Two bites of the cherry in matrimonial finance … or not, rule the Supreme Court

Cara Radford examines the recent decision Supreme Court decision in Mills v Mills dealing with changes in parties’ financial circumstances several years after a divorce.

Upon the unfortunate event of a divorce, there are a number of matters that normally need to be managed – one of those being the matrimonial finances. This can be dealt with in a number of ways, for example by Court or Consent Order. In the case of Mills v Mills [2018] UKSC 38, the latter of those options was taken. In this case, the husband had a surveying business within two companies which was jointly owned by him and the wife and the wife was a self-employed beauty therapist but her work was impeded by illness.

The Consent Order, agreed in 2002, contained that the son would continue to live with the wife and that:

  • The matrimonial home should be sold;
  • The net proceeds should be divided between the couple, with the wife receiving £230,000 in settlement of all her capital claims and the husband receiving £23,000;
  • The wife should transfer to the husband her interest in policies worth £23,000 and her shares in the surveying companies; and
  • The husband should make periodical payments to the wife at the annual rate of £13,200 until she remarried or there was a further order.

The wife’s share of the house was large as it was conceded that she did not have mortgage prospects due to her being unable to work and that she needed the capital to be able to purchase a new house, mortgage free, for her and the couple’s son. However, in contrast to buying a property mortgage free, she brought one worth £345,000, obtaining a mortgage for £125,000. The wife had, by this point, started work again part time as a beauty therapist and thought that this property was the best option for her and her son.

In 2006, the wife sold the property for the same amount as which she had brought it but in those four years, her mortgage had increased to £218,000 without her being able to provide any reasonable explanation as to why. The wife then brought a second property, with a £48,000 deposit meaning that about £62,000 of the proceeds of sale were not used towards the new property.

A year later, the wife then sold the second property, making just under £100,000 in profit and brought another with a deposit of £78,000. This meant that £44,000 had, again, not been used towards the property purchase. Two years later, in 2009, the wife sold that property for £60,000 more than what she brought it for, receiving around £120,000 from the proceeds of sale. Between 2009 and 2015, the wife rented properties.

By April 2015, when the case was heard, the wife had no capital and to the contrary had debts totalling £42,000. Before the Judge, at this time, was cross applications. One from the husband to cease the periodical payments to his wife or, in the alternative, to put a time limit on them and reduce the amount. The wife, on the other hand, had applied for the payments to be increased in amount.

Section 31(1) of the Matrimonial Causes Act 1973 allows for the Court to vary any order for periodical payments; with Section 31(7) providing that the Court should have regard to any such change that would be appropriate to vary the order and enable the party in whose favour the order was made to adjust without any undue hardship due to the termination of payments.

The Judge, in this case, calculated that the wife’s income was £18,500, with her outgoings totalling £35,792. When taking into account her periodical payments of £13,200, there was a shortfall of £4,092. However, the Judge did not vary the periodical payments in any way as he found that the wife was able to buy a home mortgage free in 2002, that she had not managed her finances wisely and that the husband should not have to fully contribute to the wife’s housing needs. The judge did also not vary the length of the order and so both applications were dismissed.

Both applied to appeal, with only the wife receiving permission. The Court of Appeal ordered an increase in periodical payments to £17,292 as they felt the Judge did not explain the reasoning of why the wife should live below her budgeted outgoings.

The husband then appealed to the Supreme Court. The Supreme Court stated that the Court of Appeal erred in saying that was no reasoning in the judgment as to why the periodical payments were not increased. They felt that the question the Court of Appeal should have addressed and the one which they would address was:

“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?”

In answering this question, the Supreme Court looked at three previous Court of Appeal cases:

  • Pearce v Pearce [2003] EWCA Civ 1054, [2004] 1 WLR 68 – This case stated that there is no power or discretion to further adjust the capital to reflect unwise or unfortunate investments, on the one side or prudent or lucky investments, on the other side.

 

    1. North v North [2007] EWCA Civ 760, [2007] All ER (D) 386 (Jul) – Under Section 31, the needs of the spouse are likely to be a dominant factor but it does not follow that the other spouse is then responsible for any established needs. The other spouse should not be used as insurance against hazards.
  • Yates v Yates [2012] EWCA Civ 532, [2013] 2 FLR 107 – Where the need to pay the mortgage arose from the wife’s choice not to apply the lump sum in discharging the mortgage, the financial consequences of this were then seen to be her responsibility. It was found that it would be wrong in principle for the husband to have to continue to fund the mortgage.

 

The wife, in the Mills case, tried to establish a distinction between rent payments and the mortgage payments discussed in Pearce and Yates; which the Supreme Court rejected. She further submitted that these cases were claiming for a lump sum payment that was more reflective of a second claim for capital, rather than an increase in periodical payments. This, again, was rejected by the Supreme Court who founded that the above three cases were properly decided.

The Supreme Court set aside the Court of Appeal order, stating that whilst a spouse may have obligation to provide provision for the other, an obligation to duplicate in such circumstances, is most improbable.

This shows that the Supreme Court will not accept ‘two bites of the cherry’, as it might be put and that if there is no good reason otherwise, spouses are not obliged to duplicate provision for the other.

Specialist advice on financial provision following divorce or separation can be obtained from members of Becket Chambers – speak to the clerks for further information.

Cara Radford is a Pupil barrister in Becket Chamber, presently undertaking her first six pupillage.

Cara Radford

November 2018