The recent authority of TK v AC [2023] EWHC 2958 (Fam) is interesting as it considers the question of whether a party can properly be ordered to pay maintenance out of debt.
Background – initial order
The case has an unusual factual matrix. It concerned a short marriage with two children, where a financial remedy order was imposed in 2013.
The parties were cash poor and with limited assets, but it is understood husband had a good income at the time the order was made. The initial award was a £42,000 capital payment to the wife, with maintenance ordered for 10 years at £4,000 per month (index linked) to the wife, and £1,000 per month for each of the two children [§10]. The husband was in £600,000 of debt at the time of the order.
Interim maintenance order
Following the expiry of the 10 year term in February 2023, a further application was lodged by the wife. During these proceedings an interim maintenance order was imposed by Recorder Tidbury in April 2023 which ordered the husband to pay further maintenance increasing to £3,510 per month until determination of her application for a financial order [§1].
It was this order that was subject to appeal, heard before Sir Jonathan Cohen.
By the time of imposing the interim order, the husband’s indebtedness had increased to £1.7m [§16]. His income was determined by the Recorder as being circa £200,000 – £250,000, albeit this income was broadly equal to the cost of servicing his hard debts.
Appeal
The appeal proceeded on the ground of whether it was appropriate to order (interim) maintenance where a party has no income, assets, and is heavily indebted, such that any maintenance payment would be merely increasing the indebtedness of the paying party [§5].
The factual point of there being “no income” was due to the husband’s business receiving no receipts since January 2023, a point that was not challenged [§19].
Appellant counsel submitted it was wrong in principle to order maintenance to be paid out of debt. This argument was rejected by Sir Jonathan Cohen, considering there were cases where it “may” be appropriate [§22].
He further set out a non-exhaustive list of cases where it may be appropriate [Ibid]:
“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.”
Notwithstanding the same, the appeal was successful on the facts [§32] where there was inter alia no source of funds to pay the maintenance, no clear path to raise further lending, and no third-party benefactor. As such it was considered the order would be merely increasing indebtedness for the husband on a “wing and a prayer” of the sums being paid [§32(5)].
Comment
In TK there was no dispute that the wife had a needs based claim for maintenance, Sir Jonathan Cohen noting her needs were “obvious” [§32]. It is settled law a claim for maintenance should be framed on needs, save in an exceptional case an argument for compensation may be advanced.
As per SS v NS [2014] EWHC 4183 Fam, one element that must be considered in any claim for spousal maintenance is whether the amount sought represents a fair proportion of the payer’s available income that should go to the payee [SS v NS, Mr Justice Mostyn at §46(vii)].
The tenor of TK is an order for payment of maintenance out of debt is likely to be the exception rather than the norm. The first exception in the non-exhaustive list, identified by Sir Jonathan Cohen [see above], covers the type of “soft debt” situation examined in P v Q [2022] EWFC B9. The other two scenarios address the availability of other financial resources to meet the debt, matters that would come within the ambit of s.25(2)(a) Matrimonial Causes Act 1973.
In practice the most common application is likely to be in the third category of cases, particularly where a historically high earning party with good future prospects has had a temporary reduction in business income, or there is an inheritance due to be crystallised.
TK is a helpful reminder of the broad discretion of the Court pursuant to s.25 Matrimonial Causes Act 1973, and the aspect of s.25(2)(a) that covers financial resources a party is “likely to have in the foreseeable future”. Merely because a paying party would need to meet maintenance payments through debt will not be fatal to a claim.
Hassan Sarwar
Barrister