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Lump sum orders - overview
The court has jurisdiction to order one party to pay a lump sum or such sums as may be specified in the order to the other party pursuant to the Matrimonial Causes Act 1973 (MCA 1973), ss 23(1)(c) and 31(7A)-(7F) and the corresponding provisions under the Civil Partnership Act 2004 (CPA 2004).
The court is guided by the s 25(2) factors in considering the appropriate order to grant. The first question is whether the payer has resources, within the wide definition given at s 25(2)(a), from which to meet any order. If so, the court must then conduct the s 25 exercise, applying the criteria set out in s 25(2) to determine whether to exercise its discretion. The court’s first consideration is the welfare of any child of the family and to that extent a child’s capital needs will be relevant. The main concern is to provide a home for the primary carer and the children.
In light of the House of Lords' judgments in White v White and Miller v Miller; McFarlane v McFarlane, the overarching objective is fairness. A fair result should avoid discrimination between the parties in their respective roles as homemaker and breadwinner. In Miller; McFarlane three rationales were introduced for considering the requirements of fairness: needs, compensation and sharing. Having reached a tentative conclusion as to fairness, the court must check the effect of any lump sum order against the yardstick of equality and provide reasons for any departure from equality.
The provisions of MCA 1973, s 31 empower a court to make a range of orders, including lump sum orders, in order to capitalise an order for periodical payments. The courts will often refer to the Duxbury model to calculate the amount of money required to capitalise the income provision.
The court may adjourn an application for a lump sum order in exceptional cases where there is a real possibility of capital becoming available in the foreseeable future, eg by way of inheritance, bonus or retirement gratuity.
The court cannot make a lump sum order until the grant of decree nisi of divorce or nullity, the grant of a conditional order (in relation to a civil partnership) or a decree of judicial separation. However, the lump sum order will not take effect until the decree or order is made absolute/final. Accordingly, the court has no power to make an interim lump sum order.
Lump sum by instalments
The court only has the power to provide for one single order that may, if appropriate, be payable by instalments. This is sometimes considered appropriate where one sum is to be paid immediately and a further amount payable upon a future date, upon the happening of a future event or to provide the payer time to liquidate assets. While there is no power to vary or discharge a lump sum order, under MCA 1973, s 31(2)(d) there is power to vary an order for lump sums by instalments. This applies to not only timing, but also the manner in which the instalments are paid. The court even has power to discharge a particular instalment. This can be avoided by drafting an order to require the payer to pay a number of individual lump sums to the payee, which is not variable under MCA 1973, s 31.
The court has the power to order that security be provided for a lump sum order, but only if the order is payable by instalments.
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