Concluded Agreement? With or without prejudice: Xydhias revisited

Divorce & Matrimonial Finance

23 February 2018

The purpose of this article is to explore in the context of Financial Remedy, the extent to which the law has evolved, if at all, since the case of Xydhias v Xydhias [1999] 2 All ER 386 especially in relation to the rather vexed question of whether the parties have entered into a concluded agreement, whether on a without prejudice basis or otherwise.

The situation usually arises in cases which are listed for final hearing.  This is after the parties have had the benefit of a First Dispute Appointment (“FDA”) and Financial Dispute Resolution (“FDR”) and at some point before the final hearing appear by way of (further) negotiation to agree terms.  Problems arise when one of the parties then seeks to resile from what has been agreed.

In the Xydhias case, the parties were facing (a three) day final hearing.  Prior to the final hearing, negotiations (the extent to which were conducted on an open, Calderbank or without prejudice basis was unclear) led to the Wife’s solicitors writing to the Court indicating inter alia that Heads of terms of settlement had been agreed albeit that there was an outstanding (minor) issue relating to security for deferred payments and seeking the vacation of the final hearing and a 45 minute appointment instead.  Counsel for both parties had agreed a (fourth) version of a (draft) Consent Order.

Neither parties Counsel attended the appointment hearing.  At that hearing the Husband’s solicitor’s stated that he had withdrawn all offers and that the case would be fully fought.  The matter was accordingly listed for a 4 day trial.

Afterwards, the Wife filed a notice of application for (a) the Husband to show cause why an Order should not be made in accordance with the fourth version of the draft Consent Order and (b) alternatively seeking directions for a full trial.

The Court having considered the Wife’s application ordered that the Wife’s application for an Order in terms of the agreement be tried as a preliminary issue with a time estimate of two days and appropriate directions were given for the filing of affidavits and documents relevant to the preliminary issue.

The hearing on the preliminary issue duly proceeded and the District Judge found for the Wife and excised from the Draft Consent Order two points that the Husband had not expressly agreed.

The Husband appealed, the notice of appeal asserting that the District Judge had been wrong as a matter of fact and/or law.

The Court of Appeal duly dismissed the Husband’s appeal.  Lord Justice Thorpe in delivering the judgement set out his conclusions under three heads, two of which are relevant for the purposes of this article, namely, (i) the applicable principles and (ii) the submission that the Wife’s application should have been excluded on the grounds of privilege, on the basis that negotiations between the parties had been without prejudice and therefore ostensibly fell to be excluded.

Regarding the applicable principles, Lord Justice Thorpe started by holding that  a “cardinal conclusion is that ordinary contractual principles do not determine the issues in this appeal.  This is because of the fundamental distinction that an agreement for the compromise of an ancillary relief application does not give rise to a contract enforceable in law………..In consequence, it is clear that the award for ancillary relief is always fixed by the court.  The payer’s liability cannot be ultimately fixed by compromise as can be done in the settlement of claims in other divisions.  Therefore the purpose of negotiation is not to finally determine the liability (that can only be done by the court) but to reduce the length and expense of the process by which the court carries out its function.  If there is a dispute as to whether negotiations led to an accord that the process should be abbreviated, the court has a discretion in determining whether an accord was reached.  In exercising that discretion the court should be astute to discern the antics of a litigant who, having consistently pressed for abbreviation, is seeking to resile and to justify his shift by reliance on some point of detail that was open for determination by the court at its abbreviated hearing.  If the court concludes that the parties agreed to settle on terms then it may have to consider whether the terms were vitiated by a factor such as material non- disclosure or tainted by a factor within the parameters set out in Edgar v Edgar[i].  Finally in every case the court must exercise its independent discretionary review applying the section 25 criteria to the circumstances of the case and to the terms of the accord……..In my opinion there are sound policy reasons supporting the conclusion that the judge is entitled to exercise a broad discretion to determine whether the parties have agreed to settle”.

Turning to the issue of the Claim to Privilege due to the ostensible without prejudice nature of at least some of the negotiations, Lord Justice Thorpe pointed out that negotiations may proceed on one of three basis, namely without prejudice, Calderbank or open. Although the learned Judge indicated that if negotiations proceed on a without prejudice basis he would accept that they are governed by a passage from the speech of Lord Griffiths in the case of Rush & Tompkins Limited v GLC [1989] AC 1280 (which it has to be noted, is distinguishable on the facts in that it relates to a civil case), he nevertheless held that there is no special rule governing without prejudice negotiation in ancillary relief proceedings.  The learned Judge held further that an agreement serves to open without prejudice correspondence and if there is a dispute as to whether or not that stage was reached the without prejudice record must be admitted to determine the issue.

