In July, the UK Supreme Court made a ruling regarding periodical payments. In this case, it means that a divorced husband does not have to increase payments to his ex-wife after she mismanaged her finances following their split
- Financial proceedings were resolved with a consent order giving £230,000 from the net proceeds of the former matrimonial home to the wife in settlement of all capital claims against the husband. The order also provided that the husband should make periodical payments to her at the annual rate of £13,200 during their joint lives until her re-marriage or further order.
- The wife purchased a house for £335,000 with a mortgage of £125,000. She kept this house for four years before selling it and renting accommodation. 13 years later, she had no capital, overdrafts, credit card liabilities and tax liabilities totalling £42,000 debt.
- The husband applied to the Family Court to discharge the order for periodical payments, or a downwards variation of the payments. The wife applied to Court at the same time for an upward variation.
When reviewing a periodical payments order, the Court must look at all the circumstances in the case and any change in the facts of the case since the original order for periodical payments was made. After looking at these factors, the Court must decide whether it would be appropriate to vary the order.
The Judge at the first hearing looked at the wife’s loss of the sum of £230,000 (awarded to her originally) and said that this would have enabled her to buy a mortgage-free home, but she had not managed her finances wisely. Therefore, the Judge allowed there to be a shortfall of £4,092 between the wife’s needs of £17,292 and the husband’s obligation to meet that shortfall. He found it fair that the husband’s contribution to the wife’s needs did not fully meet her housing costs but as the husband could afford to make periodical payments at the annual sum originally set, the order should continue. The Judge dismissed both applications.
The wife went to the Court of Appeal, which allowed her appeal to vary the periodical payments order. The Court of Appeal increased the payments to £17,292.
The husband then appealed to the Supreme Court. The Court asked whether it was entitled to refuse to increase the periodical payments order to fund payments of the wife’s rent in circumstances where the wife had lost the capital sum originally awarded to her by bad financial management, thus creating the need to pay rent. The Court decided it was entitled to decline to increase the periodical payments order but not obliged to and it had a wide discretion. The Court said it would need to give very good reason to require one spouse to fund payments for another spouse’s rent in the circumstances of this case. The Supreme Court set aside the order of the Court of Appeal and restored the original Judge’s order for the payments to continue at the same rate.
- The Court has a wide discretion when determining whether or not to vary periodical payments upwards or downwards.
- The Court will not view financial mismanagement kindly. Bad financial management resulting in debt and difficult financial circumstances is unlikely to be a good enough reason to have a periodical payments order varied upwards.
- The paying spouse’s ability to afford continued payments is an important factor in a Court’s determination of any variation, as is the adjustment of the receiving spouse to a cessation of periodical payments.
If you have any queries about this article or financial settlements on divorce, please do not hesitate to contact [email protected]