Xydhias and Its Limits: HA v EN and THR v WAT

Every day, financial remedy practitioners aim to settle their cases without involving the court. All of us are encouraged to compromise cases without incurring the costs, stress to families and delay that a contested final hearing necessitates.

To do that we have to reach negotiated settlements. And in the financial remedy context, the case of Xydhias v Xydhias[[1]] looms large as providing the only real mechanism available to compromise financial remedy claims in advance of court determination and the making of a final financial remedy order.

There are already excellent articles on the case of Xydhias which analyse the case itself and the contractual (or not) status of such agreements.[[2]] This article aims to go further and highlight some of the inherent issues presented by the concept of Xydhias agreements, namely the residual discretion that is left to the court to approve or alter those agreements, and the practical problems that result from this.

Two recent decisions, in which the authors appeared, of HA v EN[[3]] and THR v WAT,[[4]] where compromises were reached at door of the court of a final hearing, but where there were substantially different levels of variation to the final agreement, show the extent to which the outcome of any variation to a Xydhias agreement can be determined by whether a judge has a pro-fairness or pro-finality outlook.

The fundamental differences between civil and financial remedy settlements

In a typical civil dispute, the parties are free to agree any compromise that they wish and on whatever terms. There is no need for any approval of a compromise by the court, and a settlement can be made by way of binding contract between the parties.

This is true even if court proceedings have been commenced in respect of a dispute. When there is a settlement of proceedings it will commonly be reached in the form of a Tomlin order,[[5]] where the proceedings are stayed on agreed terms attached as a confidential schedule to the order. The schedule, which contains the settlement, is a binding contract between the parties and is not approved by the court as it does not form part of the body of the order. The net result of this is that:[[6]]

‘In general once the parties have entered into an agreement the ability to set aside or vary that agreement depends on there being a remedy in relation to that contract.’

There is no ability for the court to alter the terms of the agreement embodied in the schedule, which has contractual force with its own independent legal status. A party can sue for specific performance and/or breach of contract if the terms of the schedule are not performed. What has been agreed is enforceable and what was not agreed in the schedule does not form part of the agreement, and so is not. The terms of settlement, including the precise wording, is in the hands of the parties and they must live with the consequences of their agreements.

That is not the position for agreements to compromise financial remedy proceedings. No agreement can oust the jurisdiction of the court and Xydhias itself sets out that agreements to settle financial remedy claims are not contractual in nature and so cannot be enforced as such.[[7]] Any agreement to settle financial claims between spouses is subject to the approval of the court, which may, in applying its discretion, vary both the terms of the agreement and the final order in the proceedings. This can go well beyond simply resolving ambiguities in drafting and can include substantial variations to the terms of any agreement as the court fixes any final award.[[8]]

The court is entitled to find the existence of an agreement, including a Xydhias agreement, dispositive of the final financial remedy award.[[9]] But the court does not have to make an order in the terms of the agreement, and still has to conduct the s 25 Matrimonial Causes Act 1973 (MCA 1973) exercise to ensure the agreement is fair. If the court wishes to vary the terms of the parties’ agreement, it has the power to do so.

The powers of the court to alter Xydhias agreements

The nature of Xydhias agreements therefore provides the court in financial remedy proceedings with powers in respect of settlements that civil courts do not have. These fall broadly into two categories.

First, Xydhias gives the court the power to determine there is a binding agreement as to ‘essential’ mainframe matters in an overall package of settlement where other ‘residual’ matters have not been resolved. These residual issues are then within the court’s discretion to determine.

Second, even if there is an agreement on ‘essential’ matters it is then open to the court to vary its terms when making its final order.[[10]] This is very distinct from civil proceedings where the court has no power to vary the terms of settlement. The discretion to vary the terms of the agreement is broad and can include: (1) altering the particular wording of a term of an agreement; (2) inserting what it considers to be essential terms that were omitted from the agreement; or (3) actually amending the substantive terms of the agreement itself.

