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19 July 2018

Landmark court ruling: Mr and Mrs Mills

It has been said by some commentators that the making of lifetime maintenance orders is on the wane and that, in future, a spousal maintenance order which comes to an end only on either the death of either party or the re-marriage of the recipient will be less common. However, many such orders remain in force and can often run for many years.

The court has the power to vary a maintenance order whilst it is in force both upwards and downwards. It is often thought that this power which enables the court to vary an order to reflect changing circumstances over time is a valuable one but it can, for reasons that are self-evident, result in litigation between people long after their marriage has ended. Such court applications rarely get beyond a decision of a first instance judge but the dispute between Mr and Mrs Mills has very recently reached the Supreme Court.

Background

Mr and Mrs Mills were married for 15 years and divorced in 2002. A financial order was made by consent at the time of the divorce which provided that Mrs Mills would receive £230,000 in settlement of her capital claims. It was also agreed that Mr Mills would pay periodical payments at the annual rate of £13,200. Apparently Mr Mills’ expectation was that Mrs Mills would use the capital sum to purchase a suitable home for herself and their son without a mortgage. For her part Mrs Mills had maintained that she needed £350,000 to re-house. In the event Mrs Mills was able to take out a mortgage and purchase a home for £345,000. Between 2002 and 2009 she sold and bought a series of properties and, with each acquisition, the amount borrowed increased. Moreover, she did not necessarily reinvest all of the sale proceeds from one property into the next but seemingly spent the balance. This resulted in her capital base decreasing over time. Eventually in 2009 Mrs Mills sold her final property and started to rent. By April 2015 Mrs Mills had no capital but had debts of around £42,000.

First judge’s decision

Mr and Mrs Mills both made applications to the court. Mr Mills sought an order either discharging the original periodical payments order or varying it downwards. Mrs Mills applied for the level of payments to be increased. The matter came before the court in April 2015 and the judge noted that there was a shortfall of £4,092 per year between Mrs Mills’ current needs and, when coupled with her own earnings, the existing level of maintenance payments. He also held that, although the wife’s actions had not been profligate, she had not managed her finances wisely and her current financial needs, in particular her need to rent, had been increased by the choices she had made. The judge therefore considered that it would be unfair to Mr Mills if he had to make a full contribution to his former wife’s rental costs. As a result, he declined to vary the order for periodical payments either upwards or downwards. The result was that Mr Mills would continue to contribute to around 60% of Mrs Mills’ rental costs, and she would have to adjust her expenditure to accommodate that shortfall.

The judge exercised a discretion vested in him by the relevant statute. The relevant statutory provision directs that the judge ‘shall have regard to all the circumstances of the case, … [which shall include any change in any of the matters to which the court was required to have regard when making the order to which the application relates…’. The court also has to consider whether it would be ‘appropriate to vary the order so that payments under the order are required to be made… only for such further period as will in the opinion of the court be sufficient… to enable the party in whose favour the order was made to adjust without undue hardship to the termination of those payments’. The judge is therefore required to address his or her mind to the question of whether the original order should be limited in time.

Court of Appeal

Successful appeals against such exercises of discretion are not commonplace but in this case, Mrs Mills successfully appealed to the Court of Appeal. The Court of Appeal decided that the original judge had not given sufficient reasons why all of the wife’s basic needs should not be met by the periodical payments from Mr Mills and decided to increase the level of maintenance to cover the shortfall, ie to £17,292 per year. This prompted Mr Mills to appeal to the Supreme Court which handed down its decision on 18 July.

The Supreme Court

The decision of the Supreme Court may comfort husbands who find themselves in a similar situation to Mr Mills but caution is needed. Mr Mills was only granted permission to appeal to the Supreme Court on one ground namely whether, in the light of the fact that provision had already been made for Mrs Mills’ housing needs in the original order, the Court of Appeal was entitled to interfere with the judge’s decision not to increase the periodical payments so as to cover all the wife’s current rental costs.

The Supreme Court was unanimous in its view that the Court of Appeal had erred in saying that the judge had given no reason for declining to increase the order for periodical payments. The judge had given a clear reason, namely that the wife’s unwise decisions in relation to her capital had increased her basic needs by requiring her to pay rent, and that it was consequently unfair to expect the husband to meet these increased needs in full. The Supreme Court explained that the Court of Appeal should have considered the impact of the original capital payment on Mrs Mills’ current need to pay rent and should have been guided by earlier authorities. In the light of these earlier cases the judge was entitled, although not obliged, to decline to require the husband to fund the payment of the rent in full. The Supreme Court also thought that the court would need to give very good reasons for requiring a spouse to fund payment of the other spouse’s rent in the circumstances of this case. A spouse may well be obliged to make provision for the other spouse, but an obligation to duplicate that provision in situations such as this was improbable.

A few words of caution

  • As mentioned, the appeal was on a very narrow point. Cases of this type remain fact sensitive and a different set of facts may well have produced a different outcome. The decision was specific to the case.
  • The decision does not bring to an end Mr Mills’ maintenance obligations. He still has to pay maintenance to his former wife just not at the rate she was claiming.
  • Litigation of this type remains expensive and the outcome can often be uncertain. Depending upon the amount of maintenance in dispute, it may be necessary to consider whether or not it is cost effective to bring or defend a claim. The only effective way to prevent further litigation long after a divorce is to seek to secure a clean break order at the time of the divorce but this is not always possible. In many instances there is simply not sufficient capital available to both meet the parties’ housing needs and ensure that the financially dependent spouse does not need to be reliant on the other into the future for income support.

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