A Clean Break on Divorce?

The English courts are moving away from the traditional needs-based approach to deciding spousal maintenance applications, explains Caroline Park

Whilst the division of capital on a divorce has a greater degree of predictability following a series of landmark cases beginning in 2000, the law dealing with periodical payments, colloquially known as maintenance, suffers from greater inconsistency and unpredictability, making it difficult to give clients definitive advice.

Determining maintenance should be relatively simple. There is a clear directive in the Matrimonial Causes Act 1973 (MCA 1973) for the court to consider whether a “clean break” can be achieved. In clean break cases, no spousal maintenance is paid (child maintenance is dealt with separately).

The relevant provision is section 25A(1) MCA 1973. It states that the duty of the court is “to consider whether it would be appropriate … that the financial obligations of each party towards the other will be terminated as soon after the grant of the decree as the court considers just and reasonable”.

If the court decides to make a maintenance order, under section 25A(2) MCA 1973 it must consider imposing a term sufficient to allow the financially weaker party to reach financial independence without “undue hardship”.

A short read of this legislation suggests that maintenance payments should play a relatively limited role in divorce settlements but the reality has been somewhat different.  Guidance is lacking on determining the specific amount and duration of payments and this is left entirely to judicial discretion.

The court’s powers

Many countries take a strict approach to the question of maintenance.  For example, in France aside from a compensatory payment on separation there is generally no ongoing maintenance, in Scotland maintenance payments are for a maximum of three years other than in exceptional circumstances, and in Canada maintenance is calculated by formula.

By contrast, in England the judiciary enjoys broad powers and significant discretion. As a result, the statutory steer in section 25A MCA 1973 has become complicated by layers of judicial interpretation.

The seminal case of Miller v Miller; McFarlane v McFarlane [2006] UKHL 24 created the three guiding principles of “needs”, “compensation” and “sharing” in determining the quantum of ancillary relief (now known as financial remedy) claims. Other than in limited circumstances, the key concept for determining a maintenance order is that of “needs”. This remains an elastic concept.  Applicants are consequently encouraged to produce generous assessments of their needs during financial disclosure to try to push the outcome to the upper end of the bracket.

The types of maintenance orders in this country are equally broad. The most clear-cut is a clean break, either on the basis that no spousal maintenance is ever paid or because the maintenance obligation is capitalised and satisfied instead by a lump sum payment. At the opposite extreme is maintenance on a “joint lives” basis whereby maintenance is payable (in the absence of a further order of the court) until death or until the receiving party remarries.

Between these two extremes, Judges can order maintenance of a nominal sum of say £1 per annum to leave the door open for a further application if necessary or maintenance for a term either for a set number of years with no possibility of an extension or so that the recipient is entitled to ask the court to extend that term if necessary.

Despite the range of possible orders, for many years the perception has been, especially in the London courts, that a “joint lives” maintenance order is the norm. The rationale being that if financial circumstances change (e.g. as a result of retirement, ill-health or unemployment) the maintenance order can be varied.

This approach has attracted attention and criticism. It has fuelled the English courts’ reputation for generosity and has resulted in repeated attacks that our system produces a culture of “meal tickets for life” on divorce.  There are, however, signs that change is afoot.

A changing approach?

The Law Commission has recognised the difficulties arising from regional variations and the emphasis on needs which leads to unpredictability in outcome.

In 2014, in their report entitled Matrimonial Property, Needs and Agreements (Law Com No 343), they recommended measures to make it easier to assess and agree financial needs and proposed a feasibility assessment of a formula-based approach. Whilst this approach is unlikely to be adopted now, it is a bold suggestion in an environment of entrenched judicial discretion.

It seems that the judiciary is also taking steps. There have been headline grabbing cases such as Wright v Wright [2015] EWCA Civ 201 which have fuelled debate about maintenance payments.  The much quoted statement that once a child is in year two “most mothers can consider part-time work consistent with their obligation to their children” was made by a District Judge on hearing the original application in 2008.  Its repetition came on the husband’s application to vary the maintenance four years later. The wife was criticised for making no efforts to re-enter the work place. Maintenance was varied to step-down then terminate in six years.  The wife sought permission to appeal to the Court of Appeal which was refused.  The case has limited authority legally but attracted a huge amount of press coverage which again brought the issue into public focus.

At the forefront of the legal debate is Mr Justice Mostyn.  In a series of cases, he has considered the parameters of the judicial discretion when determining maintenance applications.

In the most significant of these recent cases, SS v NS (Spousal Maintenance) [2014] EWHC 4183 (Fam), he noted the paucity of discussion as to why, morally and ethically, the law permits maintenance orders.

This case is significant for two reasons. First, many practitioners see it as an example of a subtle but clear shift in approach. Secondly, Mr Justice Mostyn sought to summarise the underlying case law principles for spousal maintenance applications.

In this case, the wife was 39 and the husband was 41. They had three children aged 11, 9 and 7.  The husband was a banker.  The wife had cared for the children and had not worked since they were born save for part-time work on the desk of a gym but she was training as a Pilates instructor. Mr Justice Mostyn ordered an equal division of the capital and spousal maintenance, with RPI increases, of £30,000 for an extendable term lasting until the youngest child is 18 years old plus a percentage share of the husband’s bonus up to a capped limit of £26,500 for six years only.

The underlying principles as summarised by Mr Justice Mostyn are obiter but offer a helpful steer. In summary, they are as follows:

• Needs basis – there should be evidence that choices made in the marriage have generated hard future needs. Absent a causal connection, the award should be aimed at alleviating significant hardship.

• Term – in every case the court must consider a termination with a transition to independence. A degree of (not undue) hardship is acceptable.  Where the choice is finely balanced between an extendable term and a joint lives order, the steer should be in favour of the former.  Where it is finely balanced between an extendable and a non-extendable term, the decision should favour the economically weaker party.

• Amount – the marital standard of living is relevant but not decisive and should be carefully weighed against the objective of eventual independence. The task of the judge is to stand back and look at the global total and ask if it represents a fair proportion of the respondent’s available income to go to the support of the applicant.

• Basic salary and bonus – the award may be partitioned, with needs of strict necessity being met from the base salary and additional, discretionary, items being met from the bonus on a capped percentage basis.

• Future applications – there is no criteria of exceptionality to extend a term order. The question is has the implicit premise of the original order of achieving independence been impossible to achieve and, if so, why?  On an application to discharge a joint lives order, examination should be made of the original assumption that it was just too difficult to predict eventual independence.

There principles are not new but if Mr Justice Mostyn’s lead is to be followed (as High Court authority it is obviously not binding on fellow High Court judges), we can expect to hear more frequent reference to “transitioning to independence”, “acceptable degrees of hardship” and “term orders”. Whether this represents a welcome move towards restraint or an unjust, meaner approach favouring the stronger financial party is a matter of perspective. What is less arguable is that the zeitgeist on spousal maintenance seems to be shifting.

Read the article in the Solicitors Journal here.