The exercise of this discretion will be informed by the broad financial remedy legal principles, but there is little case law on how that discretion should be specifically exercised in the context of enforcing Xydhias agreements. There is almost no specific guidance setting out the extent to which a court should interfere to add or amend substantive terms. There is no case law that suggests that the court’s discretion is limited and cannot consider certain issues because of the existence of a Xydhias agreement, even if the agreement contains a specific agreement on those issues. The discretion is there, but it is up to the judge hearing the case to exercise that discretion and different judges can legitimately take very different approaches to changing the terms of agreements reached by parties, as was the case in the following two cases in which the authors appeared.

Pro-fairness: the decision in HA v EN

In HA v EN, the parties were negotiating to reach an agreement shortly before the start of a final hearing. On the eve of that final hearing, the parties accepted that they had reached a Xydhias agreement, which was, among other things, that a ‘family fund’ would be set up to receive: (1) the net proceeds of sale of the former matrimonial home; and (2) the realisation of other assets, including the husband’s illiquid assets.

Though the parties agreed that there was a Xydhias agreement, there remained disputes about the drafting of the order. It was agreed some points of disagreement around the interpretation of the terms of the agreement could be determined using the Xydhias jurisdiction. But the husband then sought, in advance of the hearing listed to perfect the final order, for the court to alter the substantive terms of the parties’ agreement, on grounds that legal costs he had agreed would be discharged from that family fund were of a greater sum than he had expected, and the family home may sell for a lower sum than the parties had agreed for its value.

Richard Todd KC (sitting as a deputy High Court Judge) determined that all the arguments justifying a variation of the agreement using the Xydhias jurisdiction were known of at the time of the agreement and that was not good reason to allow the husband to resile from the substantive terms agreed (at [38]). But though he held that the substantive capital portions of the agreement should not therefore be varied, he did go on to vary other substantive terms of the parties’ agreement on grounds that they were ‘maintenance agreements’ susceptible to variation under ss 34–35 MCA 1973 and there had been a change in circumstances that justified a variation (at [44]–[45]). The judge went on to vary three substantive provisions that had been agreed, effectively for child maintenance, to provide for a variation downwards by 50% in the event the home sold for a lower gross sale price.

The conclusion that there was a change of circumstances which justified a variation under ss 34–35 MCA 1973 does not sit easily with his earlier determination that these facts were ‘known to’ the husband and so did not justify a variation to the other terms of the Xydhias agreement (at [38]). If the change of circumstances was reasonably foreseeable, such that there were no grounds for variation to the capital portions of the agreement, why did those same change of circumstances amount to a valid reason for the undermining of agreed maintenance provisions?[[11]]

It seems to us that the judge in reality was assessing the fairness of the terms of the overall agreement to ensure that, notwithstanding the parties’ Xydhias agreement, the terms of the agreement were fair to both parties. The court has the power, under s 25 MCA 1973, to refuse to approve an order that it considers to be unfair and amend its terms. It can go beyond resolving remaining issues, or resolving terms of drafting, as it did here, to alter the substantive terms of an agreement without the use of ss 34–35 MCA 1973.

Pro finality: THR v WHT

The decision in THR v WAT has a very similar factual matrix, but with a very different result in respect of the enforcement of an agreement. Again, the parties had settled at the door of the court in advance of a contested final hearing. Again, they had an agreement and considered they were Xydhias bound but did not have a finalised order, and they were content to put the remaining outstanding issues between them to HHJ Hess (sitting as a deputy High Court Judge) for determination. When counsel for the wife presented the agreement orally to the court, it was made clear that there were some outstanding issues which needed to be resolved which had not yet been raised and that either they would be agreed or the court would have to decide them.

There were five outstanding issues raised by the parties, of which two: (1) interest on lump sums; and (2) security for payment, had not been expressly reserved during negotiations for determination by the judge. They were sought by the wife after the conclusion of the agreement at the stage of the agreement of the order, as set out above. The husband also tried to reduce the ‘agreed’ Xydhias lump sum he was to pay for two spurious reasons.

