On divorce Mrs Mills received capital which would have enabled her to buy a home without a mortgage. After later transactions left her renting, the Supreme Court held that a court may refuse to increase periodical payments so as to meet all of that rent, even if the payer can afford it. It restored the trial judge’s decision that Mr Mills should continue to pay £13,200 a year, rather than the higher sum ordered by the Court of Appeal.
The parties’ financial claims had been settled by a consent order on divorce. It made separate provision for housing capital and ongoing maintenance.
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The 2002 order and the later transactions
The 2002 order divided the proceeds of the former matrimonial home and provided for continuing periodical payments. The capital award was intended to meet the wife’s housing needs.
Periodical payments are ongoing maintenance. This order did not fix a calendar date for them to end. Lord Wilson, giving the judgment of the Court, said that it is misleading for non-lawyers to describe such an order as a meal-ticket for life, a description Mr Mills himself called unattractive. Death, remarriage or a further court order can still bring it to an end.
The wife bought a more expensive home with a mortgage, although the award would have enabled her to buy a home outright.
She later sold and bought other properties, increasing her borrowing and reducing the equity available for housing. Eventually she sold the last property and rented instead.
The applications to vary
Both parties applied under section 31(1) of the Matrimonial Causes Act 1973. Mr Mills asked for the periodical payments to be discharged in return for a modest capital sum, which he put at about £26,000; or for them to be limited to a fixed period; and, or alternatively, for them to be reduced. Mrs Mills asked for an increase.
Section 31(7) required the court to consider all the circumstances, including any change in the matters to which it had to have regard when the original order was made. Those matters are set out in section 25(2) of the Act, even though the 2002 order was made by consent. The court also had to consider whether the payments should continue only for long enough to allow Mrs Mills to adjust, without undue hardship, to their ending.
The judge concluded that the wife’s later housing decisions had caused the need to pay rent. He did not find that she had acted wantonly.
The judge also examined the husband’s ability to continue paying maintenance.
The judge accepted Mrs Mills’s breakdown of necessary spending as very modest. Excluding figures for the adult son, it came to £35,792 a year, of which £10,200 was rent. After earnings of £18,500, the claimed annual need was £17,292. The existing order provided £13,200, leaving a shortfall of £4,092.
The judge’s reason for leaving a shortfall
The judge neither increased nor reduced the payments. He found that the 2002 award would have enabled Mrs Mills to buy a home free of mortgage; that it had been reasonable for her to be ambitious and borrow to buy the Weybridge house; that she had not thereafter managed her finances wisely; that, like others then, she had taken on borrowings that were too high; and that it would be wrong to describe her approach as profligate or wanton. Her needs had nevertheless been increased by choices she had made.
He rejected the argument that the whole £10,200 rent should be removed from the needs it was appropriate for Mr Mills to meet. He nevertheless held that fairness required that Mr Mills’s contribution should not include a full contribution to her housing costs. The contribution should do no more than meet her bare minimum needs, and she would have to adjust her expenditure to live within her means. Lord Wilson noted that, if the rent is treated as falling entirely within the residual need of £17,292, the shortfall meant Mr Mills was contributing £6,108, or 60 per cent, towards it. He described that illustration as arbitrary, but it shows that the rent was not eliminated altogether.
The Court of Appeal and the limits of the further appeal
The Court of Appeal considered that the trial judge had not sufficiently explained the shortfall. It increased the maintenance from £13,200 to £17,292 a year to cover the wife’s assessed needs.
Mr Mills appealed to the Supreme Court against the increase. He also sought to challenge the refusal to discharge the order, impose a fixed period or reduce the payments. Those further points were challenges to a refusal of permission. Section 54(4) of the Access to Justice Act 1999 provides that no appeal lies against such a refusal. Permission was therefore limited to whether, housing having already been provided for in the capital settlement, the Court of Appeal had been entitled to interfere with the judge’s refusal to allow the rent in full. The Court restated that limit at the hearing on 6 June 2018.
Lady Hale, Lord Carnwath, Lord Hughes and Lord Hodge agreed with Lord Wilson. He held that the Court of Appeal had been wrong to say that the judge gave no reason. The reason was the analysis of how the capital had been lost and the conclusion that fairness did not require a full contribution to housing costs.
Why earlier housing provision mattered
Earlier cases recognised that an original capital settlement may already have met a housing need. A later variation application does not automatically oblige the other spouse to fund that need again. The earlier decisions informed the exercise of discretion under section 31.
Mr Feehan QC, for Mrs Mills, argued that rent differed from the mortgage payments disallowed in Pearce and Yates, and that those cases concerned the conversion of income into capital rather than the amount of continuing periodical payments. Lord Wilson rejected both distinctions. He saw no relevant difference between rent and mortgage instalments. Capitalisation begins by calculating the periodical payments which would otherwise continue, and the objectionable elements had been removed at that stage. They would therefore have been disallowed even if the payments had not been converted into a lump sum.
The question was whether the court is entitled, not whether it is obliged, to decline to increase periodical payments so as to fund all, or perhaps even any, of the rent in these circumstances. That formulation respects the wide discretion in section 31. The earlier cases were, however, expressed forcefully. A court would need very good reasons before requiring one spouse to fund the other’s rent where capital had already been provided for housing and had then been exhausted by unwise transactions. Lord Wilson concluded:
A spouse may well have an obligation to make provision for the other; but an obligation to duplicate it in such circumstances is most improbable.
The judge was therefore entitled to refuse an increase which would have required Mr Mills to pay all of the rent. The Court of Appeal should not have interfered with that determination.
Verdict: The Court unanimously allowed the husband’s appeal and restored the order leaving annual maintenance at £13,200. The trial judge was entitled to decline an increase to cover all the rent. Discharge or reduction of the existing order was outside the appeal.
Source: Mills v Mills [2018] UKSC 38
