Fairness versus Certainty – Should the Matrimonial Causes Act 1973 be Amended to Restrict the Duration of Spousal Maintenance?

Published: 03/07/2023 08:00

As part of the Law Commission’s review of the law concerning financial division upon divorce, announced on 4 April 2023, it will consider ‘how maintenance payments for an ex-spouse or civil partner should work’. The terms of reference set out that the Law Commission is to consider specifically potential maximum periods for spousal periodical payment orders.

The maximum period approach is taken in the Divorce (Financial Provision) Bill tabled by Baroness Deech. The proposal is set out in the draft for section 5 of the Bill:

‘5(1) In deciding whether and in what terms to exercise its powers to make a periodical payments order in favour of one of the parties to the marriage, the court must take into account …

(c) that a party who has been dependent to a substantial degree on the financial support of the other party should be awarded such periodical payments as is reasonable to enable that party to adjust to the loss of that support on divorce over a period of not more than five years from the date of the decree of divorce, such period not to be exceeded unless the court is satisfied that there is no other means of making provision for a party to the marriage and that that party would otherwise be likely to suffer serious financial hardship as a result.’ (emphasis added)

This approach contrasts markedly with the lack of any real steer within the Matrimonial Causes Act 1973 (the 1973 Act) as to whether and in what way an order for periodical payments should be made. The limitation of the 1973 Act in this regard was addressed in 2006 in Miller v Miller; McFarlane v McFarlane [2006] UKHL 24 by Lord Nicholls:

‘5. ... The Matrimonial Causes Act 1973 gives only limited guidance on how the courts should exercise their statutory powers. Primary consideration must be given to the welfare of any children of the family. The court must consider the feasibility of a “clean break”. Beyond this the courts are largely left to get on with it for themselves. The courts are told simply that they must have regard to all the circumstances of the case.

6. Of itself this direction leads nowhere. Implicitly the courts must exercise their powers so as to achieve an outcome which is fair between the parties. But an important aspect of fairness is that like cases should be treated alike. So, perforce, if there is to be an acceptable degree of consistency of decision from one case to the next, the courts must themselves articulate, if only in the broadest fashion, what are the applicable if unspoken principles guiding the court’s approach.’

The judgment of Baroness Hale in Miller v Miller; McFarlane v McFarlane is also of note:

‘122. My Lords, there is much to be said for the flexibility and sensitivity of the English law of ancillary relief. It avoids the straitjacket of rigid rules which can apply harshly or unfairly in an individual case. But it should not be too flexible. It must try to achieve some consistency and predictability.’ (emphasis added)

And further at [131]:

‘131. Section 25A(2) provides:

“Where the court decides in such a case to make a periodical payments or secured periodical payments order in favour of a party to the marriage, the court shall in particular consider whether it would be appropriate to require those payments to be made or secured only for such term as would in the opinion of the court be sufficient to enable the party in whose favour the order is made to adjust without undue hardship to the termination of his or her financial dependence on the other party.”

I assume that the reference to “such a case” is to a case in which the court has decided to exercise its powers under the listed sections rather than to a case in which it has decided that it would be appropriate to exercise those powers so as to terminate the parties’ financial obligations as soon as possible after the decree. If it decides to make a periodical payments order, it must consider how quickly it can bring those payments to an end. It has therefore to consider fixing a term, although in doing so it must avoid “undue hardship”. This is linked to two other powers: section 28(1) allows the court to specify the duration of a periodical payments order; generally, it is open to the recipient to apply to extend the term, provided this is done before it expires; but section 28(1A) gives the court power to prohibit any application for an extension. If there is an application for an extension, the court has the same duty to consider bringing the periodical payments to an end as soon as possible: section 31(7); and it now has power to order a lump sum, property adjustment or pension sharing instead: section 31(7B). Thus if there were not the capital resources to achieve a clean break at the outset, it may be achieved later if sufficient capital becomes available.’ (emphasis added)

Baroness Deech’s proposal of a presumption of a 5-year restriction on periodical payments is seen in the approach taken in the Scottish law. Lord Hope addressed this in his well-known judgment at [114]–[120] in Miller v Miller; McFarlane v McFarlane.

