During the course of a divorce or dissolution, it is essential to resolve the issue of matrimonial finances. This involves the division of all assets in the marriage, between both parties.
There are a number of ways in which this can be achieved. Many divorcing couples are able to reach a financial settlement between themselves. Following a prescribed process, negotiations take place between their legal representatives, who then reflect the agreed division of assets within a consent order that is drafted and lodged with the Family Court for approval. Once the Court approve the Order this is formalised and becomes binding on both parties.
Where parties are not able to reach an agreement, then it is open to either of the two to issue financial remedy proceedings with the Court. The Court will issue a number of directions to ensure that it has sufficient information and following a series of Hearings, will make a final financial order which is binding on both parties. During the Court process, the parties are able to reach an agreement directly which can be approved by the Court and will conclude the lengthy and contentious proceedings, minimising legal fees for both.
Problems commonly arise where one party changes their mind in respect of the agreement reached before the Court approve a financial order.
This issue came before the Court of Appeal in 1998, in the case of Xhydias v Xhydias.
What happened in the matter of Xhydias v Xhydias?
To briefly consider the facts of the case; the Wife (Mrs Xhydias) had petitioned for divorce and in April 1995 filed a court application for financial remedy. Following a period of negotiations, the matter was listed before the Court on 02 September 1996 for a 3-day Final Hearing. Negotiations continued and on 27 August 1996, the Wife’s representatives wrote to the Court advising that “heads of terms have been agreed between the parties.” On the same day, the Husband (Mr Xhydias)’ representatives sent to the Wife’s representatives a draft version of the consent order which was agreed over the telephone.
It was understood that there were two minor issues yet to be resolved and so the Wife’s representatives requested that a 45-minute Hearing is listed to resolve these, as a 3-day Hearing was not necessary.
At the Hearing on 02 September 1996, the Husband’s representatives informed the Court that all offers were withdrawn and the matter would continue to be contested. The Wife’s representatives filed an application with the Court that the Husband should be required to show cause of why an Order should not be made in the terms they understood to have been agreed.
The Judge ruled that it was apparent the parties had intended to conclude the Agreement prior to the Hearing and all essential elements of an agreement were found to be in place.
The Husband filed an appeal upon which it was held that all parties (including respective legal representatives) understood the matter was settled and the Court were notified that the matter had been settled. The Court was satisfied that an agreement had been reached with only trivial matters remaining unresolved, the negotiations were not without prejudice, and accordingly the appeal was dismissed.
What is a notice to show cause?
Notice to show cause arises in all areas of law, not just family law. Where there is a clear agreement, and one party is seeking to renege from that agreement, they may be requested to show cause. Notice to show cause is a request to that party to clarify why they consider an agreement should not be formalised in the terms which have already been agreed between the parties.
Such notices are very important and often have deadlines by which they must be complied with. In the event these are not dealt with appropriately, the defaulting party can face significant costs consequences so it is recommended that you seek legal advice as soon as possible once you have been served with such notice.
What principles were highlighted from the matter of Xhydias v Xhydias?
The Court of Appeal found that agreements within family law proceedings are not bound by the usual rules of contract law. The Court has the final say in relation to matters of financial remedy.
The Court should be mindful of circumstances where a party who has previously sought to resolve matters is now seeking to justify a change in position by relying on trivial or mechanical outstanding points yet to be resolved, following agreement being reached in regards to the substantive issues.
Parties will be held to agreements where it is apparent that they have substantively agreed issues, and the outstanding points are trivial or mechanical. This is known as a Xhydias Agreement.
This benefits all involved by reducing costs and time spent on lengthy contentious proceedings and reduces unnecessary litigation from appearing before the Court.
How can I prevent a Xhydias Agreement arising?
One of the simplest ways to ensure that an unintentional Xhydias Agreement does not arise is to ensure all communications prior to an agreement are marked as “without prejudice.”
Without prejudice correspondences are generally not put before the court and cannot be relied on by either party as evidence or otherwise put before the Court. They are used widely as it encourages parties to resolve disputes out of court where possible and avoid litigation as they offer parties the opportunity to engage with one another more openly and negotiate.
Open correspondence does not have the same protections and can be admissible as evidence during the course of court proceedings.
In the event the Court do find that a Xhydias Agreement has arisen, the wider circumstances of the matter will be considered by way of the factors detailed within Section 25 of the Matrimonial Causes Act. The Court must consider these factors to ensure that matters have been appropriately resolved. You will need to evidence to the Court that the agreement contravenes principles arising out of section 25.