Yates v Yates

When capitalising a former spouse’s periodical payments, the assessed income need must exclude mortgage interest where capital was made available to discharge the mortgage but the recipient instead chose an investment producing no income. The financial consequences of that investment choice are the recipient’s responsibility and cannot be transferred to the payer through maintenance.

The court also noted that a short-term periodical payments order will only unusually be extended, as Fleming v Fleming cautions, absent exceptional circumstances. Whether a budget includes child-related expenditure remains a question of fact; there was no double counting here.

The parties’ 2006 consent order provided the wife with substantial capital and periodical payments for three years, without a bar on a further application. On her later application, the District Judge extended the maintenance arrangement and capitalised the wife’s future periodical payments.

The wife’s monthly budget included £500 mortgage interest. Although capital had been made available to discharge the mortgage, she had remortgaged and invested the advance in a non-income-producing bond. The husband appealed from the circuit judge’s decision upholding that inclusion. He also contended that the budget duplicated child-related needs already met by separate orders.

The central issues were whether mortgage interest resulting from the wife’s investment choice could form part of her capitalised income need, and whether the budget included child expenditure.

Appeal allowed. The capital sum payable to terminate the wife’s periodical payments was reduced by £58,000.

1. The court held that the District Judge’s adopted figure of £4,000 per month included £500 mortgage interest. Capital supplied under the earlier order had enabled the wife to discharge the mortgage. She instead retained mortgage borrowing in order to invest in a bond that produced no income.

   It was therefore wrong in principle to require the husband, through capitalised maintenance, to fund that continuing mortgage interest. The investment decision and its financial consequences were the wife’s responsibility. Her income need for this purpose was £3,500 per month, which was to be carried into the calculation under Duxbury principles.

2. The circuit judge had erred in upholding the inclusion of mortgage payments. The fact that the wife might later sell the former matrimonial home and eliminate the mortgage did not cure the error in the existing assessment.

3. The husband’s separate challenge based on alleged child-related expenditure failed. The evidence and the District Judge’s assessment showed that the reduced £4,000 budget represented the wife’s own needs, rather than needs already covered by periodical payments for the children.

4. The court did not revisit the extension of the original three-year term. Although such extensions are highly unusual and Fleming v Fleming [2003] EWCA Civ 1841 cautions that exceptional circumstances are required, the extension rested on factual findings about the parties’ 2006 understanding which the appellate courts could not disturb.

• Court of Appeal (Civil Division): Allowed the husband’s appeal and reduced the capitalised sum by £58,000: [2012] EWCA Civ 532.
• Bournemouth County Court (His Honour Judge Meston QC): Allowed the husband’s challenge to the straight-line multiplier and substituted a Duxbury calculation, but rejected the challenges concerning mortgage payments and alleged child expenditure.
• Bournemouth County Court (District Judge Weintroub): Extended the wife’s periodical payments and fixed a capitalised sum of £456,000.