Periodical payments to former spouses, a meal ticket for life?

Following a divorce, if there is an order in place for one spouse to pay periodical payments to the other for the remainder of their joint lives this can only be varied or terminated:

• if one of the former spouses’ dies;
• if the spouse receiving the periodical payments remarries; or
• by further order of the court.

The Supreme Court recently handed down the judgement of Mills v Mills which considered the law on varying periodical payments paid to a former spouse.

Summary of the facts

The husband and wife divorced in 2002. Under the terms of the financial settlement reached on their divorce, the wife received a capital sum of £230,000. In addition, the husband agreed to pay his former wife periodical payments of £13,200 per annum on a joint life basis.

On receipt of the capital sum, the wife did not buy a mortgage-free property and she made a number of financial decisions which did not prosper. By April 2015 the wife had no capital and was living in rented accommodation.

In April 2015 the husband and wife submitted cross-applications to the court. The husband was applying to the court to discharge or reduce his obligations of paying maintenance to his former wife, and the wife bought an application to increase the periodical payments.

The trial judge made the following key findings of fact:

Capital on divorce

• The £230,000 that the wife received on divorce represented the majority of the couple’s capital.
• This sum would have enabled the wife to buy a property mortgage-free.
• The wife made “unwise” decisions in relation to the capital and her need to pay rent was a consequence of her decisions.
• The judge said it would be wrong to describe the wife’s approach to finances as “profligate” or “wanton”.

The wife’s needs

• It was accepted that the wife needed £35,792 per year to meet her basic needs, about £10,200 of this was for rent.
• The wife earned a net salary of £18,500 and so she needed £17,292 per year in periodical payments to make up the short fall (about £4,000 more than the original periodical payments order).
• It was accepted that the wife could not increase her salary to meet this shortfall.

The husband’s means

• The husband had the ability to continue paying the periodical payments at the rate of £13,200 per year, and he had the means to pay £17,292 per year.
• The husband did not have means to capitalise the periodical payments (pay a larger one-off sum to discharge his obligations in the future).

The trial judge decided that the correct outcome was to maintain the status quo, i.e. that the periodical payments paid to the wife should continue at the current rate of £13,200 per year.

Both parties tried to appeal to the Court of Appeal, but only the wife’s appeal was successful.

The Court of Appeal found in the wife’s favour and decided that the amount of the periodical payments should be increased to £17,292 per year. The Court of Appeal’s reasoning was that the trial judge had not given sufficient reasons as to why all of the wife’s basic needs, including her rent, should not be met by the periodical payments from the husband.

The husband appealed this decision to the Supreme Court. As his original appeal of the trial judge’s decision had not been successful, the husband was only able to appeal on a single ground: whether in light of the fact that provision had already been made for the wife’s housing needs in the capital settlement, the Court of Appeal was entitled to interfere with the judge’s decision not to increase the periodical payments, so as to cover all of the wife’s rental costs.

The Supreme Court found in the husband’s favour and the decision of the trial judge was restored.

Comments on the judgement

There are two main implications of this judgement:

1) It reinforces that judges have wide discretion when considering whether to vary periodical maintenance payments.

The Supreme Court did not decide whether they would have reached same decision had they been in the trial judge’s shoes, but whether the trial judge had properly applied the law. The Supreme Court found that the trial judge had been entitled (but not obliged) to reach his decision as he was acting within the discretion conferred to him under the Matrimonial Causes Act 1973. This reinforces the wide discretion granted to judges when deciding whether to vary orders for spousal maintenance.

2) It takes into account how the receiving spouse managed the original capital sum

This judgement also highlights that judges are entitled to take into account how receiving spouses have managed the capital sums they received on their divorce and how their subsequent financial decisions have affected their needs.

In particular, the Supreme Court found that the wife could have purchased a property mortgage-free using the capital she had received from the divorce, and consequently it would be unfair for the husband to pay his former wife’s rent in full. Under the current arrangements, the periodical payments contributed around 60% of the wife’s rental costs and the Supreme Court decided that the wife would need to adjust her lifestyle to make up the shortfall in the future.

The judgement is more favourable to paying spouses than receiving spouses because the Supreme Court found that increasing the periodical payments would be duplication of the provision that the husband had made in 2002. This suggests that the Supreme Court was taking the approach that divorced spouses should seek to become financially independent from one another over time. In fact, the judgement says that it is misleading to describe a joint lives periodical payments order “as a meal ticket for life”.

Indeed, over the last few years judges have become increasingly reluctant to order joint lives periodical payments preferring to limit the periodical payments to a specific number of years or until their children cease full time education.

Do you need help?

The Family team at Field Seymour Parkes can assist you with an application to the court to increase or reduce periodical payments to/from your former spouse.