Mills & Bust: Financial Mismanagement After Divorce
The Supreme Court has ruled on the case of Mills and Mills, and family practitioners have been taking note of what the court has had to say on the issue of spousal maintenance payments.
On divorce, courts have the power to order one spouse to pay the other a certain amount of money, usually on a monthly basis, in order to meet their need. The exact amount payable, and the length of time for which the money is to be paid, is a matter of negotiation or determination in each case. Court are encouraged to bring these payments to an end as soon as possible, and maintenance should only be payable if the recipient cannot adjust without “undue hardship”, suggesting some degree of hardship is permissible.
A characteristic of maintenance is that it is always variable in the future, and a change of circumstances can lead to the payment going up, down or being terminated altogether.
That was the issue that engaged Mr and Mrs Mills. Their finances had been settled in 2002. Mrs Mills received £230,000 (being the bulk of the available capital) and £13,200 per annum maintenance on a joint lives basis , meaning it was paid until one party died, Mrs Mills remarried, or the court terminated the payment sooner.
Mrs Mills used the money, and a mortgage, to buy a new property. Over the following years, she sold and bought a number of properties. On each occasion, the properties purchased were more expensive than the one sold, and the mortgage increased. Additionally, not all the sale proceeds were utilised in the purchase.
Eventually, she sold and began to rent. She had no capital left, and debts of around £42,000.
She asked the court to increase the payments her husband was required to make to help meet her increased living costs. The husband asked for the payments to be brought to an end.
The judge dismissed both applications, and ordered that the payments continue at the same rate. The judge found that while Mrs Mills could have purchased mortgage free had she chosen, she was entitled to borrow on a mortgage if she wished, and although her financial management had not been wise, it had not been wanton.
Nonetheless, the judge found her needs had increased as result of her own choices. Mr Mills was found to still need to contribute towards her needs, but his payment was not increased.
Both parties appealed to the Court of Appeal. The Court of Appeal said that the judge had not given sufficient reasoning about his assessment of the wife’s needs, and increased the payment to just under £17,300 per annum, and included an element of backdating.
Mr Mills appealed to the Supreme Court, and the Supreme Court has now agreed with him. In a concise, unanimous judgment, the Supreme Court reviewed cases where there had been financial mismanagement by one party, and the decision of the original judge was restored, finding the judge had given proper reasoning for his decision.
As always with family law, each case turns on its own facts, but this case continues a judicial trend where separated couples have to strive for independence from each other on divorce. Keeping a party “in the manner to which they have become accustomed” or providing a “meal ticket for life” is not what couples can expect.
While parties are free to do what they like with their money, they cannot expect their former spouse to bail them out of difficulty if they make unwise choices in the money management decisions they make after their divorce.