In respect of those issues, HHJ Hess determined that as the parties had ‘not raised at all’ in the negotiations stage those issues they should be held to the agreement, which did not feature their inclusion. This is despite the fact that Xydhias itself was a case where a binding agreement was found to have been reached even though the issue of security had not been agreed, and it was held that ‘in ancillary relief litigation a clear distinction has always been drawn between the determination of the liability and the determination of the security for the performance of the obligation’ and so agreement as to security is not necessary for a binding agreement.[[12]]

HHJ Hess, who himself appeared in Xydhias as junior counsel for the husband, determined that there is a distinction between a case in which the principle of security is agreed but not the form, such as Xydhias, and a case where the issue of security had not been raised (at [18]). As security had not been raised at all during negotiations, HHJ Hess determined it would not be right to impose something that formed no part of the agreement.

HHJ Hess declined to use his powers under s 25 MCA 1973 to impose new elements in the order which did not feature as part of the parties’ deal. He resolved only points that had been expressly reserved to him in negotiations.

Analysis: the differing approaches to the discretion under Xydhias to vary agreements

We see from these two cases two very different approaches to the discretion given to the court in respect of Xydhias agreements.

Richard Todd KC’s approach in HA v EN was highly interventionist and flexible, permitting the reopening of already agreed substantive terms of the agreement in the process of converting the agreement into an order. In this context, the certainty provided by a Xydhias agreement was reduced; he varied the substantive terms of an agreement that had been reached days before the hearing. That variation was not really, in our analysis, due to any change in circumstances. It was a variation to the terms of the final order by the judge to better reflect what he considered to be a fair outcome in the case, which required, in his view, variations to the (previously agreed) maintenance terms of the Xydhias agreement.

HHJ Hess’s approach to the exercise of discretion was much more restrictive, starting from the principle that parties should be held to the bargains that they enter into. HHJ Hess would not allow for the necessity for the parties’ agreement to be converted into an order to allow the wife to introduce new matters that had been omitted from negotiations and the husband to reduce his lump sum liability. His reasoning as to why the terms sought by the parties were excluded did not engage with the arguments as to whether the proposed terms were ‘fair’ or not, but instead only whether or not these issues had formed part of the negotiations between the parties. Having determined that they did not, for HHJ Hess that was the end of the matter. His view was that the wife (and husband) needed to be ‘held’ to her acceptance that the financial remedy settlement would not include the omitted terms.

The discretion set out in Xydhias allows for both approaches. The fact that there is a concluded agreement is not the end of the argument, even if (as in HA v EN) a court concludes that the factors relied on to justify a variation to an agreement were either known or reasonably foreseeable at the time. The court is not limited from still stepping in to deal with what it considers to be potential unfairness. But it also can determine that if unfairness was a free choice by the parties, that does not mean they should not be held to the terms of their bargain.

Practical considerations

Given the Xydhias jurisdiction can be applied in both a pro-fairness and a pro-finality manner, the approach by the court to the enforcement of an agreement will depend entirely on: (1) the particular facts of each case, when applied to the particular agreement; and (2) the judge who hears the case. This is problematic when, typically, the advantage of an agreement is pitched to clients as providing: (1) certainty, avoiding the inherent uncertainty of the discretionary nature of contested court proceedings; and (2) control over the outcome. These benefits only exist up to a point (as shown by the above).

Beyond this general warning that practitioners must bear in mind, we would highlight two further specific realities that make the broad discretion in Xydhias even more problematic.

First, an offer for settlement is made for acceptance as a whole not in part, but the court can consider each term of a settlement individually. Both parties may make concessions on the basis they are assured that some other more important demand to them, which is part of their offer, is agreed. But if an agreement is reached the court can then, under the Xydhias jurisdiction, hold a client to part of their offer where they have made a concession but alter or remove the quid pro quo which was their reason for making that concession (as Richard Todd KC did in HA v EN).

