District Judge Roger Bird on how the court should approach a periodical payments variation application

The Matrimonial Causes Act 1973 makes a clear distinction between those orders which are once and for all and cannot be changed, such as lump sum and transfer and property orders, and those which can be revisited and, if appropriate, varied or discharged at some future date.

This second category comprises, for all practical purposes, orders which have a continuing basis.

Section 31(2) of the Act sets out the classes of orders which can be varied - but here we confine ourselves to periodical payments orders, which are the subject of the vast majority of variation applications which come before the court.

Section 31(1) provides that the court has power to vary, discharge, or suspend the operation of such orders.

Clearly, the court will not do so where nothing has changed since the date of the original order; to approach the matter otherwise would encourage endless second or third bites at the cherry.

However, the court must consider all the circumstances, including any change there may have been in any of the matters to which it was originally required to have regard under section 25; a complete review is required and the changes since the date of the order are not the only matters to be considered (see Lewis v Lewis [1977] 3 All ER 992, CA).

Another requirement on the court is to consider whether it should impose a clean break on the parties (section 31(7)(a)).

Therefore, the court may reconsider what clearly it was not prepared to order originally.

Since November 1998, the court has enjoyed the power to substitute a lump sum order or property adjustment order when it discharges a periodical payments order and also, where the petition was filed on or after 1 December 2000, to make a pension-sharing order.

For some time, there has been debate about how far the court is permitted to go when considering variation applications; it was sometimes argued that if the court had to carry out a full review, all matters were 'up for grabs'.

This debate has now been resolved by the decision of the Court of Appeal in Pearce v Pearce [2003] EWCA Civ 1054.

Giving the lead judgment of the court, Lord Justice Thorpe summarised his general conclusions on this issue as follows:

- On dismissing an entitlement to future periodical payments, the court's function is not to reopen capital claims but to substitute for the periodical payments order such other order or orders as will both fairly compensate the payee and, at the same time, complete the clean break.

- In surveying what substitute order or orders should be made, first consideration should be given to the option of carving out of the payer's pension funds a pension for the payee equivalent to the discharged periodical payments order.

Therefore, it is now clear that on a variation application, the court does not have carte blanche to revisit all the capital issues.

In more detail, the task of the court falls into three stages.

First, it must decide what, if any, variation to make in the order for periodical payments.

Second, the date from which any varied order is to commence must be fixed.

Then, and only then, should the court decide whether a capital payment should be substituted for the income stream which is being terminated.

Any such capital sum should be calculated in accordance with the Duxbury tables.

However, the first choice of the court, where it is available, should be to make a pension-sharing order in substitution for maintenance.

The reason for this is obvious: no capital would have to be raised or paid by the paying party and the receiving party would have the benefit of a continuing income stream from the pension transferred to her.

This three-stage process was followed by Nicholas Mostyn QC, sitting as a deputy High Court judge in W v W [2003] EWHC 2254 (Fam).

(As a diversion from the main subject of this article, this case is also interesting reading on the question of the professional obligation on solicitors, as officers of the court, in completing Form E on behalf of clients.

It was held that this is a serious professional duty, non-observance of which may lead to an unpleasant consequence.) The main interest of his judgment was in the approach to the appropriate discount rate to be applied in the Duxbury calculation, which he decided should be just more than 3.25%.

There will be many cases where there is insufficient capital or pension to take advantage of this guidance and the court will then be faced with the choices of increasing or decreasing the amount of periodical payments or, where it is satisfied that the payee is now genuinely self-sufficient, discharging the order for no consideration.

Where the application is simply to increase a periodical payments order, either for a former spouse or a child, with no capital implications, parties often complain about the fact that they have to file Form E as if this were a full ancillary relief application.

Such exasperation is understandable, but it must be remembered that a variation application is classed as an ancillary relief application and whether or not the parties have significant capital is not something that can be known until the evidence is available.

In many cases where, for example, a husband is seeking a reduction, details of his savings and investments will be highly relevant.

Furthermore, it would be very difficult, if not impossible, to devise a 'two-tier' system.

However, in the genuinely simple case, parties are free to take advantage of the right to apply for an interim order (see rule 2.69F of the Family Proceedings Rules 1991).

The application must be supported by a statement of means, and the respondent must file evidence in reply.

The application should be heard before the time for filing Form E.

If the judge is satisfied at the hearing that no more evidence is needed, it is open to him to treat that hearing as the final hearing, make a final order, and dispense with the need to file further evidence.

It is for the parties to satisfy themselves that their case genuinely fell within this category before embarking on that short cut.

District Judge Roger Bird sits at Bristol Combined Court Centre