His Lordship at [114] set out the position under Scottish law, that:

‘a party who has been dependent to a substantial degree on the financial support of the other party should be awarded such financial provision as is reasonable to enable him to adjust, over a period of not more than 3 years from the date of the decree of divorce, to the loss of that support on divorce.’ (emphasis added)1

Lord Hope’s speech sets out the competing concepts which underpin the question of whether there should be a statutory time limit for periodical payments (or a presumption of such) or not:

‘[115] A rigid application of the clean break principle, as enacted in s 9(1)(d), has the advantage of certainty. But it runs the risk of becoming outdated as social conditions change and the reasoning behind it no longer fits in with modern concepts of fairness. As Lord Nicholls of Birkenhead has explained, the concept of fairness is ultimately grounded in what people think. Social and moral values change from one generation to the next. Baroness Hale of Richmond’s comment in para [127] that statutory statements of principle translated into rules can operate harshly in some cases, particularly where the resources consist largely of income rather than capital, shows where the problem lies. The flexibility which sheriffs and judges need to adapt the law to what would be regarded as fair today as compared with what was regarded as fair 25 years ago is denied to them.

[116] The way that Mrs McFarlane’s case would have to be dealt with if the case had arisen in Scotland illustrates the problem. It would not be possible to design an award under the Scottish system that provided her with an amount of income for the future that gave fair recognition to her entitlement. She is entitled to an award that reflects the agreement that she and her husband entered into, because in their case the capital assets that would be needed for this are not available. They decided that she should sacrifice her own high earning career in the interests of the family while her husband developed his ability to generate income. Under the Scottish system he would continue to enjoy the benefits of his high earning capacity. But she could not be compensated for her future economic disparity, due to his lack of capital. She would be required instead to adjust to a lower standard of living. And she would have to do this over a period of no more than 3 years.

[117] The annotation to s 9(1)(d) in Current Law Statutes, based on para 3.107 of the report by the Scottish Law Commission, explains the purpose of that paragraph. The principle is intended to enable the court to cushion the blow of divorce by providing funds to enable a spouse “to find employment or retrain, or to adjust to a lower standard of living”. I agree with Lord Nicholls of Birkenhead’s observation, in para [94] of his speech, that the situation in which Mrs McFarlane finds herself is a paradigm case for an income award that will compensate her for the significant future economic disparity, sustained by the wife, arising from the way the parties conducted their marriage. That is impossible under the rules which apply in Scotland.

[118] With the benefit of hindsight, it can be seen how unfairly the principle which s 9(1)(d) lays down … discriminates against women. It operates harshly in cases where a high earning wife, or the highly qualified wife with the prospect of high earnings – and it is, of course, almost invariably the wife, not the husband who does this – gives up a promising and demanding career in the interests of the family. Women today compete on equal terms with men in business and in the professions for high earnings. They are being encouraged to do so by the measures for equal pay and the removal of discrimination on the ground of sex. These measures were already in place by 1985, but had not begun to realise their full potential for change by that date. Many more women than were foreseen in 1981 are now reaching the ranks of those who are highly paid for what they do. But many women are mothers too. The career break which results from concentrating on motherhood and the family in the middle years of their lives comes at a price which in most cases is irrecoverable.

[119] As the district judge recognised in Mrs McFarlane’s case, it is almost always impossible for a woman who has made that choice to achieve the same pattern of high earning on her return to work which she would have done if the progress of her career had not been interrupted by concentrating on her family. The price that her decision brings with it is made all the more severe by the difficulties which under current conditions couples are likely to experience in providing for a pension which will maintain their standard of living in the future.

