Why it is so important to legalise an agreement

As we will see in a moment, those involved in disputes over financial arrangements on separation/divorce are constantly being implored by judges, lawyers and others to resolve the dispute by agreement. But simply reaching an agreement isn’t the end of the matter. The agreement needs to be ‘legalised’.

What do we mean by ‘legalised’? Well essentially this means ensuring that the agreement is legally final and binding. How this is done depends upon the circumstances. If there are divorce proceedings then it will entail obtaining a consent court order, setting out the agreement. If there are no divorce proceedings then a written separation deed can be drawn up, setting out the agreement.

Consent orders and separation deeds are complex legal documents that should really be drawn up by expert family lawyers, with a lawyer for one party drafting the document, and a lawyer for the other approving it. This process does not have to involve great expense to the parties.

The importance of legalising agreements was demonstrated by a Family Court case published last week.

Catastrophic expenditure

The case concerned a couple who separated in 2010. They jointly owned various business and property assets, and in 2012 they entered into an agreement as to how those assets should be divided between them.

Over the following years the agreement was largely implemented, but it was never legalised. In fact, divorce proceedings were not commenced until 2019, by which time the husband’s business assets had substantially increased in value.

The wife issued a financial remedies application within the divorce proceedings, seeking a substantial further payment from the husband. The husband argued that the agreement had been final, and therefore offered the wife nothing.

The case eventually went to court last November, and involved combined legal fees in excess of half a million pounds. Giving judgment, Mr Justice Holman explained that he had previously implored both parties to settle the case, to avoid not just substantial further costs but also the destructive effect of a contested hearing. The parties failed to heed the warning.

In the end Mr Justice Holman did award the wife a further lump sum, but nothing like what she had been seeking.

In the course of his judgment he pointed out that “an expenditure of perhaps a few thousands of pounds of legal costs in 2012 [to legalise the agreement] might well have saved and avoided the catastrophic expenditure of over £500,000 now.”

The lesson to be learned from this case is simple and clear: yes, do everything you reasonably can to settle your financial remedies claim by agreement, but if you do settle ensure that the agreement is legally finalised. Failure to legalise an agreement can cause huge expense and stress further down the line.

Further information

As explained above, financial agreements can be finalised by obtaining a consent order, if there are divorce proceedings. 

Sometimes, as in the above case, parties separate but don’t want to enter into divorce proceedings, at least not yet. Here, a separation deed can be drawn up, setting out the terms of any agreement. The deed is not quite as final as a court order, but if its terms are fair and if both parties take legal advice before entering into it, then the court in any future divorce proceedings is highly likely to adhere to it.

If you would like advice or help regarding either a consent order or a separation deed, we can provide it. To find out more, and to get started with one of our specialist lawyers, click here.