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Zahra Pabani
Zahra Pabani
Partner - Family Law
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Mills v Mills: Fairness over needs: Taking the ‘cherry’ out of the ‘meal ticket’
Date:26 JUL 2018
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Senior Associate Solicitor
Many family lawyers (including me) are starting to put the 'meal ticket for life' phrase in the same bracket as 'quickie divorce' and 'common law spouse'. It cropped up again in the Supreme Court case of Mills v Mills [2018] UKSC 38 with Lord Wilson stressing that it is both misleading and unattractive to refer to a joint lives maintenance order in such a way.

Of course the issue which the Supreme Court had to determine in Mills was not the merits or otherwise of a joint lives order, but the narrower point concerning whether Mr Mills should have to pay increased maintenance to cover the whole of Mrs Mills’ monthly rental payments in circumstances where provision for her housing had already been made by virtue of the capital settlement which formed part of the original consent order in 2002. 
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Background

The facts, briefly stated, are that Mr and Mrs Mills married in 1987 and had one child (now an adult). Mrs Mills was a qualified beauty therapist but suffered health problems following a late miscarriage in 1996 which had impacted on her ability to work for a time. Mr Mills was a surveyor and there were two companies in which husband and wife were equal shareholders. The parties separated in 2000. 

A financial consent order was agreed whereby Mrs Mills received £230,000 from the proceeds of sale of the family home. Mr Mills received £23,000. An endowment was transferred to Mr Mills and he was to pay maintenance of £13,200 per year. 

Mrs Mills had asserted her housing need to be £350,000 so she could live in the area she wanted but Mr Mills said she could buy a mortgage free property for £230,000 in the vicinity of the former family home. 

Mrs Mills purchased a property in Weybridge for £345,000 with a mortgage of £125,000 which by the time she came to sell the property had increased to £218,000. She could not give the judge an adequate explanation of why the mortgage had increased to this extent. She went on to purchase a series of properties with increasing mortgages and decreasing equity until by the time of the hearing she had no capital left and had debt of about £42,000. She was living in rented accommodation. 

The first instance ruling

Mr Mills applied to reduce the periodical payments and for a term order. Mrs Mills applied to increase the maintenance as she could not afford to meet her regular outgoings including the rent. The matter was heard in April 2015 by Judge Everall QC. 

The judge found that Mrs Mills could earn about £18,500 net per year from her work as a beauty therapist and that although she could now work more hours, it was unlikely she could attract more clients. Mr Mills was earning about £55,000 from his surveying company to include the salary that was drawn by his second wife. He was living in a jointly owned mortgaged property with his wife and their nine year old son and his wife’s adult daughter. It was not part of his case that he could not afford to pay the additional maintenance.

The first instance judge found that Mrs Mills’ evidence as to the depletion of her capital was inadequate. He noted her needs of £35,792 (of which £10,200 was for rent) were conservatively stated and that without the additional maintenance from Mr Mills she would have a shortfall of just over £4,000. However he declined to either increase or reduce the periodical payments and he did not impose a term, considering that he could not identify a period of time in which the wife could adjust without undue hardship to the termination of payments.

The effect, if none of Mrs Mills’ income was applied towards her rent, is that the maintenance from the husband was effectively covering about 60% of the rent. 

The appeals 

Both parties sought to appeal the order but Mr Mills was not given permission. The Court of Appeal considered that the judge had not given any reason for not increasing the maintenance to meet Mrs Mills’ accepted basic needs and ordered the increase of maintenance from £13,200 to £17,292. 

Having not been given permission to appeal certain matters before the Court of Appeal, the grounds on which Mr Mills could appeal to the Supreme Court were very limited. Indeed he was permitted to appeal on a single ground the point of principle that he should not have to fund monthly rental payments for his former wife when she had already had a large slice of the liquid capital generated during the marriage and from which her housing need should have been met. Although his legal team wanted to raise wider arguments, the Supreme Court restricted them to this narrow issue. 

The Supreme Court’s judgment

Lord Wilson gave the single unanimous judgment. He noted that the judge had given reasons for his decision not to vary the maintenance; he had found:
i) the award in 2002 would then have enabled the wife to buy a home free of mortgage;
ii) it had however been reasonable for her to be ambitious and to secure a mortgage for the purchase of the house in Weybridge;
iii) thereafter she had not managed her finances wisely;
iv) like others at that time, she had committed herself to borrowings which were too high;
v) it would be wrong to describe her approach to finances as profligate or wanton;
vi) but her needs had been augmented by reason of the choices which she had made.

In the light of those findings the judge decided it was fair for the husband to meet part but not all of the wife’s rent. 

The cases central to the arguments were the Court of Appeal cases of North, Yates and Pearce, and the Supreme Court confirmed that they had been correctly decided: 
In Pearce v Pearce [2003] EWCA Civ 1054, [2003] 2 FLR 1144. The wife had sold and depleted the proceeds of a mortgage-free flat on a speculative venture. She then required a mortgage when she returned to London. The wife sought capitalisation of her maintenance and on appeal the Court of Appeal removed the wife’s mortgage payments from her budget before capitalising the maintenance because the wife’s mortgage was not to be discharged at the husband’s expense as this amounted to a forbidden further adjustment of capital. 