Second, what the court considers to be the ‘essential’ terms for an agreement may not be the same as the parties. The court can determine the parties are Xydhias agreed even if one party’s position is that the remaining issues are not residual issues that the court should have free reign to determine.

In both of the above scenarios, one (or both) parties could end up with something that they could well say they would never have agreed to, or would never have let the court determine, had they known that was a possible outcome. But under the Xydhias jurisdiction, there is no way that either of these scenarios can be ruled out.

We must therefore be careful to advise our clients about the limits of Xydhias as a tool of reaching a binding agreement, and also the dangers of being Xydhias agreed objectively (whatever the client’s subjective view on whether there is a concluded agreement). These agreements are not binding like civil settlements; they are always only subject to the court’s discretion to approve them. They can be unpicked depending on the facts of the case and the leanings of the judge approving the final order. Clients must be made aware that although the law suggests that parties should be held to the terms of their agreements to compromise, until the order is agreed, approved and sealed there is no true finality as to the terms of the settlement.

[[1]]: Xydhias v Xydhias [1999] 2 All ER 386.

[[2]]: We wholeheartedly recommend two previous articles in the Financial Remedies Journal on these issues by Daniel Mutton and Shannon Knight, ‘Xydhias, 25 Years On – What Exactly IS a Xydhias Agreement?’ [2024] 1 FRJ 51 and Andrzej Bojarski KC, ‘Section 35: Dead Letter or Living Instrument? The Contractual Status of Agreements, and the Scope of the Court’s Power to Vary Them’ [2026] 1 FRJ 5.

[[3]]: HA v EN [2025] EWHC 2436 (Fam).

[[4]]: THR v WAT [2025] EWHC 1125 (Fam).

[[5]]: See the White Book commentary at para 40.6.2 for discussion of the origins of the Tomlin order from Tomlin J in Practice Note [1927] WN 290, following the decision in Dashwood v Dashwood (1927) 71 SJ 911.

[[6]]: Community Care North East v Durham County Council [2010] EWHC 959 (QB) at [24], cited with approval in Watson v Sadiq & Anor [2013] EWCA Civ 822 at [44] and [49]–[50].

[[7]]: Though the decision of the Court of Appeal in Soulsbury v Soulsbury [2007] EWCA Civ 969 suggested that this statement of principle in Xydhias was ‘too wide’ and that an enforceable contract could arise (at [45]), to our knowledge the approach in Soulsbury has not been followed in any subsequent reported decision. In HA v EN, Richard Todd KC suggested that the approach in Soulsbury was that after a final financial remedy order there could be an enforceable binding contract but there could not be in advance of a final financial remedy order (at [37]).

[[8]]: Pierburg v Pierburg (No 2) [2022] EWHC 2701 (Fam) at [43].

[[9]]: Radmacher v Granatino [2010] UKSC 42.

[[10]]: The court is ‘not a rubber stamp’: Kelley v Corston [1997] 4 All ER 466. Per Xydhias at 396: ‘Finally, in every case, the court must exercise its independent discretionary review applying the s 25 criteria to the circumstances of the case and to the terms of the accord.’

[[11]]: Particularly when the definition of ‘financial arrangements’ that constitute a ‘maintenance agreement’ which is susceptible to variation using terms of MCA 1973, ss 34–35 are so widely drawn that all the underlying terms of the agreement, including the provision of capital, would potentially be susceptible to variation under MCA 1973, s 35 in principle. See Andrzej Bojarski KC’s article, ‘Section 35: Dead Letter or Living Instrument? The Contractual Status of Agreements, and the Scope of the Court’s Power to Vary Them’ [2026] 1 FRJ 5 for further discussion of this issue, where he states, ‘The wording of s 34 is sufficiently broad as to capture most forms of formal agreement which parties are likely to make dealing with their matrimonial financial provision including separation agreements and agreements compromising their financial remedy claims (in the Edgar v Edgar and Xydhias v Xydhias sense)’ (at 7).

[[12]]: Xydhias at 397.