[120] These effects appear not to have been foreseen in 1981 when the Scottish Law Commission published their report. Achieving a clean break in the event of divorce remains as desirable now as it was then. But if this means that one party must adjust to a lower standard of living, the result is that a clean break is being achieved at the expense of fairness. Why should a woman who has chosen motherhood over her career in the interests of her family be denied a fair share of the wealth that her husband has been able to build up, as his share of the bargain that they entered into when that choice was made, out of the earnings that he is able to generate when she cannot be compensated for this out of capital?’ (emphasis added)

In recent years, however, there has been an increasing trend in the reported cases towards a significant curtailment of the use of joint lives spousal periodical payments order and an emphasis on the need for a clean break, requiring the applicant to justify anything other than a non-extendable term.

In Waggott v Waggott [2018] EWCA Civ 727, the Court of Appeal found that the husband’s earning capacity is not capable of being a matrimonial asset which the wife is entitled to share. The judge at first instance had ordered the husband to pay the wife ongoing maintenance for joint lives assessed at £175,000 per annum. The husband’s cross appeal was allowed and a 5-year term with a section 28(1A) bar substituted.

In finding that earning capacity is not a matrimonial asset, Moylan LJ, with whom MacDonald J and Sir James Munby agreed, said:

‘[123] Any extension of the sharing principle to post-separation earnings would fundamentally undermine the court’s ability to effect a clean break. In principle, as accepted by Mr Turner, the entitlement to share would continue until the payer ceased working (subject to this being a reasonable decision), potentially a period of many years. If the court was to seek to effect a clean break this would, inevitably, require the court to capitalise its value which would conflict with what Wilson LJ said in Jones v Jones.

[124] Looking at its impact more broadly, it would apply to every case in which one party had earnings which were greater than the other’s, regardless of need. This could well be a very significant number of cases. Further, if this submission was correct, I cannot see how this would sit with Lady Hale’s observation in Miller that, even confined to “(i)n general”, “it can be assumed that the marital partnership does not stay alive for the purpose of sharing future resources unless this is justified by need or compensation” (para 144) or her observation as to the effect of “(t)oo strict an adherence to equal sharing” (para 142).’ (emphasis added)

In Quan v Bray & Ors [2018] EWHC 3558 (Fam), Mostyn J gave the following guidance:

‘48. In every case where an award of periodical payments is made the court must consider, pursuant to sections 25A and 28(1A) of the Matrimonial Causes Act 1973, whether the award should be term limited, and, if so, whether that term should be extendable or not. These provisions have been strangely neglected since they were enacted, but recent decisions have emphasised their key importance. A limited term should be imposed unless the court is satisfied that the claimant would not be able to adjust to a cut-off without undue hardship. Normally that decision is easily reached because the claimant will have a capital base to fall back on in her later years. Generally speaking, there would have to be shown good reasons why a term maintenance order should not be made. And, generally speaking, where a term maintenance order is to be made there would have to be shown good reasons why it should not be non-extendable. Ultimately the court’s goal should be wherever possible, to achieve, if not immediately, then at a defined date in the future, a complete economic separation between the parties.’ (emphasis added)

The aim of complete economic separation was reiterated by Mostyn J in Clarke v Clarke [2022] EWHC 2698 (Fam). His Lordship referred at [36] to the now widely referenced synopsis of the jurisprudence applicable in financial remedy cases set out by Peel J in WC v HC (Financial Remedies Agreements) [2022] EWFC 22 and proposed that the following be added to that guidance:

