Upward variation of periodical payments after the recipient’s financial recklessness. A political hot potato

The case that has caught the attention of the sensationalist press recently is that of Graham and Maria Mills. Divorced in 2002, Mrs Mills was at that time awarded a lump sum of £230,000 and periodical payments of £1,100 p.c.m.. Some 15 years later, the Court of Appeal was considering her application to vary the monthly payments upwards under s.31 of the Matrimonial Causes Act 1973.  Whilst the judgment is not yet available, it seems likely that the original periodical payments order was a joint lives order.

The application for the increase in her payments was on the back of Mrs Mills having made poor investment decisions and ending up in rented accommodation, unable to meet her basic needs. She had purchased a series of properties in London, over-financing herself on each occasion and with nothing to show for the money received in 2002.

Despite strong opposition from the husband through his counsel, Philip Cayford QC, on the basis that the wife must become independent and that it was not for Mr Mills to bail her out, the Court of Appeal upheld the increase in the payments to £1,441 p.c.m. This order was understandably unpopular with Mr Mills, who has since remarried and has a new family. It is also, it appears, unpopular with the popular press.

The judgment will make interesting reading. At first glance the decision appears to be somewhat at odds with the general principle that the payer is not responsible for financial risks taken by the payee.  In North v. North [2008] 1 FLR 158, Thorpe LJ said as follows:

“The order must be fair both to the applicant in need and to the respondent who must pay. In any application under Section 31 the applicant’s needs are likely to be the dominant or magnetic factor. But it does not follow that the respondent is inevitably responsible financially for any established needs. He is not an insurer against all hazards nor, when fairness is the measure, is he necessarily liable for needs created by the applicant’s financial mismanagement, extravagance or irresponsibility. The prodigal former wife cannot hope to turn to a former husband in pursuit of a legal remedy, whatever may be her hope that he might out of charity come to her rescue” (emphasis added).

That case was on similar facts. The wife had received capital provision allowing her to buy a house, and assets which produced an income of £6,000 p.a.  A nominal periodical payments order was made in favour of the wife for the parties’ joint lives.  Some 19 years later, the wife moved to Australia, invested badly and made losses.  Meanwhile the husband had remarried and his wealth had increased.  The wife sought to increase the periodical payments order.  The husband sought the dismissal of the nominal order altogether.

At first instance a judge had ordered that the wife should receive £16,500 p.a. from the husband, which was capitalised to a lump sum of £202,000. The Court of Appeal disagreed.  While no decision was made on the quantum of any order (as the court had not heard submissions on the point) May LJ noted that all of the reasoning pointed to “no significant payment or a much lower one”.

In trying to square the two decisions, regard must be had to the statute. The criteria which the court applies on a variation application are contained within s.31(7) of the Matrimonial Causes Act 1973.

“In exercising the powers conferred by this section the court shall have regard to all the circumstances of the case, first consideration being given to the welfare while a minor of any child of the family who has not attained the age of eighteen, and the circumstances of the case 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, and—

  1. in the case of a periodical payments or secured periodical payments order … the court shall consider…whether in all the circumstances and after having regard to any such change it would be appropriate to vary the order so that payments under the order are required to be made or secured 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” (emphasis added).

That section clearly envisages a move towards financial independence, while retaining the court’s discretion by providing for consideration of “all the circumstances of the case”.

So what hope for those seeking finality years after a divorce? It is certainly true that in both cases the husbands had prospered: Mr North’s wealth had increased and Mr Mills was reportedly drawing £200,000 p.a. in dividends from his company. This would suggest that, whatever the reason for their financial failures, the wives’ needs were the ‘magnetic factor’.  In the context of Mr Mills’ wealth, an award of £17,280 p.a. might seem reasonable.

Alternatively it may come down to matter of public policy. If, without such an award, Mrs Mills would be reliant on the State, is it not reasonable that her wealthy former spouse should support her rather than the public purse?  Such an argument has echoes of the much-criticised decision in Illot v. Mitson [2015] EWCA Civ 797 under the Inheritance (Provisions for Family and Dependents) Act 1975 which is soon to be considered by the Supreme Court.

In any event the issue now appears to be a political one. A number of comments made by Philip Cayford QC appear to have been directed more towards MPs than the Lords Justices.  “There is a social change going on”, he declared, while asking for a change in the law to limit spousal periodical payments to a maximum of five years.

No doubt he is alluding to Baroness Deech’s private member’s bill which asks for a five-year maximum term save in exceptional circumstances. In a recent exchange, she spoke of the judiciary’s “preference for individual tailor-made solutions” being “unaffordable”.  No doubt Mr Mills would agree.

This battle looks set to run and run, but in the meantime the popularity of term orders and section 28(1A) bars is likely to increase with those representing the wealthier spouse.

Holly Coates is a member of the Becket Chambers Family Finance team.