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2nd August 2021

Henry Hood examines the Thwaite jurisdiction where a client seeks adjustment of a financial remedy order in The Review

Henry Hood examines the Thwaite jurisdiction where a client seeks adjustment of a financial remedy order in The Review
Henry Hood
Henry Hood
Senior Partner

This article was originally published in Resolution and can be accessed here

Thwaite to the rescue?

The rarely used Thwaite jurisdiction offers an important alternative to Barder where a client seeks adjustment of a financial remedy order because subsequent events – such as the consequences of the Covid-19 pandemic – render the original order unfair.

While the jurisdiction deriving from the Court of Appeal decision in Thwaite v Thwaite [1981] 2 FLR 280 was the subject of much discussion among family lawyers in the early days of the pandemic, two High Court judgments delivered since spring 2020  Akhmedova v Akhmedov [2020] EWHC 2235 (Fam) and Kicinski v Pardi [2021] EWHC 499 (Fam) have provided important clarity on Thwaite‘s scope.

Under Thwaite, the court can adjust a financial remedy order which remains executory (unimplemented) if it would be inequitable to hold the parties to the original order in light of a significant change of circumstances. The recent cases make clear that a significant change of circumstances is a lower threshold than a Barder event. Nor does Thwaite require that the event occurred shortly after the order, or that the application be made promptly, though these factors may influence whether it is inequitable to hold the parties to the order. Further, while the recent judgments differ on whether the change of circumstances must be unforeseen, consideration of each approach and the previous jurisprudence suggests that unforeseeability is not a requirement under Twaite. Overall, therefore, Thwaite is potentially of significantly wider application than Barder.

The exercise of the Thwaite jurisdiction has traditionally been characterised as a set aside, and accepted as a basis for set aside in addition to those included in the (explicitly non-exhaustive) list in FPR PD9A para 13.5 (see eg US v SR [2018] EWHC 3207 (Fam)). It was, however, perhaps more accurately characterised by Mr Recorder Allen QC in G v C [2020] EWFC B35 when he stated the exercise of the Thwaite jurisdiction is not strict set aside but is a sui generis power to adjust… [The] court may, if appropriate, set aside some of the substantive paragraphs but in so doing is not setting aside the order. While the decision was overturned on appeal in Kicinski v Pardi, Lieven J described Mr Recorder Allen’s analysis of the case law on Thwaite as exemplary.

The facts in Thwaite were as follows. In a consent order the wife undertook to return, with the parties’ children, from Australia to the UK, and the husband agreed to transfer the family home to her. Upon the wife deciding to remain in Australia, the husband applied to court to vary the order. The trial judge held he could not vary the order but set it aside and made a fresh order providing for the sale of the property and division of the proceeds. The wife’s appeal failed; Ormrod LJ held that [w]here the order is still executory… and one of the parties applies to the court to enforce the order, the court may refuse if, in the circumstances prevailing at the time of the application, it would be inequitable to do so. Ormrod LJ noted that the wife’s decision had completely destroyed the basis of the agreement and held that the trial judge had had jurisdiction to set aside the order on the basis of fresh evidence (the wife’s intention to remain in Australia), and jurisdiction to make a fresh order as, with the original order set aside, the wife’s original application for ancillary relief remained undetermined before the court.

Thwaite predated the House of Lords’ decision in Barder v Barder (Calouri intervening) [1987] 2 FLR 480, which also concerned an applicant seeking to revisit an executory order whose basis had been undermined by subsequent events (the wife’s suicide and killing of the parties’ children). The House of Lords held that an order can be revisited where new events have invalidated the basis of the order if the events occurred within a relatively short time of the order, the application was made promptly and did not prejudice third parties. Cornick v Cornick [1994] 2 FLR 530 clarified that the new event be unforeseen and unforeseeable. That the original order remained executory was not identified as a necessary circumstance in Barder or the cases which developed it, and Thwaite has remained a distinct jurisdiction.