Interestingly, Lord Justice Thorpe added a postscript to his judgment to the effect that the case (i) illustrated the deficiencies of the ancillary relief procedures at the time and that three and a half years after issuing her application, the wife was no further forward despite incurring very considerable legal costs.  The learned Judge referred to the proposals for new procedures and expressed the hope that this sort of litigation history would not be repeated and (ii) that there were 2 lessons for specialist practitioners, namely (a) firstly, to distinguish between the two stages of negotiation, the first stage to establish what the applicant is to receive to be expressed in simple terms in heads of agreement signed by both counsel and their clients and the second stage to reduce the heads of agreement to a court order, the signature of the parties to a draft consent order hardly seeming apt and (b) secondly, that it is desirable that counsel should explicitly agree whether their negotiations are open or without prejudice and that ordinarily they are likely to be without prejudice and if they do not achieve a concluded agreement the aftermath is likely to be an exchange of Calderbank and/or open correspondence.

It is to be noted that since the Xydhias case and despite the coming into effect of the new streamlined financial remedy procedures on the 5th of July 2000, the enactment of the Family Procedure Rules 2010[ii] and subsequent amendments, the development of the case law and in particular in relation to (a) material non-disclosure[iii] and (b) pre[iv] and post[v] nuptial agreements, where parties have negotiated an agreement, it will be open to either of the parties to raise this as a preliminary issue.

In the case of Rose v Rose [2002] EWCA Civ 208, the parties had ostensibly agreed terms after a lengthy FDR which although not reduced to writing at the time, had been approved by the Judge conducting the FDR and reduced to a draft order by counsel afterwards.  The husband sought to resile from the agreement and the issue on appeal was whether he was entitled to do so.  The Court of Appeal held that in the circumstances, the agreement was an unperfected order of the Court, that no authority had been cited where a party seeks release between the making of the order and its subsequent perfection[vi] and that “the whole purpose and effect of the FDR would be lost or compromised were the parties free to analyse and re-evaluate a crucial decision of the previous day or the previous week to decide on further reflection that they made the wrong choice”.  Accordingly the Appeal Court confirmed the Order which had been made by the Judge following the FDR.

Pulling the strands together, it is clear that:  (i) each case depends on its own facts, (ii) the Xydhias case is a good starting point when dealing with the issue as to whether there has been a concluded agreement and (iii) in financial remedy proceedings, in considering whether there has been a concluded agreement, the Court (a) has a discretion as to whether to investigate/consider without prejudice negotiations and (b) has a mandatory duty to consider any agreement in the context of the section 25[vii] criteria and (iv) any party seeking to resile from a properly negotiated agreement may depending on the circumstances, be liable to having costs awarded against them.


[i] Edgar v Edgar [1980] 1 WLR 1410 in which on appeal, the Court held that the wife in that case was bound by a prior agreement not to claim a lump sum by treating that agreement as conduct of the parties which was to be taken into account when considering the section 25 criteria set out in the Matrimonial Causes Act 1973.
[ii] Please note:  a definition is given in the Family Procedure Rules 2010 for “without prejudice” in sections 2.2 (interpretation) read with the glossary which is as follows:  “Without Prejudice – negotiations with a view to settlement are usually conducted ‘without prejudice’ which means that the circumstances in which the content of those negotiations may be revealed to the court are very restricted” and The Glossary is defined as “2.2(1) The glossary at the end of these rules is a guide to the meaning of certain legal expressions in the rules but is not to be taken as giving those expressions any meaning in the rules which they do not have in the law generally”.
[iii] As dealt with in the cases of Sharland v Sharland [2015] UKSC 60 and  Gohill v Gohill [2-15] UKSC 61.
[iv] See cases of Radmacher (formerly Granatino) v Granatino [2010] UKSC 42 and DB v PB [2016] EWHC 3431.
[v] As dealt with in cases of Kremen v Agrest (financial remedy:  non-disclosure:   post nuptial agreement) [2012] EWHC 45 (Fam).
[vi] However, please note, s9.9A of the Family Procedure Rules 2010 as amended by s 4 of the Family Procedure (Amendment no 2) Rules 2016.
[vii] Matrimonial Causes Act 1973.  See also the latest SC decision Birch v Birch [2017] UKSC 53.

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