What happens when one spouse wants to stop paying maintenance?
In a recent case a husband who had been paying £150,000 per year in spousal maintenance was told that he could stop paying.
He would have to pay a final one off lump sum of £400,000 when he chose to retire, even though he was proposing to retire at the relatively early age of 56.
The full judgment in the case can be found here. We have set out a summary of the issues below.
The couple in this case were divorced in 2005. At the time the wife received most of the capital and a substantial maintenance payment in her favour. The husband was earning £450,000 at the time.
There had previously been an application in 2007 to increase the maintenance up to the £150,000 level where it had remained ever since.
Circumstances in the husband’s life had led him to now seek an order terminating the payments.
He argued that in the time he had been paying the maintenance that his wife had saved enough money to now live independently of him. This is an important point. The family courts in England and Wales have to consider enabling a clean break between the husband and wife even where they have already ordered maintenance to be paid.
s37(7)(a) of the Matrimonial Causes Act 1973 reads;
“In the case of a periodical payments or secured payments order made on or after the grant of a decree of divorce… the court shall consider whether in all the circumstances and after having regard to any such change it would be appropriate to vary the order so that payments under the order are required to be made or secured only for such further period as will in the opinion of the court be sufficient… to enable the party in whose favour the order was made to adjust without undue hardship to the termination of those payments.”
If the court wishes to terminate the payments then the court can order a final lump sum at the time that the payments cease.
This lump sum is often used to provide the receiving spouse with a substantial payment to ease that transition into a period where they are not receiving maintenance.
When one partner wants to stop paying maintenance the arguments that follow take one of two directions.
- Should maintenance be allowed to stop at all or should it continue?
When this happens the receiving party argues that they cannot adjust without undue hardship. That argument will often be bolstered by suggestions that there is simply no need on the part of the paying party to stop paying.
The person paying the maintenance will, on the contrary, explain why they propose that they should no longer have to pay and demonstrate that the transition can be made without undue hardship.
The wife in this current case tried to argue this position at first.
She argued that her husband’s suggestion that he was going to retire fully at age 56 was unlikely. It seems that the court disagreed with her stance on this. The judgment accepts that the husband’s intention to retire early was both likely and `Poignant.’ His second wife, with whom he had had more children, had a short life expectation as a result of illness. The husband’s case was that he anticipated retiring if and when she passed away, likely to be in 2015, in order to care for their children.
- If maintenance is to stop, should there be a lump sum and, if so, how much?
By the second day of the trial the wife had changed her position. She may well have realised that the Judge had a great degree of sympathy with the husband’s predicament.
She accepted that maintenance payments were likely to stop and so needed to pursue the second strand of the argument, namely, arguing for the maximisation of the one off lump sum payment that was to be paid to her instead of ongoing maintenance.
Here the wife argued that the court should make a lump sum order that would enable her to continue to withdraw her current level of provision of £150,000 per year in place of the lump sum from her ex-husband.
The court disagreed. The £150,000 was on the basis of the husband’s earned income and took no account of the fact that this income would reduce substantially once he retired.
The husband argued that there should be no lump sum payment. He argued that his ex-wife had been able to save large reserves of money from the maintenance that he had been paying to her. He also argued that his ex-wife had a far larger house than she required.
The husband proposed that his maintenance payments should stop. She could adjust to a life without maintenance by taking £700,000 as an invested fund whether from savings or by releasing equity in her home, perhaps by downsizing. He argued that if his ex-wife used the interest that fund created and withdrew a little of the invested capital each year that there should be enough to meet her living expenses for the rest of her life expectation.
The court said that in many cases it would be inclined to agree with the husband’s case. That seems to say that in a case where an ex-wife has saved reserves from the maintenance that she is being paid, that she might, at a later date, be expected to use those reserves to provide for herself and release the husband from his obligations.
The only thing that stopped that from happening in this case, however, was that the wife had an eligible claim for compensation.
Her case throughout had been that she had given up a lucrative career in professional services and that, if it was not for that, she would have had a better income herself.
The court agreed with here and so ordered what looks like a compromise.
The court ordered a lump sum of £400,000 to be paid by the husband at the time that he needed to stop maintenance payments. The shortfall, he argued, could be met by the wife investing a portion of her funds at 3.75% and living on the interest.
The court was not inclined to suggest that the wife should have to draw down on the invested capital – as the husband had sought – and that the invested money would therefore remain intact in order to provide the interest.
It is possible to get an order confirming that maintenance payments, even those said to be for life, can be terminated.
When such an order is sought there are two lines of argument;
- Should maintenance be allowed to stop or should it continue and, if so, at what level?
- If maintenance is to stop should there be a lump sum payment and, if so, how much?
This case also shows that there are some cases, although they will continue to be relatively rare, where the court will be more generous towards a spouse who has given up work, in order to compensate her or him for their loss of income.
We will write more on this question of compensation in a later article.
Want more information?
Are you paying or receiving spousal maintenance? If you have any questions about stopping payments, varying them or want to explore a clean break order then please do get in touch with us, Family Law in Partnership, divorce lawyers in London.
We can give you the expert advice that you need.
You can contact us by email on email@example.com or by telephone on 020 7420 5000. We look forward to being able to help you.