Concept for - Can child maintenance be capitalised?

The recent and sudden deviations in the UK economy have been unsettling for much of the country. For anyone going through a divorce however, the reassuring backdrop of static, if slightly increasing valuation figures now threatens to be replaced by more erratic and less predictable valuation numbers.

Some examples of how these changes can sometimes impact a couple going through divorce proceedings include:

  • Increased inflation generally leading to increases in household outgoings. That can erode any surplus income over outgoings that a family has or push them even further into the red. This may in turn lead to a greater argument for maintenance to be paid to a former spouse.
  • The increase in interest rates can make mortgages less affordable and impact one’s ability to purchase a reasonable property for themselves and their family. That may in turn result in a greater argument for capital so as to reduce their reliance on mortgage borrowing. If the capital isn’t there it could, again, place a greater reliance on maintenance to meet the increased mortgage costs.
  • The reduced affordability of mortgage borrowing could also lead to a contraction in the housing market and house prices. A couple going through a divorce may, as a result, receive less from the sale of their property. If the market has reduced generally, they would hope that the cost to rehouse will be less expensive as well, however the increased mortgage costs can sometimes mean compromises need to be made.
  • A reduction in the value of the pound can increase costs for businesses importing materials and reduce the turnover they have available for salary costs. That could impact employment and salary in circumstances where the need for maintenance may increase.

These examples are by no means exhaustive and there are a great many variables to each divorce that could suffer a negative impact in the event of a downturn in the UK economy. Each of these factors and variables can also have a knock-on effect on each other.

So, what solutions can the English Courts adopt in these circumstances?

The first observation is that the Court’s abilities are limited. They cannot inject value or capital into a case where there is none, nor force a lender to advance a mortgage, an employer to put in place a pay rise or a buyer to pay over the odds for a house. They can only work with the factual matrix they are given. Fluctuations in valuations, incomes, mortgage capacities and employment are all realities that Courts can only look at from afar.

Courts do however adapt and alter their approaches to cases as best they can to take account of these fluctuations. For example, as a case proceeds, the Court will generally insist that up-to-date valuations are available, that incomes are accurate and as best they can take account of changes in the wider economy and, for example, risks over job security. They cannot reach for a crystal ball here however – the reliable information they use can only be current.

When faced with those fluctuations, the Courts will always look first and foremost at the needs of a couple (and most importantly their children) and seek to leave everyone as able to meet their needs as they can with the resources they have. Their needs may increase with a change in the economy and their resources may erode. However, whilst the divorce is ongoing the Court should take account of those changes and seek an outcome that best provides for those fluctuations.

The best advice to give in this situation is to keep your financial information up to date as the divorce progresses, in terms of income levels, outgoings and valuations. This ensures that the Courts have at their disposal the best information to ensure that these fluctuations are fully taken account of and considered when the case is concluded.

What if a case has already been settled only for the couple to see the changes to the economy occur?

This happened before now, both as a result of the financial crisis of 2008, and more recently as a result of the COVID pandemic. The difficulty the Courts have here is that financial settlements are often full and final – they contain a clean break, legally severing all abilities a couple might otherwise have to bring claims against one another. To give value to these clean breaks the Courts will seldom ever consider they should be undone. This applies to economic crashes or major financial events. Whilst the Courts must employ a fact specific approach to this general principle, history tells us that applications to set aside financial agreements owing to changes in the economy are extremely unlikely to succeed.

Where that is not necessarily the case is where there hasn’t been a financial clean break between the parties. Most often we see this in one of two situations. Either, there is an ongoing maintenance claim resulting from the divorce and perhaps the ability to seek a change to the level of maintenance has been left open. The other common situation where there may not be a clean break, is where the couple have divorced but they haven’t (for any number of reasons) thought to get a consent order dealing with their ongoing financial claims through the courts. This is often the situation where the couple have progressed the divorce themselves without using solicitors. That can open a window of opportunity to look at financial claims afresh in light of any changes in the wider economy.

Most people going through a divorce at the moment are going to be affected in some way through the wider economic changes afoot. It can be vital during these life changing situations that advice is taken from solicitors with the knowledge and experience to ensure these changes are correctly taken account of.