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12 SEP 2018

Meal ticket for life?

David Burrows

Solicitor Advocate

@dbfamilylaw

Meal ticket for life?

The recent ‘meal ticket for life’ Supreme Court case of Mills v Mills, [2018] All ER (D) 107 (Jul) (18 July 2018) operates on three levels:

  • variation of periodical payments (‘meal ticket for life’);
  • capitalisation of periodical payments; and (hovering in the background); and
  • the extent of an appellate court’s interference with a first instance judge (in this case His Honour Judge Mark Everall QC sitting in the Central Family Court).

The Supreme Court appeal related to the application of Mrs Mills (W) to vary periodical payments which had been part of a consent order made in 2002; and the application of Mr Mills (H) to capitalise the periodical payments the consent order required him to pay (H was refused permission to appeal to the Court of Appeal on his application). Underlying all this must be the question: why did the case go to the Court of Appeal when it was an appeal against the discretionary decision of a judge? (Matrimonial Causes Act 1973 (MCA 1973), s 31).

The question raised by the Mills appeal was summarised by Lord Wilson at [1]:

‘In circumstances in which at the time of a divorce a spouse, say a wife, is awarded capital which enables her to purchase a home but later she exhausts the capital by entry into a series of unwise transactions and so develops a need to pay rent, is the court entitled to decline to increase the order for the husband to make periodical payments to her so as to fund payment of all (or perhaps even any) of her rent even if he could afford to do so?’

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H succeeded on W’s periodical payments variation issue, in that his appeal was allowed and the judge’s order restored (though it is difficult to see how W will pay the costs which he is likely to be awarded: a Pyrrhic victory seems inevitable for H). The capitalisation point was largely ignored (a net, and perhaps more serious, loss to H). He does not seem to have been given an answer to the question he was entitled to ask: ‘Why was I ever before the Court of Appeal or in the Supreme Court when the first judge was applying his statutory discretion to the variation issue?’

On 7 June 2002 a divorce financial consent order required that:

  • the parties jointly owned home should be sold;
  • its net proceeds should be divided to give W £230,000 in settlement of her capital claims against H and £23,000 for him;
  • W should transfer to the husband her interest in policies worth £23,000 and her shares in H’s companies; and
  • H should pay periodical payments to W at £13,200 per annum (not index-linked) during their joint lives, until her remarriage or further order.

W said that ill health disabled her from working. Later in 2002, W bought a house, £345,000 with her capital and a mortgage of £125,000. H expressed surprise through his solicitors. By this time W was working again, part-time, as a beauty therapist. Four years later she sold the house, by which time the mortgage had risen by £93,000 to £218,000—circumstances not satisfactorily explained to the judge. HHJ Everall found that W had been unable satisfactorily to explain why the sum owing had increased. W then moved to flats in Wimbledon and Battersea: there the price was £520,000 and a mortgage of £442,000. In 2009 W sold the flat in Battersea for £580,000 and began to rent accommodation. The judge calculated that, after repaying the mortgage of £442,000 and meeting the collateral costs, she received about £120,000 from the proceeds of sale.

By April 2015, when the judge heard the case, W had no capital. She had overdrafts of £4,000, credit card liabilities of £18,000 and a tax liability of about £20,000.

Cross-applications before the judge

The judge heard cross-applications. H applied for discharge of the order for periodical payments on his payment to the wife of a modest capital sum, say of £26,000; or for a fixed period to be set on her continued receipt of periodical payments and/or for a downwards variation of their amount. W applied for an increase of periodical payments. HHJ Everall said W been unable to give him a clear picture of her financial circumstances. He ascribed to her net earnings of around £18,500 per annum. H gave reliable and truthful evidence in all respects and ascribed to the husband an existing net annual income of £55,000 inclusive of a small salary which one of the companies chose to pay to his current wife.

W’s then counsel put before the judge a breakdown of what he suggested to be the amount of her necessary annual expenditure. The judge accepted it as ‘very modest’. Exclusive of figures referable to the adult son, the annual total was £35,792, of which £10,200 was for rent. Following deduction of her earnings of £18,500, the wife’s annual need was therefore for £17,292.

So, said Lord Wilson (with whom the other four Supreme Court Justices agreed) [18]: ‘The judge’s decision was not to vary, whether upwards or downwards, the existing order for periodical payments in the annual sum of £13,200. In other words he countenanced a shortfall of £4,092 between the wife’s annual need and the husband’s obligation to meet it. Why?’ The answer, said Lord Wilson, ‘lies in the judge’s analysis of the wife’s loss of the capital sum which had been awarded to her in 2002’ (at [19]). He listed, at [20], the factors which the judge found in support of his decision, including:

  • the original award in 2002 ‘would then have enabled the wife to buy a home free of mortgage’;
  • she had not managed her finances wisely, and committed herself to borrowings which were too high;
  • it would be wrong to describe her approach to finances as profligate or wanton;
  • her claimed needs had been augmented by reason of the choices which she had made.

