Mills v Mills

On an application to vary periodical payments, the court has a wide discretion to decide whether a paying spouse should meet needs created by the recipient’s financial choices. Where capital provided on divorce enabled the recipient to purchase a mortgage-free home, the court may decline to increase periodical payments to meet later housing costs caused by the recipient’s unwise depletion of that capital.

The payer is unlikely to be required to duplicate earlier housing provision. Very good reasons would be needed to require payment of the recipient’s rent in those circumstances, even if the payer can afford it.

On divorce, a consent order gave the wife capital sufficient to purchase a mortgage-free home and open-ended periodical payments. She instead bought more expensive properties with substantial borrowing. After a series of transactions, she exhausted her capital and incurred rental expenses.

The Central Family Court dismissed both parties’ variation applications under section 31(1) of the Matrimonial Causes Act 1973. It maintained the existing payments, leaving part of the wife’s needs unmet because her housing need had been augmented by her financial choices. The Court of Appeal, [2017] EWCA Civ 129, held that the judge had not adequately explained that shortfall and increased the payments to meet all her assessed needs.

The Supreme Court considered whether the judge was entitled to decline to make full allowance for rent when capital provision had already been made for the wife’s housing.

1. Appeal allowed unanimously. Lord Wilson gave the judgment, with which Lady Hale, Lord Carnwath, Lord Hughes and Lord Hodge agreed. The Court of Appeal had erred in holding that the judge gave no reason for declining to increase the payments to meet all the wife’s basic needs. His clear reason was that the wife’s housing need had been augmented by her financial choices after receiving capital sufficient to buy a mortgage-free home.

2. Section 31(1) and (7) of the Matrimonial Causes Act 1973 confer a wide discretion when the court determines an application to vary periodical payments. A recipient’s needs may be highly important, but the payer is not inevitably responsible for every established need. The court may consider whether a need arose from the recipient’s financial mismanagement, extravagance, irresponsibility or other choices.

3. Pearce v Pearce [2003] EWCA Civ 1054, North v North [2007] EWCA Civ 760 and Yates v Yates [2012] EWCA Civ 532 were correctly decided. Their reasoning was not confined to capitalisation cases. Capitalisation first requires calculation of the periodical payments otherwise payable. The objectionable housing elements in those cases would therefore also have been excluded from an ongoing periodical-payments order.

4. There was no relevant distinction between mortgage payments and rent. Where capital provision on divorce enabled one spouse to purchase a home, the court is entitled to decline to require the other spouse to fund later rent after that capital has been exhausted through unwise transactions. Although the discretion remains broad, very good reasons would be required to order such funding. An obligation to duplicate earlier housing provision is most improbable.

5. The judge was entitled to require the husband to contribute only part of the wife’s rent, notwithstanding his ability to pay more. The Court of Appeal’s order was set aside and the judge’s order restored.

1. United Kingdom Supreme Court: Allowed the husband’s appeal, set aside the Court of Appeal’s order and restored the Central Family Court’s order: [2018] UKSC 38.

2. Court of Appeal: Allowed the wife’s appeal and increased annual periodical payments from £13,200 to £17,292, backdated to the first-instance judgment. It refused the husband permission to appeal against the rejection of his wider claims: [2017] EWCA Civ 129.

3. Central Family Court: Dismissed both the husband’s application to discharge, reduce, capitalise or limit the duration of periodical payments and the wife’s application for an upwards variation. It maintained annual payments of £13,200.