In North v North [2007] EWCA Civ 760, [2008] 1 FLR 158 the wife applied to increase a nominal maintenance order. The consent order in 1981 had provided her with a mortgage-free house in Sheffield and a comfortable income from ground rents. The wife sold her assets and moved to Sydney with “relatively disastrous” financial consequences. The Court of Appeal set aside an order capitalising maintenance in the sum of £202,000 and apparently substituted a substantially lower figure. Thorpe LJ said that the husband should not be liable for needs created by the wife’s financial mismanagement, extravagance or irresponsibility. Here the wife’s choices had created a need for which the husband should not have to be responsible. 

And finally in Yates v Yates [2012] EWCA Civ 532, [2013] 2 FLR 1070 the wife had received a substantial lump sum on the basis that she would use half of it to discharge a mortgage on her home. She had repaid only part of the mortgage debt and had invested the remainder in a non-income-bearing bond. The Court of Appeal held that the judge’s inclusion of mortgage interest in capitalising the maintenance had been wrong. Again the court considered the wife’s choices were her responsibility and as a matter of principle she could not look to the husband to fund the mortgage. 

It was argued on behalf of Mrs Mills that these cases should be distinguished from the present because they concerned the payment of mortgage rather than rent and they were also capitalisation cases and therefore more akin to an impermissible second claim for capital. The wife in this case would not be building up equity in a property. That argument was rejected. Mr Mills argued that the wife was effectively seeking a second bite of the cherry and that, in line with the Court of Appeal cases, he should not be the insurer against her financial misfortune. 

The Supreme Court acknowledged that a court would be entitled, in its broad discretion to vary periodical payments under s 31, to decline to increase a wife’s maintenance in circumstances where she had been awarded capital to meet her housing need but exhausted that to the extent that she had a need to pay rent. Although the court did not go so far as to say it would be obliged so to decline, Lord Wilson noted that 'a court would need to give very good reasons for requiring a spouse to fund payment of the other spouse’s rent' in such circumstances. '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.' 

The Court of Appeal’s order was set aside and Judge Everall QC’s order restored.

Discussion 

There were initially cries of 'the end to the meal ticket for life' from certain media quarters, but this judgment addresses a far narrower issue than the question of joint lives maintenance. Indeed Mrs Mills still has a joint lives maintenance order, but she was not allowed a second bite of the capital cherry. 

As is apparent from the three Court of Appeal cases referenced above, this is not a novel issue. The Supreme Court has now cemented the position that it is unfair for there to be double recovery. It makes no difference whether it’s a question of capitalisation or variation of maintenance – if housing/mortgage needs have been addressed through the capital element of the settlement then the paying party should not generally have to meet those costs again via maintenance (capitalised or on-going). 

So although we are used to needs being absolutely central to the exercise of discretion, they do not trump all. Fairness will almost certainly demand that there should not be duplication of provision, even if this will cause hardship. 

Clearly the court retains a wide discretion on a variation application and the Supreme Court does not rule out the possibility of maintenance being paid to cover housing costs, but very good reasons will be required. It seems likely that where there has been an element of choice in the way the capital settlement has been applied and so the additional need generated is the result of investment/lifestyle choice rather than a blameless catastrophe, it is extremely unlikely that the court will expect the other party to meet that need. There are bound to be grey areas, but it is clear that if an individual receives capital intended to provide for their housing, they would be well advised to invest it wisely and not expect a safety net if they don’t use it for that purpose – something IFAs advising divorcing parties should be aware of. 

As Lord Wilson noted, it is somewhat arbitrary to attribute all of the wife’s earned income to meeting her needs other than rent, and consequently deduce that the maintenance paid by the husband is meeting, in this case, 60% of the rent leaving a 40% shortfall (rather than a £4,000 shortfall on her other needs). However if one assumes that the maintenance was effectively paying 60% of the rent, there is double recovery to that extent. In this case the judge had exercised his discretion and concluded it was fair that Mr Mills should have to meet some but not all of Mrs Mills’ rent. 

Whilst there is no question the maintenance should not have been increased to meet the whole of the additional rental need, there remain some interesting questions to muse upon: 
1.If the wife’s earned income was lower such that the existing maintenance did not meet any of her rent after her other needs, would a court increase the maintenance to cover part of her rent or leave her with the full £10,200 shortfall? Is significant hardship a good enough reason?
2.And had Mr Mills been able to argue before the Supreme Court that he should not have had to pay any of the wife’s rent at all and therefore that the maintenance payments should be reduced, might he have succeeded, despite the fact that this would have left the wife in a situation of significant need? 
3.Or in a situation where needs are not fully met will the court generally stop short of reducing maintenance, even if part of it is notionally being used to cover a second round of housing costs? 

Although the Supreme Court deals with the double recovery matter in principle, it remains to be seen whether the court would allow an applicant to suffer significant hardship in practice. The narrow basis of the appeal meant this did not have to be grappled with, let alone broader issues.

It is understood that Mrs Waggott is seeking to appeal to the Supreme Court (from Waggott v Waggott [2018] EWCA Civ 727). This case is at the other end of the spectrum – there is no question of either party suffering hardship, however it raises issues of joint lives versus term maintenance and amortisation of capital. No doubt the “meal-ticket-for-lifers” will be paying close attention.
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