The judge held that ‘it was fair that the husband’s contribution to the wife’s needs should not include a full contribution to her housing costs’. H could afford to continue to make periodical payments in the annual sum of £13,200 and there should be no capitalisation. In a short judgment the Court of Appeal said the wife should have the increase she asked for: from £1,100 to £1,441 per month. The Supreme Court disagreed: ‘A spouse may well have an obligation to make provision for the other; but an obligation to duplicate it in such circumstances is most improbable,’ said Lord Wilson at [40].

The law & the ‘meal ticket for life’

The law in MCA 1973 on periodical payments, ie maintenance, has been developed substantially since the introduction of the 1973 Act, notably by the ‘clean break’ provisions introduced by Matrimonial and Family Proceedings Act 1984 (MFPA 1984). Lord Wilson refers to MCA 1973, ss 31(1) and 31(7). Section 31(7) sets out that on a variation application the court takes into account the factors taken into account also when an order is made (including, as here, a consent order)—namely MCA 1973, s 25(2) (factors to be taken into account when making a financial order). On considering a variation application, the court takes into account 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’ (MCA 1973, s 31(7) amended by MFPA 1984).

These last words must be read in parallel with other ‘clean break’ provisions introduced into MCA 1973, namely s 25A(1) and (2) (added by MFPA 1984), namely that where the courts are considering a financial relief order: ‘(1) … it shall be the duty of the court to consider whether it would be appropriate so to exercise those powers that the financial obligations of each party towards the other will be terminated as soon after the grant of the decree as the court considers just and reasonable’ and ‘(2) … [and in particular] the court shall…. consider whether it would be appropriate to require those payments to be made or secured only for such term as would in the opinion of the court be sufficient to enable the party in whose favour the order is made to adjust without undue hardship to the termination of his or her financial dependence on the other party.’

For periodical payments and variation of periodical payments this goes back to Ringo Starr’s S v S [1986] Fam 189, [1987] 1 FLR 71, [1986] 3 All ER 566 when Waite J enabled him to pay a capital sum to buy off his first wife’s periodical payments. S v S is referred to in Pearce v Pearce [2003] 2 FLR 1035, CA, which in its turn, is referred to by the Supreme Court in Mills at [36]. These cases refers to the next stage of the variation process: what the court has power to do in terms of capitalisation, such as payment of a lump sum (s 31(7B)(a)). On the basis of these cases it seems harsh on H that he was not given an opportunity to find a phased way to buy off W (see MCA 1973, s 31(7B)). This would be an answer to the journalist’s inaccurate characterisation of a spouse’s entitlement to periodical payments under MCA 1973 as a ‘meal ticket for life’.

Discretion of the judge

And why was Mr Mills in the Supreme Court at all? As Lord Wilson shows, HHJ Everall’s reserved judgement was carefully explained. All financial relief under MCA 1973, Pt 2 is based on the discretion of the judge—the ‘court shall have the power’ etc. Time and again appellate courts have stressed the need to accord to first instance judges their full powers and not to interfere on appeal. For example in Piglowska v Piglowski [1999] 1 WLR 1360, [1999] 3 All ER 632 Lord Hoffmann said: ‘In G v G (Minors: Custody Appeal) [1985] 1 WLR 647 [1985] FLR 894, 898G, this House, in the speech of Lord Fraser, approved the following [from] Bellenden (Formerly Satterthwaite) v Satterthwaite [1948] 1 All ER 343, 345, which concerned an order for maintenance for a divorced wife: 

“It is, of course, not enough for the wife to establish that this court might, or would, have made a different order. We are here concerned with a judicial discretion, and it is of the essence of such a discretion that on the same evidence two different minds might reach widely different decisions without either being appealable. It is only where the decision exceeds the generous ambit within which reasonable disagreement is possible, and is, in fact, plainly wrong, that an appellate body is entitled to interfere.”’

Lord Wilson touches on ‘the wide discretion conferred upon’ a court by MCA 1973, s 31(1) and (7) ‘in determining an application for variation of an order for periodical payments’ (at [40]). It is disappointing that in his very short (17 paragraph) judgment allowing W’s appeal, Sir Ernest Ryder P made no reference to the discretionary nature of the judge’s decision; and of the need for caution in allowing an appeal against a discretionary decision. Nor did he remind himself of Piglowska (above) and of the House of Lords’ decisions referred to there by Lord Hoffmann.

This article was first published in New Law Journal.