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Home > Articles > 2014 archive

Clean Break Orders and Spousal Maintenance: where are we now?

Liz Cowell, principal lawyer with Slater & Gordon analyses the case law and trends emerging from case law regarding clean breaks and termination of spousal periodical payments orders



Liz Cowell, principal lawyer Slater & Gordon


Introduction
It is clear from speaking to other solicitors practising family law that it appears to them that there is a wide divergence in the courts' approach to spousal maintenance.  Indeed, there appears to be a general belief that it is far harder to obtain a clean break or a section 28(1A) MCA 1973 bar from the Principal Registry or other major court centres such as Manchester, Leeds, Liverpool and Birmingham than it is in other courts.

Primarily this is a consequence of the wide discretion provided to the courts by section 25 MCA 1973 but there are some worrying patterns.  What is driving the apparent differences in the approach of the courts? 

When the Matrimonial Causes Act 1973 came into force there was no requirement to try to achieve a clean break between the parties and indeed there was no power to do so unless both parties consented. The new legislation was regarded by many, particularly in the media, to have provided a "meal ticket for life" for claimants who at the time were primarily wives.  This concern led to the amendments that were introduced to the Matrimonial Causes Act 1973 by the Matrimonial Proceedings and Property Act 1984 which imposed a formal duty upon the court to consider a clean break and the dismissal of periodical payments.

Section 25A states that on or after the grant of a decree of divorce:

 "….if the court decides to exercise its power under s.23(i)(a),(b) or (c); s.24 or s.24A in favour of a party to the marriage it shall be the duty of the court to consider whether it would be appropriate to exercise those powers so that the financial obligations of each party towards the other will be terminated as soon after the grant of decree as the court thinks just and reasonable".

Accordingly, since 1984 the problem facing the courts has been the question as to whether or not periodical payments are necessary for life, a fixed term or at all. This question is resolved by the exercise of the court's discretion but the way in which that exercise is undertaken can produce some contradictory results.


Some History

If one looks at the case law it is clear that by the 1990s the courts were becoming increasingly reluctant to order a clean break. 1

This reluctance culminated in the case of C v C [1997] 2 FLR 26 where the wife obtained periodical payments for life after only a 9 month marriage (albeit there was a young child).  When the husband appealed Ward LJ defined the statutory test as follows:

"is it appropriate to order periodical payments only for such time as in the opinion of the court would be sufficient to enable the payee to adjust without undue hardship to the termination of the financial dependence on the paying party".

This is the first we see of the formulation being developed that the question to be applied is, "can the wife adjust" and not "should the wife adjust".

Of course, this case law pre-dates the decision in the White case 2.

During the 1990s capital was being shared on the basis of meeting the wife's needs and where there was sufficient capital to do a Duxbury calculation, the wife's share of the capital would include that figure which would then lead to a clean break.  Where, as in the majority of cases, there was insufficient capital to achieve such a settlement, it is clear that the courts would not impose a clean break and spousal maintenance was the norm.

Even where term maintenance orders were required, the court also showed a great reluctance to impose a section 28(1A) MCA 1973 bar and this reluctance came from the Court of Appeal.

In G v G [1997]1 FLR Ward LJ even expressed doubt that term orders should be imposed at all if there was any possibility that the payee would not have adjusted within the fixed term stating,

"those agreeing and those making term orders have a duty pursuant to section 25(2) to consider whether the payee can adjust without undue hardship to the termination of dependence upon the payer".

In the White case their Lordships created the concept of "the yardstick of equality" which was to be applied to the division of capital. The payee became entitled to have the yardstick of equality applied to all the parties' capital with the court needing to justify a departure from an equal division. Thus the lump sum measured against the payee's needs appeared to become redundant.

Of course, the decision in White v White [2000] UKHL 54 impacted on the way in which spousal maintenance was viewed.  In the subsequent case of Miller v Miller ; McFarlane v McFarlane [2006] UKHL 24, Lord Nicholls defined the concept of fairness which had been explored in White as follows:

"fairness is an elusive concept……grounded in social and moral values"…..which "change from one generation to the next".

