Many clients think that once a financial order is made on divorce, that’s it forever. ABC v XYZ is a reminder that things are more flexible than that – but also that fighting over variation can be ruinously expensive.

District Judge Maddison in Birkenhead was asked to decide two linked questions:

1. Should a former husband be released from undertakings given in a 2020 consent order?
2. If so, how should the spousal maintenance now be set?

The case is a good opportunity to look at Birch v Birch, variation of periodical payments, “over-provision” through index-linking, and the sheer cost of taking a relatively narrow dispute all the way to a final hearing.

The original deal: tax planning dressed as maintenance

ABC (husband, now 61) and XYZ (wife, 59) had a long marriage of about 24 years, separating in 2016 and resolving finances by consent in 2020.

Key parts of that order:

• The wife kept the former matrimonial home (a five-bed, three-reception property).
• She also kept shares in the family company, F Limited, and received £50,000 per year in discretionary dividends, index-linked to RPI.
• The husband undertook to use his “best endeavours” to make sure F Limited paid those dividends.
• If the company didn’t, he undertook to “top up” via a nominal periodical payments order – effectively guaranteeing her income.
• There were share transfers the other way and a pension share in her favour.

Everyone understood this as a continuation of a tax-efficient marital income structure: using her lower tax rate and allowances while he sacrificed salary.

Fast forward to 2025, and the picture looked different.

Back to court: when the company falters

By 2025, F Limited had had a very bad year – a seven-figure loss, redundancies, and a halt to bonuses and dividends. The husband argued that:

• The dividends paid to his ex-wife were, in reality, simply being carved out of his own package.
• With the business under pressure and his own debts rising (including a director’s loan and borrowing from his father), he couldn’t afford to keep propping up the arrangement.
• He asked to be released from all undertakings and for the nominal maintenance to be replaced with £1,000 per month, non-indexed, on a joint lives basis.

The wife’s position was simple: the 2020 order should stand. She said:

• The dividend structure was what he proposed at the time;
• Her needs hadn’t gone away; and
• The company’s poor year looked more like a blip than a permanent collapse.

However, she did accept one important point: if maintenance switched from taxable dividends to tax-free spousal maintenance, her income need would reduce by about £753 per month (which is what she currently paid in income tax on the dividends).

The legal framework: Birch, undertakings and variation of maintenance

The court can’t “vary” an undertaking in the way it can vary a periodical payments order – but it can:

• Release a party from an undertaking; and
• Impose different undertakings or a revised maintenance order in its place.

The Supreme Court in Birch v Birch confirmed that the court should approach release from undertakings via s.31(7) Matrimonial Causes Act 1973, i.e.:

• Has there been a significant change in circumstances?
• Looking again at the s.25 factors, what is now fair?

District Judge Maddison also applied the modern guidance on varying income orders, including:

• The focus is on needs, not relitigating capital.
• The court can look at amortising capital, but it’s not automatic.
• The burden is on the payee (here, the wife) to justify ongoing dependence and the level of provision.

What did the judge actually do?

First, the judge was not persuaded that F Limited had irreversibly collapsed. The 2024 accounts showed respectable performance; 2025 looked more like a bad year than a permanent new normal.

Second, the judge accepted:

• The wife’s income needs were around £3,500 per month after some trimming of her budget (including council tax discount and modest economies).
• She receives no earnings, has real health and age-related vulnerability and no realistic earning capacity.
• She should not be required to start eating into her modest capital or pension to subsidise current living costs.

Third, the judge held that the wife was currently over-provided for:

• The original £50,000, now RPI-linked to over £67,000 per year, plus tax effects, meant she was receiving more than she needs on her own case.
• This justified a downward variation.

The final order:

• The husband is released from all undertakings in the 2020 order.
• The nominal periodical payments order is varied to £2,900 per month,
• Index-linked going forward (but to CPI, not RPI),
• On a joint lives basis.

In other words: the tax-driven dividend machinery is dismantled, but the wife keeps a secure, needs-based income stream for life.

The sting in the tail: £175,000 in costs

Perhaps the most striking passage in the judgment is the judge’s comment on costs:

• Between them, the parties had spent £175,287.10 over less than 10 months.
• That equates to about five years’ worth of maintenance at the newly ordered level.

This was, in the judge’s words, a “relatively simple dispute” about the level of maintenance and the form it should take. It was “eminently capable of settlement”, but both sides adopted rigid and unrealistic open positions, which blocked compromise.

Practical lessons

For practitioners and clients, ABC v XYZ underlines:

1. Undertakings are not untouchable – they can be revisited where circumstances significantly change.
2. Index-linking (especially to RPI) can drift into over-provision and may justify variation.
3. Tax-driven structures may work well in the marriage, but can become distorted or unfair post-divorce.
4. Courts are slow to force a non-earning, vulnerable spouse to live off capital where maintenance was plainly intended.
5. And above all: the cost of litigating modest variations can very quickly outstrip the value of what’s in dispute.

For many separating couples, the smarter option is often to renegotiate sensibly with early legal advice, rather than spending years’ worth of maintenance arguing over the decimal points.