‘xvii) Where an application for spousal periodical payments is actively pursued the court must diligently apply s.25A and consider whether the application can be dismissed and an immediate clean break effected. If the court concludes that a substantive order is needed to meet the applicant’s needs the court should only make the award in such amount and for such a period as to avoid the applicant suffering undue hardship. The applicant must show good reasons why a non-extendable term maintenance order should not be made. The court’s goal should be to achieve, if not immediately, then at a defined date in the future, a complete economic separation between the parties. The same principles apply, mutatis mutandis, where the court considers an application by a payer of spousal periodical payments for the variation or discharge of the order. The burden will be on the payee to justify a continuance of the order, and if so, for how long: SS v NS (Spousal Maintenance) [2014] EWHC 4183 (Fam), [2015] 2 FLR 1124, Quan v Bray & Ors [2018] EWHC 3558 (Fam), [2019] 1 FLR 1114.’ (emphasis added)

There is wide consensus that a clean break is best if possible. There is obvious advantage in no longer being financially entangled with or dependent on a former spouse, and a clean break also has the significant policy advantage of creating separate economic actors and precluding future litigation.

The real issue is the breadth of circumstances in which a clean break is not achievable within a prescribed timeframe. That a clean break should be avoided only where it is necessary to prevent ‘undue hardship’ in the future presupposes that some economic hardship for one party but not the other is fair. That may well be so: perhaps if you divorce a breadwinner then you should not expect to be eating the same type of loaf in in the future. On the other hand, if the privileging of clean break outcomes is taken too far or if the judge’s discretion is limited to making an order for periodical payments for a specific duration, say 5 years, then overall outcomes might begin to resemble structural or institutional sexism: simply put it will often be women who have to make downward adjustments to their standards of living. The debate about whether there should be statutory time limits brings this balancing exercise to the fore.

There is then further the issue of the unpredictability of outcome which is a product of the current legislation. Three judges considering the same case in which it is contended that a periodical payments order should be made are likely to make three different orders. In itself that is unproblematic but there must be a real concern that the orders made can be so different as to make the outcome unpredictable.

The issue is made more complicated when one considers the view that the same case would probably occasion a different periodical payments order in different parts of England. The Law Commission considered evidence of significant regional differences in the levels of needs-based support likely to be awarded in different courts in its 2014 report Matrimonial Property, Needs and Agreements and its concerns led to the Family Justice Council producing its Guidance on ‘Financial Needs’ on Divorce, the second edition of which was published in 2018 (‘the Family Justice Council Guidance’).

In the Family Justice Council Guidance it is stated that ‘a party may be expected to suffer some reduction in standard of living having regard to the overall objective of transition to independence’ and that need is to be measured by ‘assessing the standard of living during the relationship’ with this factor assuming more importance the longer the relationship’s duration.

The questions raised by the long-standing proposal to restrict the duration of periodical payments orders will no doubt be well mapped-out in the Law Commission’s future reports and the ensuing discussions. Ultimately, there are various incompatible ‘fairnesses’, each of which privileges a different underlying idea or belief about society. Without expressing a view as to whether periodical payments should be restricted in duration by statute, the following matters are a selection of the points which are likely to arise:

(1) Is the statutory steer towards a clean break sensible and should other ‘rules’ be built around this? What of cases where a clean break is not possible or desirable, such as those where the parties are older or those where there is a sizeable disparity in future earnings or earning capacity which cannot be fairly addressed by the apportionment of assets?

(2) Is it time to move on from the notion of women being ‘compensated’ for future economic disparity which was created by decisions made within a marriage (e.g. career pause or sacrifice; apportionment of domestic tasks and childcare and wider caring responsibilities)?

(3) Would a time-limited rule for periodical payments assist in reducing the number of cases which went to court? Do such rules create greater certainty of outcome?

(4) Would such rules be fairer for unrepresented parties? Or would there tend to be litigation in an attempt to be seen as an exception to the rules?

Ultimately, the decision is, of course, for Parliament to determine. In so doing, it will be necessary to take account of prevailing societal attitudes, which may still be accurately reflected in the current drafting of the 1973 Act, interpreted and developed by the courts over the past 5 decades.

©2023 Class Legal classlegal.com
Class Legal


Share this

    Most read