Birch v Birch [2017] UKSC 53

A divorced wife sought to postpone the sale of the matrimonial home, contrary to her undertaking to sell by 2012 if her husband was not released from mortgage covenants. The Supreme Court held the court had jurisdiction to release her from the undertaking and remitted the matter for determination on the merits.

Facts

The husband and wife entered into a consent order dated 28 July 2010 compromising their financial claims on a clean break basis. The husband transferred his legal and beneficial interest in the jointly owned matrimonial home (subject to a substantial interest-only mortgage) to the wife. In return, the wife gave undertakings recited in the order: at para 4.3, to discharge mortgage instalments, indemnify the husband, and use her best endeavours to obtain his release from the mortgage covenants; and at para 4.4, that if the husband had not been released by 30 September 2012, she would secure his release by placing the home on the market and selling it.

On 18 November 2011, the wife applied to “vary” her undertaking at para 4.4, explaining that her efforts to secure her brother’s or sister’s guarantees or to obtain employment sufficient to be accepted as sole mortgagor had failed. She sought postponement of the sale obligation until 15 August 2019 (her son’s 18th birthday), citing the children’s schooling and welfare.

The husband challenged the court’s jurisdiction by way of a preliminary issue. The District Judge, HHJ Waller, and the Court of Appeal each found against the wife – the Court of Appeal holding that jurisdiction existed but was only “formal” or “technical” with no basis for exercise. The wife appealed to the Supreme Court.

Issues

The principal issue was whether the court had jurisdiction to entertain the wife’s application for release from her undertaking at para 4.4 of the consent order. Subsidiary issues concerned: (i) the proper conceptual framing of an application to alter an undertaking (release rather than variation); (ii) whether the undertaking could equivalently have been framed as an order for sale under section 24A of the Matrimonial Causes Act 1973, variable under section 31(2)(f); and (iii) the proper approach to the exercise of any such jurisdiction, particularly in light of Omielan v Omielan [1996] 2 FLR 306.

Arguments

The wife

Counsel for the wife contended that jurisdiction existed to release her from the undertaking, that the undertaking was equivalent to a section 24A order for sale, and that her application did not alter the substance of the original capital order because the husband had transferred his entire beneficial interest to her.

The husband

Counsel for the husband contended that the court lacked jurisdiction, relying on Omielan for the proposition that section 31(2)(f) did not permit revisiting the “territory” of the underlying property adjustment order. He realistically accepted that the undertaking could have been framed as an order for sale.

Judgment

The Supreme Court (Lady Hale, Lord Kerr, Lord Wilson and Lord Carnwath; Lord Hughes dissenting) allowed the appeal.

Lord Wilson’s reasoning

Lord Wilson clarified that an undertaking is a voluntary promise to the court and cannot be “varied”; the correct procedure is to apply for release, often coupled with an offer of a fresh undertaking. He cited Morton LJ in Cutler v Wandsworth Stadium Ltd [1945] 1 All ER 103:

“… the court does not vary an undertaking given by a litigant. If the litigant has given an undertaking and desires to be released from that undertaking, the application should be an application for release … Litigants are not ordered to give these undertakings; they choose to give them, and an application to have an undertaking already given varied is wholly wrong in form.”

He emphasised the distinction between the existence of jurisdiction and its exercise, noting that the lower courts had conflated the two. He cited Jenkins LJ in Russell v Russell [1956] P 283:

“… any undertaking given to the court is capable of being discharged by the court whenever it appears to the court that circumstances have arisen which make that course a proper one in the interests of justice.”

He referred to Kensington Housing Trust v Oliver (1997) 30 HLR 608, where Butler-Sloss LJ stated:

“I am in no doubt, therefore, that an undertaking wherever recorded which is accepted by the court can be discharged by the court at any stage if it is just to do so.”

Turning to the statutory analysis, Lord Wilson held that the wife’s undertaking could equally have been framed as an order for sale under section 24A(1) subject to a direction under section 24A(4), and would then have been variable under section 31(2)(f). The Court of Appeal’s contrary view (that para 4.4 could not have been so framed because linked to para 4.3) was indefensible and not defended by counsel.

Lord Wilson criticised the reasoning in Omielan, which held that the jurisdiction to vary under section 31(2)(f) was confined to the “territory” of the section 24A order and could not revisit the underlying property adjustment. He held that where Parliament has conferred jurisdiction, the court cannot say part of it does not exist, and that demarcation by “territory” is not a proper criterion for identifying the existence of jurisdiction.

Lord Wilson proposed that the matter be remitted to HHJ Waller for determination on the merits under section 31(7), with first consideration given to the welfare of the minor children but also having regard to whether the wife could establish a significant change of circumstances and whether the husband had suffered or would suffer prejudice from his continued mortgage liability.

Lord Hughes (dissenting)

Lord Hughes agreed on the nature of undertakings and the equivalence with a section 24A order, but disagreed on the principles governing exercise of the jurisdiction. He emphasised the Act’s twin aims of flexibility and finality, with capital orders generally being final (citing Minton v Minton [1979] AC 593). He argued the “acid test” was whether the application is in substance to vary or alter the final capital order or to support it by working out how it should be carried into effect. On that test, the wife’s application sought impermissibly to vary the substance of the final capital order and was bound to fail.

Implications

The decision clarifies several important matters in family financial remedy practice:

First, undertakings given to the court are not varied but discharged or released; an application framed as one to “vary” an undertaking is procedurally incorrect, though courts have routinely tolerated such loose language.

Second, where an undertaking could equivalently have been framed as a section 24A order for sale, the court has the same jurisdiction to release the undertaker as it would have under section 31(2)(f) to vary the equivalent order. This confirms L v L [2006] EWHC 956 (Fam).

Third, and most significantly, the majority disapproved the analysis in Omielan v Omielan insofar as it treated the limits on section 31(2)(f) as defining the existence of jurisdiction. The proper analysis is that the jurisdiction exists in the terms Parliament conferred it; arguments about the substance of any proposed variation go to the exercise of the jurisdiction, not its existence.

Fourth, the majority confirmed that, in the exercise of jurisdiction under section 31(7), first consideration must be given to the welfare of minor children, and the circumstances of the case include any relevant change in matters to which the court had regard when making the original order. Although a significant change of circumstances is not a statutory precondition, grounds for variation will be hard to conceive without one.

The decision is important for practitioners advising on consent orders involving deferred sale provisions or comparable undertakings. The dissent of Lord Hughes flags real concerns about the impact on finality and the utility of orders for sale – concerns which the majority addressed by emphasising that the merits of any application remain subject to careful scrutiny on remission. The case leaves the future of the Omielan territorial approach uncertain and signals that disputes about the substance of the proposed variation must be resolved as part of the discretionary exercise rather than as a jurisdictional bar.

Verdict: Appeal allowed. The Supreme Court held that the court had jurisdiction to hear the wife’s application for release from her undertaking and remitted the matter to HHJ Waller for determination of whether that jurisdiction should be exercised, in accordance with section 31(7) of the Matrimonial Causes Act 1973.

Source: Birch v Birch [2017] UKSC 53