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High-Net-Worth Divorce – Supreme Court Rules Against Meal Ticket For Life

The Supreme Court has ruled that a husband should not have to increase payments to his ex-wife after she made bad financial decisions following their divorce.

However, commentators have warned against reading too much into the Mills v Mills [2018] UKSC 38, [2018] All ER (D) 107 (Jul) decision, emphasising that it is reasonably fact-specific.  As such, any inference that the courts are moving towards a ‘clean-break’ divorce would be reading too much into the case.

06 August 2018
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Generous periodic payments lost to bad financial choices

The case of Mills v Mills involved a husband and wife, who after 15 years of marriage divorced in 2002.  As part of the financial settlement, the matrimonial home was sold, with the respondent receiving £230,000, while the appellant received £23,000.  It had also been agreed that the appellant would make periodical payments to the respondent of £13,200 a year. At the time, the respondent claimed her ill-health prevented her from working for the foreseeable future.

In late 2002, Mrs Mills used the £230,000 as a deposit for a home, taking out a mortgage to pay for the balance.  Unbeknown to her husband, she also began working part-time.  She sold the house in 2006, by which time the amount owned on the property was £218,000.

She then bought and sold two further properties.  Although she sold them for more than she had paid, her mortgage had increased to £442,000, and following the sale of the third property, it was her evidence that she had no capital left.

After renting out six properties over the next few years, she ended up in debt to the sum of around £42,000 by 2015.
Around this time, Mr Mills applied for the periodic payments he made to his ex-wife to be discharged, in exchange for a capital sum.  If this was refused, he requested the court to limit the periodic payments to a fixed period or reduce the sum.

Mrs Mills cross-applied for the amount of the periodical payments to be increased to £17,292 per year, as there was, she alleged, a substantial shortfall between her reasonable needs and her income.

Wife told to cut her expenditure

At first instance, the High Court refused to increase the periodic payments, stating Mrs Mills would simply have to reduce her spending.

Mrs Mills appealed, and the Court of Appeal found in her favour.  It declared the High Court judge had not provided any clear reason why the shortfall in periodic payment should not be met and thereby increased it to the requested amount.

Mr Mills appealed to the Supreme Court, contending:
•    both parties were young enough to work through to retirement and build up a pension (they were only 33 years old when they separated)
•    the financial settlement made in 2002 was based on the wife’s claim she was unable to work in the foreseeable future – had this assertion not been made, the consent order would have been different
•    soon after the consent order was made, Mrs Mills was working and had taken on a mortgage
•    Mrs Mills had gone through her entire capital settlement at a time when property prices were rising and afterwards had rented her house, never making an application for the consent order to be varied until Mr Mills made his submission
•    Mrs Mills accounts showed she had been self-sufficient for many years and only in her very latest accounts was there a sharp downturn and a consequent alleged financial struggle

The Supreme Court ruled the Court of Appeal had been mistaken, and that the trial judge had given clear reasons for exercising his discretion and not uplifting the amount of the periodic payments.  It also cited several cases (North v North [2007] EWCA Civ 760, [2007] All ER (D) 386 (Jul), Yates v Yates [2012] EWCA Civ 532, [2012] All ER (D) 209 (Mar) and Pearce v Pearce [2003] EWCA Civ 1054, [2003] All ER (D) 467 (Jul), which effectively stated that if a party to a consent order mismanaged their finances and lost all the capital, the payer should not normally be expected to clean up the mess.

The Court of Appeals order was completely overturned, and the High Court judge’s ruling re-instated.

Time for the law around financial settlements in relation to divorce to change?

Many parties, including Baroness Deech (a crossbench peer), the Law Commission and family lawyer organisation Resolution, have been pushing for an overhaul of family law in England and Wales for several years.  The Divorce (Financial Provision) Bill [HL] 2017-19 (the Bill), which is currently working its way through the House of Lords (where it was introduced), aims to restrict the court’s powers to award spousal maintenance by providing a set criteria for cases where an order can be made and limiting payments to five-years, except in cases involving exceptional circumstances.  

This change in the law would bring England and Wales in line with countries such as Scotland, where spousal maintenance payments are generally limited to three years.  In Finland, maintenance payments are extremely rare – both parties to a divorce are expected to support themselves from the outset.

The Bill also allows for ring-fencing of assets acquired prior to marriage and would make pre and post-nuptial agreements binding as long as certain safeguards such as both parties receiving independent advice are met.

The case of Mills v Mills, along with Owens v Owens, highlights the desperate need for family law in England and Wales to be brought into line with modern social norms.  The Divorce (Financial Provision) Bill [HL] 2017-19 provides the vehicle to make this happen.

Guillaumes LLP Solicitors is a full-service law firm based in Weybridge, Surrey.  We have a highly experienced family law team who can assist you with all matters relating to high-net-worth divorce.  To make an appointment, please call us on 01932 840 111.