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Budget, don’t fudge it

It’s a sad fact that if financial matters can’t be agreed during divorce, the court’s cogs can turn slowly. The litigation process, and for some people the process of gathering together the evidence that is necessary for a fair resolution of a financial difference of opinion, can take a long time. What happens in the meantime if one person is left without enough money to live on while the other has sufficient for their needs, or a surplus?

‘Maintenance pending suit’ (or ‘MPS’), otherwise known as ‘interim maintenance’, is a stop-gap legal solution intended to meet the financially weaker person’s needs in the short-term, before a court has had a chance to examine in detail the question of everyone’s long-term income, or capital, needs. It works on the same principle as spousal maintenance, i.e. periodical payments made from one party to the other, usually on a monthly basis. (For further information on what amounts to needs, you can take a look at our blog post here.)

In procedural terms, anyone who needs maintenance pending suit has to make a specific application to court – it is not something the court will automatically consider even if there’s already a financial application in the system. The person applying must submit written evidence in support of the application, including up-to-date information about financial circumstances and income needs. This will include preparing a detailed budget.

You might have read about budgets before but to summarise, when preparing a Form E, which is the comprehensive financial form used in family finance proceedings on divorce, you have to set out your income needs in the form of a monthly budget. This will usually include amounts spent on utilities, household expenditure, travel costs, clothes, entertainment and children’s activities etc. Most budgets tend to reflect a generous view of the pre-separation lifestyle and may include amounts for things like satellite television, gym membership, hobbies and holidays. However when it comes to preparing a budget for a maintenance pending suit application, luxury items and any expenditure which was not routinely incurred during the marriage ought to be disregarded. As MPS is a short-term fix, judges are only interested in ensuring the recipient has sufficient to cover the bare necessities required to keep afloat, financially speaking, until matters can be permanently resolved.

Some people say that maintenance pending suit hearings can amount to “rough justice” as they tend to be brief and dealt with fairly swiftly by the judge hearing the case. A judge will usually read the papers in the case, decide what the recipient really needs to get by over the coming months, consider what the payer can afford whilst still maintaining a reasonable standard of living themselves, and then impose a figure on the parties.

A recent case looked at the question of budgets within maintenance pending suit applications, and it is worth a quick look due to the comments made by the judge about the approach to take in MPS applications, and the unrealistic expectations of the wife who was the applicant in this case.

This couple has been married for 11 years and had four children. The husband was very wealthy with assets of £49m, as well as trust assets exceeding £100m, and an annual income of £1.7m net. The wife had property in her own name worth £2.9m and £1.4m in cash and investments, of which £1m had been transferred to her by the husband since the separation. He had confirmed that he did not expect her to use that any of that sum to fund her legal costs or living expenses.

The husband was voluntarily paying the wife £202,000 per annum as well as her legal fees. However the wife considered this insufficient and applied for maintenance pending suit of an “absolute minimum” of £280,000 a year. In fact, she pitched her actual budget on an interim basis at £392,000.

The husband was able to counter her claims by producing evidence that the family had lived on around £230,000-£265,000 a year including school fees. In support of his current position, he argued that the wife’s actual needs were around £156,000 per annum.

The judge agreed with the husband that maintenance pending suit should stay at the sum that he was currently voluntarily paying (£202,000 per annum). The judge said that the wife’s stated expectations substantially exceeded the marital standard of living. He felt her case was unprincipled and unreasonable, as it included a “significant element of forensic exaggeration”. He commented that whilst the standard of living during the marriage is not necessarily a ceiling to ongoing maintenance levels, there would need to be a specific powerful justification for that standard being exceeded on an interim basis before the final determination had been made.

The judge confirmed that the purpose of MPS is to ensure that the financially weaker spouse has sufficient resources to meet his/her immediate needs in a way which does not prejudice the longer term position, or place him/her at a significant disadvantage. He further observed that the application made by the wife here was a disproportionate use of both the parties’ and the court’s resources, particularly in view of their combined costs of around £90,000 which represented a significant chunk of the figure they were arguing over.

Even though MPS calculations tend to be on the rough and ready side, a court will aim for a fair interim outcome taking some account of the marital standard of living, whilst carefully scrutinising the parties’ budgets. An unrealistic budget will get short shrift and may well result in costs penalties, as unlike in the ordinary course of matrimonial finance law where the starting position is no order for costs, a court can more readily make costs orders against parties to litigation in MPS applications. The upshot is: be realistic, be reasonable, and you should get a fair decision. If you’re not, you may incur the wrath of the court.

If we can help with maintenance, or any other aspect of family law, please get in touch with us on 01223 443333.

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