Cambridge Family Law Practice

A heavily indebted husband has won his appeal against a financial order requiring him to pay further large sums to his former wife.

 

The former couple are aged 50 and 48 respectively. They had begun living together in 2003 and eventually married in 2008, but the relationship quickly broke down. They separated and finally divorced in 2012. They have two children, both now teenagers.

 

In their divorce settlement, the wife was awarded a sum of £42,000 and inflation-linked maintenance payments of £4,000 per month, along with £2,000 per month in child maintenance. At the time, the husband, who ran a financial services firm, had substantial debts totalling around £600,000.

 

By February 2023, he was paying his former wife a total of £5,900 per month in child and spousal maintenance. However, in the meantime the husband had also remarried and had three additional children, and his debts had inflated to £1.7 million, forcing him to sell his home to avoid bankruptcy.

 

Sitting in the Family Division of the High Court, Sir Jonathan Cohen noted:

 

“There is no doubt that the husband is living substantially beyond his means. In summer 2022 on the sale of his home he and his wife rented a property at £8,000 per month. His three children by his second marriage are in private education. There are aspects of his budget which certainly strike me as extravagant, including payments for holidays which are put at £2,500 a month although he says that that is not something that is actually being spent.”

 

The Judge continued:

 

“Life for the parties has not gone smoothly. The wife has had one very harmful subsequent relationship, and she now is on her own with the parties’ daughter…She comes from a relatively prosperous background. Within his business life the husband and a colleague set up a financial services business specialising in mergers and acquisitions. It has had a rough few years. It ceased paying salaries some time ago and instead, when [mergers and acquisition deals] are executed, the company received substantial payments [from its clients].”

 

But the firm’s work began dry up in January 2023. In April that year, he appealed against a legal order increasing the monthly payments due his first wife to £3,510 per month, along with additional backdated payments, as well as an order that he cover his wife’s legal costs.

 

The husband’s case was that he had no way to find the funds required. Sir Jonathan was persuaded and discharged both orders, saying:

 

“I do not agree with [the claim) that it is necessarily wrong in principle to order maintenance to be paid out of debt. There are, in my judgment, cases where it may be appropriate. The following non-exclusive list immediately spring to mind:

 

(i) cases where the history establishes that the debt is unlikely to be called in;

(ii) cases where debt is likely to be met by a third party. I think of a trust, a generous parent, or whatever;

(iii) cases where it is foreseeable that money will be coming, whether by sale of property, inheritance or gift, or by some successful business venture.”

 

Nevertheless, in this case:

 

“I cannot see how it can be right to make a maintenance order in these circumstances…where there is no source of funds that can be identified…[and] I am not told that there is any generous soul prepared to advance money in circumstances where no security can be offered and when there is no obligation; and therefore all I would be doing if I left the order in place is increasing the huge indebtedness that is already there, on a wing and a prayer that someone might come up with some money.”

 

Kathryn Evans, one of the partners of Cambridge Family Law Practice notes:

 

“This interesting case highlights the effect of debt on financial settlements and ongoing maintenance awards. As Sir Jonathan explains, if the party who appears to be the wealthier of the two nevertheless has substantial debts, there are circumstances in which it may be appropriate to reduce or even suspend ordered payments.”

 

Read the full ruling here.