He went on to comment that the White case had shattered the glass ceiling of the reasonable requirements of the claimant in a claim for periodical payments as well as for capital.

Their Lordships went on to find that where there was not enough capital to make a clean break fair, for Mrs Macfarlane and her periodical payments were not limited to her maintenance needs nor was a term order to be imposed. Their Lordships preferred to place the onus of a termination of periodical payments upon the payer Mr Macfarlane by way of an application to vary. 

They indicated that in order to terminate periodical payments,  Mr Macfarlane would need to establish that a lump sum could be provided pursuant to s.31(7A) MCA 1973 to capitalise maintenance.

Their Lordships' findings replaced the term order that had been imposed by the Court of Appeal.

Their Lordships also introduced the concept of compensation (for loss of a career) and the concept of sharing was considered to be valid in some circumstances.

This decision has been followed by a body of case law where it seems to be that the courts are trying to restrict the width of their Lordships' decision by relying upon their discretion.


Is the clean break back in favour?
Since the latest recession, many families are unable to reach financial settlement as there is insufficient capital to agree a clean break after there has been an equal split of the assets. Accordingly, there has been a noticeable upsurge in applications for spousal maintenance.

Furthermore, achieving a clean break has been complicated by decisions such as the leading case on term orders of Fleming v Fleming [2003] EWCA Civ 1841 which was decided in late 2003.  In Fleming there was a term order but no s.28(1A) bar had been made.  The Court of Appeal found that on an application to extend the term there was an "obligation" to consider whether it would be appropriate to terminate the order. 

The findings in Fleming were that the payee was earning and cohabiting so that her combined income with her cohabitee met her outgoings without her having to use savings and therefore there was no justification for an extension of the term.

This was seen to be a move in favour of the clean break however one of the consequences of this decision is that the courts now regard the Fleming test as rigorous and have subsequently been yet more reluctant to impose a s.28(1A) bar. 


Summary

Where the payee is the primary carer of children and unable to work, a joint lives order is still inevitable and the court will be reluctant to order a clean break even if the parties submit a consent order on such a basis.

Term orders are unlikely to be imposed upon payees aged over 55 unless the payee has his or her own substantive capital, a significant earning capacity or the benefit of a pension.

In all these cases the courts prefer to rely upon the payer to make an application to vary.

Despite the apparent generosity shown to payees in the case law, statistics still show that less than 50% of orders provide for periodical payments. It follows that away from court centres and the Court of Appeal, clean breaks must be being achieved either by consent or by the courts imposing them.

Furthermore, it is worth looking at the recent case law where there does seem to have been a swing back against over generous orders at first instance.

In the case of L v L [2011] EWHC 2207 (Fam) a joint lives order was reduced to a lesser figure payable for two years five months and with a s.28(1A) bar imposed, King J having found that the trial judge had failed to properly assess the ability of the husband to make maintenance payments for life or to consider s.25(A) or explain as to why she had made a joint lives order. 

There has also been the very helpful decision of A v L [2011] EWHC 3150 Fam where Moor J considered that he was "balancing unfairness" between the parties.  On appeal from a district judge he replaced a term order and a delayed order for sale on the matrimonial home with an immediate sale of the matrimonial home. The division of the equity in that property was to remain the same as that ordered by the district judge but the unequal split in favour of the wife was said to be all that was available to capitalise her maintenance claim and he therefore declined to make a term maintenance order.

In Yates v Yates [2012] EWCA CIV 532 the wife on an application to vary, wanted to extend, increase and capitalise her maintenance.  At first instance, she was granted a lump sum of £450,000.  This was reduced by the Court of Appeal by £58,000, the Court of Appeal stating:

"it is the authority of Fleming that cautions against such extensions unless exceptional circumstances have been established".

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1 Whiting –v- Whiting [1988] 1WLR 565, Standford –v- Standford [1986] 1 FLR 412, and Scanlon –v- Scanlon [1990] 1FLR 323
2 White –v- White [2000] 3 WLR 1571