ABC v XYZ (Financial Remedies: Release from Undertakings and Variation of Periodical Payments Order) [2025] EWFC 370 (B)

Judgment date: 6 November 2024

https://caselaw.nationalarchives.gov.uk/ewfc/b/2025/370

DJ Maddison. Application by H to be released from undertakings and vary a nominal maintenance order following a significant change of circumstances. Reassessment of needs resulted in substantive joint lives provision.

Background

The parties divorced in 2020 after a 24-year marriage, concluding financial remedy proceedings by consent at an FDR; [3]. Under the order, W retained a shareholding in F Limited, supported by undertakings requiring H to secure discretionary dividends of £50,000 each year, indexed to RPI, with any shortfall to be covered through a nominal periodical payments mechanism; [4]. W also remained in the former matrimonial home and received a pension share; [4].

The application and issues

H sought release from his undertakings and variation of the nominal periodical payments order on the basis that a significant decline in F Limited had reduced his income; [5]. W opposed the application. She accepted that direct maintenance would lessen her tax burden but maintained that her needs had not diminished; [6], [38].

The court was required to determine whether H had demonstrated a sufficient change in circumstances to justify release, and whether the nominal periodical payments order should be varied to secure W’s ongoing needs.

Law

Birch v Birch [2017] UKSC 53 establishes that release from undertakings requires a significant change in circumstances, assessed under s 31(7) of the Matrimonial Causes Act 1973 by reference to the s 25(2) factors; [11]–[15]. A v A [2018] EWHC 340 (Fam) further confirms that undertakings cannot be varied, although a party may be released where a more appropriate undertaking is offered; [13].

As to variation, WK v GC [2023] EWFC 151 distils the governing principles, including the payee’s burden to demonstrate continuing need and the central requirement of fairness; [16].

Evidence and submissions

Applicant (H)

H gave evidence that F Limited’s performance had declined, reducing his remuneration and making the existing dividend mechanism unsustainable; [53]–[54]. He submitted that significant changes since 2020, including reduced income, increased borrowing, the children reaching adulthood, his proximity to retirement, and poorer company performance justified release from the undertakings; [44]. He argued that W’s needs must be assessed in light of what he could realistically afford; [47].

Respondent (W)

W relied on psychiatric evidence confirming a chronic mental health condition eliminating her earning capacity; [56]–[57]. She submitted that the structure of the 2020 order reflected an arrangement designed by H and should not now be revisited, arguing that a single poor year for F Limited did not justify change; [38]–[41].

Discussion

The judge found a significant change in circumstances since 2020, warranting a fresh s 25(2) MCA 1973 analysis; [51]. Under the RPI-linked mechanism of the 2020 order, W was receiving £67,465.80 per year (£5,622.15 per month).

On reassessment, W’s reasonable needs were around £3,500 per month, leaving a shortfall of £2,900 after accounting for PIP; [59]. The judge rejected submissions that W should amortise capital or draw down pension assets, noting her vulnerability, limited resources, and proximity to retirement; [58]. He also rejected the suggestion that she should downsize, holding that remaining in the former matrimonial home was integral to the 2020 order and should not be disturbed; [60]–[61].

H had not shown that £2,900 per month was unaffordable, given his income, earning potential, and the likelihood that F Limited’s performance would fluctuate rather than remain impaired; [24], [53]–[54], [70]. The order was therefore set at £2,900 net, linked to CPI rather than RPI, and expressed on a joint lives basis to reflect W’s lack of earning capacity and need for security; [51(c)–(e)].

Held

H was released from all undertakings; [69]–[70]. The nominal order was varied to substantive periodical payments on a joint lives basis. The judge expressed concern at disproportionate legal costs incurred in a case capable of resolution without trial; [71].