Variation of lump sum payments

Can Lump Sum Payments Be Varied After Divorce?

Lump sum orders are often used in divorce settlements to achieve a clean financial break. Section 23 of the Matrimonial Causes Act 1973 provides that a court may, on a financial remedy application, make a lump sum order, which may take the following forms:

• A single lump sum
• A single lump sum payable by instalments
• A series of lump sum payments

However, life is unpredictable and in some cases, the original terms of a lump sum payment may no longer be fair or feasible.

Under section 31(2)(d) of the Matrimonial Causes Act 1973, a lump sum payable by instalments can be varied, both in relation to the amount payable and the timing of the payments. However, the power to vary the amount of the lump sum should be used sparingly, where the parties’ circumstances have changed very significantly and/or it would be unjust or impracticable to hold the paying party to the original sum (Westbury v Sampson [2002] 1 FLR 166).

But whilst an order for a lump sum by instalments can be varied, an order for a single lump sum or a series of lump sum payments cannot, except in limited circumstances related to timing. The court cannot extend the deadline for payment significantly, but as per Birch v Birch [2017] UKSC 5, the court has inherent jurisdiction to provide “a modest extension”. For example, in Masefield v Alexander (lump sum: extension of time) [1995] 1 FLR 100, a five-week extension was provided.

At Vardags, we have extensive experience advising clients on applying for or resisting variations to financial orders, including complex lump sum arrangements.

Hamilton v Hamilton

The issue of the distinction between an order for a series of lump sum payments, and an order for a lump sum payable by instalments, was addressed in Hamilton v Hamilton [2013] EWCA Civ 13.

• The wife had been ordered to pay a number of lump sums to the husband but had been unable to pay the full amount due to a serious decline in her business.
• She sought a variation of the consent order, on the basis that it was an order for a lump sum payable by instalments, which the husband disputed.
• At first instance, it was held that the original order provided for payment of a lump sum by instalments and was therefore variable. The wife was ordered to pay the remaining instalments with interest but was afforded a significant extension.
• However, the Court of Appeal held that the trial judge had been wrong to determine that any order for the payment of lump sums over time constitutes an order for a lump sum by instalments but upheld the order for variation on the basis that the trial judge was entitled, in this particular case, to find that the parties had agreed a lump sum payable by instalments, notwithstanding the wording of the order.

Beyond the specific facts of the case, the Court of Appeal provided helpful clarification as to the court’s approach when determining which order had been made. It highlighted that the court can only make capital orders once and so its power to order “lump sum or sums” enables it to provide for multiple lump sum payments in one order. This is also beneficial for parties, as staggered payment or payment by instalment is often more convenient. It upheld that the two types of order (a series of lump sums and a lump sum payable by instalments) are distinct, and both are available to parties. Where there is a dispute as to which order has been made, the court will look to the wording of the order, as well as the relevant context behind it, to determine what had been agreed.

Therefore, it is crucial that such orders are carefully drafted, and it may be useful for parties to set out whether variation has been agreed to be possible or not in a recital to the order to prevent similar disputes.

BT v CU

This issue was revisited more recently in BT v CU [2021], where Mostyn J concluded that:

“If the award is a pay-out under the sharing principle, but spread over time to soften the blow to the payer, then it will surely almost always be a lump sum by instalments, regardless of how it is dressed up. If, however, there are different payments on different dates for different purposes, as described by Sir George Baker P in Coleman ([1973] Fam 10), then that arrangement will be a series of lump sums.”

If your circumstances have changed significantly and you believe the lump sum you have been ordered to pay should be varied, contact Vardags today for a free initial consultation with one of our expert divorce solicitors.  

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