouse in addition to paying the outgoings on the property would, in the absence of a specific provision to that effect, be quite unfair to the occupying spouse.
You can read the full judgment here.
Get in touch
If you need advice regarding the interpretation of a financial order, you can make a confidential enquiry to our Client Care Team who will put you in touch with one of our specialist divorce lawyers here.
The judgment was right; the order was wrong. The house often does not sell as quickly as the party out of occupation hopes and the party in occupation claims to hope; the latter has no real incentive to cooperate by making it available to viewers and presenting it in the best light when they show up, being ready to compromise on the price, and making herself (usually herself) available to sign the contract and the transfer.
There is a solution; I saw it when a friend of mine sent through the divorce mill. The odd provided that if contracts were not exchanged by [date] she was to give up possession and he was to have conduct of the sale, by private treaty or auction as he saw fit.
The house was sold successfully – and he believed that it was only that clause that induced her to work with them for a sale.
A wife-in-possession who is committed in good faith to sale will agree to that, if [date] is reasonably far way; if she won’t agree to it she is not committed in good faith.