In Potter v Potter [1990] 2 FLR 27 the Court of Appeal cited Thwaite as authority for the court’s power to refuse to enforce an executory order if, in the circumstances prevailing at the time of the application, it would be inequitable to do so. In Benson v Benson (dec’d) [1996] 1 FLR 692 the framing of the jurisdiction moved closer to Barder, with Bracewell J describing Thwaite as establishing that an executory order could be set aside if the basis upon which it was made has fundamentally altered.

Munby J considered Thwaite in L v L [2006] EWHC 956 (Fam), holding:

Merely because an order is still executory the court does not have, any more than it has in relation to an undertaking, any general and unfettered power to adjust a final order let alone a final consent order merely because it thinks it just to do so. The essence of the [Thwaite] jurisdiction is that it is just to do it would be inequitable not to do so  because of or in the light of some significant change in the circumstances since the order was made. [emphasis in original]

Munby J considered it unclear whether a significant change in circumstances sufficed, or whether, as seemed to have been assumed in Benson, the more stringent Barder test applied.

The Court of Appeal seemingly resolved this issue in favour of the lower standard in Bezeliansky v Bezelianskaya [2016] EWCA 76. A consent order made in 2013 provided for properties in Russia and Monaco to be transferred to the wife. The orders were not implemented and it emerged that the husband had, at the time of the consent order, already contracted to sell the Russian property to a third party and received an advance on the sale price. The wife applied to set aside the order, and, relying on Thwaite, Moor J granted the application, putting in place an alternative mechanism to transfer capital to the wife. The husband unsuccessfully sought permission to appeal, with McFarlane LJ, giving the lead judgment, holding:

With respect to cases where there is an undertaking or an order that is still executory the approach to determining whether or not to set aside or vary the order is… based upon it being inequitable to hold to the terms of the original order in the light of a significant change of circumstances.

Whilst this was a decision regarding permission to appeal and therefore technically not binding on lower courts, Lieven J stated in Kicinski v Pardi that as a fully reasoned decision of three members of the Court of Appeal, including McFarlane LJ (now President of the Family Division)… it carries the very greatest weight.

2018 saw two High Court judgments on ThwaiteSR v HR [2018] EWHC 606 (Fam), in which Mostyn J sought to narrow the jurisdiction, and US v SR [2018] EWHC 3207 (Fam), where Roberts J took a broader approach.

In SR v HR property adjustment orders remained unimplemented following disputes about the sale process. In implementation proceedings the judge held that, under Thwaite, he could refuse to enforce an executory order if it was inequitable to do so, and determine the matter afresh; his new order significantly altered the financial outcome of the original order. On appeal, Mostyn J rejected the reasoning of Ormrod LJ in Thwaite (notwithstanding that he was bound by it as a Court of Appeal authority) and concluded that any application under the principle in Thwaite should be approached extremely cautiously and conservatively; he allowed the appeal. Notably, however, on the facts there does not appear to have been a significant change of circumstances and the first instance judge’s formulation of Thwaite excluded that element; furthermore, Bezeliansky was not referred to.

In US v SR [2018] the original order provided for the wife to retain property in England and for the sale of property in Russia. It remained unimplemented and the husband sought to invoke Thwaite, relying on two changes in circumstances: the wife’s move to Russia and the collapse of the Russian property market. Roberts J  granted the application and, citing Bezeliansky, stated that the Court of Appeal has recently confirmed that the court retains the power to make a new or varied order in the light of new evidence whilst an order remains executory; she noted that Mostyn J’s decision in SR v HR did not refer to Bezeliansky or L v L.

Thus at the start of the pandemic the Thwaite jurisdiction was subject to conflicting decisions. The two subsequent High Court decisions  Akhmedova and Kicinski  both endorse Roberts J’s broader approach in US v SR, but then differ on whether the significant change in circumstances must be unforeseen.

