There is a rise in divorce applications and at the moment it isn’t clear whether this is post pandemic where couples have put on hold personal matters whilst having to live under the same roof, or whether some couples have waited for the introduction of no fault divorce on 6th April this year. We are now also likely to see an impact in some cases from the cost of living crisis.
It is, indeed, already impacting. This is particularly in relation to the increase in mortgage rates. There are cases that have been settled within the last few months and are often on the basis of the person remaining at the house paying the mortgage in full. Whilst this was achievable on the rates applicable at the time, it can be significantly more expensive at higher rates and potentially not manageable on the terms that were agreed in the financial settlement. We do not yet know how the Courts will deal with this. If it has to go back before the judge on a application to set aside the order, the Court will have to consider whether the limited legal grounds for a set aside application are met. The may include the Court considering whether a rise in interest rates was foreseeable.
In resolving finances, it was often the case that the weaker financial party would receiver maintenance from the stronger financial party. This could be substantive maintenance or if the weaker party could manage financial initially the court would often order nominal maintenance. This kept open the weaker financial party’s claims for maintenance until a specific end period. This could be when the youngest child started secondary education or they completed it.
A nominal spousal maintenance order acts as a safety net to allow for a future variation application should the circumstances of either party change. It is more usual where the recipient has young children living with them and where they can support themselves, but circumstances may change during the children’s minority. Applications for upwards variation of nominal spousal periodical payments orders are rare. It has to be shown that there has been a significant change in circumstances (as with any application under section 31 of the MCA 1973).
It became quite rare to see maintenance payments for the rest of one person’s life. However, the courts have moved away from nominal maintenance. Whilst the court was always expected to consider a clean break, they are now looking at this as a more usual outcome. A clean break means that the weaker financial party has no recourse to the courts for any sums for themselves (child maintenance remains payable). With a nominal maintenance order it is possible to apply to the court to vary it upwards if the recipient’s income has gone down or their outgoings have significantly increased. This can related to the cost of living crisis with mortgage payments particularly as well as fuel costs. We may, therefore, see more applications to vary nominal maintenance orders. The Court may be unsympathetic as the payer’s outgoings will also have increased.
For future cases we wait to see whether the court will, in the current climate, be more supportive of there being nominal maintenance orders, rather than a clean break. We have had many years of relatively low inflation and the confidence in financial arrangements that flowed from it. Will this change when there is likely to be real financial need? North v North  EWCA Civ 760 is the leading case, in which a wife had successfully secured an upwards variation of a nominal spousal periodical payments order made in her favour some years earlier. However, the Court of Appeal held that as a matter of principle a party should not in fairness be the “insurer against all hazards” suffered by the payee’s own financial mismanagement, extravagance or irresponsibility (Thorpe LJ at paragraph 32).
We now have very real cost of living increases which will impact on the parties to a divorce in different ways. Some areas of employment will be far more secure with the current ability to pay. The ongoing effect of the cost of living crisis is of great concern to many businesses and if they fail then the employment they provide will also cease to be available. This could lead to a payer of maintenance preferring ongoing maintenance, rather than paying the recipient a higher capital sum for a clean break. If the business fails, or the payer becomes unemployed they can expect to obtain a downward variation to the sums being paid.
The tensions created by these changes do prompt divorce proceedings, as it makes it far more difficult for couples to co-exist under the same roof. Conversely, for many middle and lower income families the significant increase in the cost of separating has to be taken into consideration.
For those with family businesses, they could be facing financial difficulties on both sides as they respond within their business to the cost of living crisis. To manage costs at work directors may seek to cancel supplier contracts to avoid holding (and funding) too much stock or delay planned investment for business infrastructure. Lender may look to recoup loans which could force businesses to liquidate assets. If company directors have guaranteed business debts, they can also be facing personal claims by the creditors. Business plans to expand may have relied on available borrowing which is now either too expensive, or the lender is no longer willing to advance the funds.
Marilyn Bell, Partner and Head of the Family Law team at SA Law.