Akhmedova v Akhmedov (August 2020) was a set-aside application made by intervenors in this long-running litigation. Knowles J endorsed the approach of Roberts J in US v SR, but also stipulated (without elaboration) that the change in circumstances must be unforeseen: [t]he fact that the order remains executory is insufficient to set it aside in circumstances where the applicants cannot point to an unforeseen supervening event which invalidated the basis of those orders.

However, Lieven J took the opposite approach six months later in Kicinski v Pardi (in which Akhmedova is not referenced), on appeal from Mr Recorder Allen QC’s decision in G v C. A significant issue in the case concerned funds held by the wife in overseas accounts which had been transferred to her by the husband’s uncle and aunt (U&A); the husband had argued that the wife was not beneficially entitled to the funds and U&A had commenced proceedings against the wife in Italy seeking their return. During the final hearing the parties reached an agreement which was approved as a Rose order; it provided for tripartite agreements between the husband, wife and U&A in respect of the funds and for U&A to withdraw the Italian proceedings. However, the agreement was not finalised and the proceedings were not withdrawn; the wife applied under Thwaite to adjust the Rose order to insert an indemnity from the husband in respect of the Italian proceedings.

Mr Recorder Allen QC reviewed the authorities and concluded that the Thwaite jurisdiction would be engaged if (i) the order remained executory; (ii) there had been a change in circumstances and (iii) if so, it would be inequitable to hold the wife to the order. On the issue raised by Munby J in L v L as to whether Thwaite required only a significant change in circumstances rather than a Barder event, Mr Recorder Allen QC considered that the Court of Appeal’s analysis in Bezeliansky was tacit assent that it was not necessary for the change to amount to a Barder event. Lieven J, on appeal, seemingly agreed; as mentioned above she described Mr Recorder Allen’s analysis of the case law as exemplary, and she held that the jurisdiction is engaged where there has been a significant (and necessarily relevant) change of circumstances and where it would be inequitable not to vary the order.

Mr Recorder Allen QC however concluded that the jurisdiction was not engaged on the facts: the failure to conclude the tripartite agreements and U&A’s failure to withdraw the Italian proceedings did not amount to a change of circumstances because when the wife chose to settle she was, or ought to have been, aware that further negotiations with U&A would be required. Lieven J disagreed: the wife had, when entering the agreement, perfectly reasonably believed that U&A would withdraw the proceedings and enter the anticipated deeds. Lieven J held:

… it is not part of the Thwaite tests that the significant change which triggers the jurisdiction must be wholly unforeseen. It would not, in my view, make sense for such an additional requirement to be imposed. It may be, particularly in this area of litigation, that it is foreseeable that one party to the agreed order will seek to renege upon it before it is executed. That does not mean that the change that then occurs is not significant even if to some degree foreseeable… The courts have not sought to delve into [foreseeability] before applying the Thwaite jurisdiction.

Lieven J went on to find that it would be inequitable to hold the wife to the original order as it would leave her exposed to a contingent liability when she had entered into a clean break settlement, and adjusted the order as sought.

There are therefore now three High Court decisions building on the Court of Appeal’s decision in Bezeliansky making clear that a Barder event is not required to engage Thwaite. Mostyn J’s decision in SR v HR seeking to minimise use of the jurisdiction is now seemingly an outlier. On the issue of foreseeability, I suggest that Lieven J’s position is to be preferred: her reasoning on the point is more detailed and better reflects the previous case law.

The decision of HHJ Kloss in HW v WW [2021] EWFC B20 indicates that whilst it will be possible to succeed in a Barder claim based on the pandemic, it will not be easy, particularly where Covid-19 was known of by the time of the order. In his judgment HHJ Kloss recorded that he raised with counsel the possibility of invoking Thwaite, though the applicant chose not to pursue it, seeking (unsuccessfully) a full set aside so that the case could restart afresh. For many, however, the Thwaite jurisdiction could offer a viable alternative where the Barder criteria are not met, and it may have an increasing role to play in the Family Court’s ability to ensure just outcomes.