Aimee Matthews
- Senior Associate
- Family & Divorce
The role of expenditure budgets in assessing spousal maintenance in divorce and financial proceedings
In divorce and financial proceedings, the expenditure budget is a crucial tool. It helps the court determine each spouse’s financial needs and obligations, ensuring a fair maintenance award. Understanding its importance can significantly impact the outcome of your case.
Q: Why is the expenditure budget so important?
A: The expenditure budget is a key document in divorce proceedings, helping the court assess the financial needs and future obligations of each spouse, particularly when deciding on ongoing financial support (that is, maintenance). It provides a breakdown of the living costs each party expects to incur after separation. When deciding what level of maintenance to award, the court will have regard to all the circumstances of the case (as set out in Section 25 of the Matrimonial Causes Act 1973). The income of the payer, and the “needs” of the payee become a primary consideration. The expenditure budgets are therefore vital in the court’s assessment.
Q: What are financial “needs” and how are they assessed?
A: In 2018, the Family Justice Council provided some guidance on the principle of “needs”. These are to be generously interpreted, measured against the standard of living enjoyed during the relationship, and it is generally accepted that relationship-generated needs should be met where the marital resources allow. That said, the court must assess the needs of both parties when considering a maintenance award, and it is expected that there could be some reduction in standard of living for the payee given that the overall objective is one of a transition to independence.
Q: What factors does the court consider?
A: The court takes several key factors into account when evaluating expenditure budgets:
- Standard of living during the marriage: The court compares the claimed post-separation living expenses with the couple’s lifestyle during the marriage and the payer’s reasonable ability to pay. A sudden increase in living costs post-separation, especially if the pre-separation lifestyle was more modest, will raise suspicion.
- Necessity and reasonableness: The court distinguishes between essential expenses (e.g., housing, food, utilities) and non-essential spending (e.g., luxury items, holidays). A budget that includes excessive spending on non-essentials is likely to be rejected or reduced.
- Transparency and full financial disclosure: Full financial disclosure is required during divorce proceedings, including income, assets, and expenditures. If one party is found to have exaggerated their expenses, it can harm their credibility and negatively impact their financial claim.
Judicial discretion: Ultimately, the court’s role is to ensure a fair and just financial settlement. If the court finds that one party has exaggerated their budget, it can adjust the financial award accordingly, potentially reducing claims for maintenance or altering the division of assets to reflect the true needs and resources of both parties. The court in Purba v Purba ((2000), 1 FLR 444) offered some guidance that the judge’s role is not to go through the budget item by item, but to consider as a whole what is the appropriate proportion of the payer’s income to go to supporting the payee.
Mr Justice Mostyn (for many years a prominent and outspoken High Court judge) sought to clarify the position in SS v NS ((Spousal Maintenance) (2014) EWHC 4183) and added that the principle in Purba “should not be taken to mean that the individual items of the budget are irrelevant. Rather, it emphasises that in the exercise it is important that the court should clearly survey the wood as well as the trees”.
Whether needs are “causally connected” to the marriage or not is another principle arising from SS v NS. A distinction can be made where decisions taken during the marriage have the consequence of generating future needs on behalf of the payee. Conversely, where needs are not causally connected to the marriage, Mostyn J tells us that “the award should generally be aimed at alleviating significant hardship only”.
Q: How do exaggerated expenditure budgets affect divorce proceedings?
A: Exaggerated expenditure budgets can be used as a tactic to inflate financial needs, with the aim of securing a larger financial settlement. This may involve inflating everyday living expenses or including non-essential costs like luxury items and unnecessary purchases, which were not part of the couple’s lifestyle during the marriage. It can have a magnifying impact in cases where capitalisation of spousal maintenance is being considered as it could lead to a much inflated lump sum payment in lieu of monthly maintenance. In exceptional cases, however, inflated expenditure budgets may be accepted. In cases where it can be shown that the payer’s income is significantly more than required to adequately meet both parties’ needs, it may seem unfair that the payee’s claim is limited strictly to needs. This “compensatory element” is dealt with by a “generous assessment” of the payees needs “unrestricted by budgetary consideration”.
Q: How can parties ensure a fair financial outcome?
A: To achieve a fair and equitable financial settlement, both parties should present accurate, reasonable, and well-supported expenditure budgets that reflect their actual circumstances. Being transparent and honest will help ensure that the settlement reflects each party’s true financial needs, leading to a more balanced resolution. However, it is important to present a comprehensive budget to the court that is well thought through and properly researched.
How Wedlake Bell can help
Wedlake Bell’s family law team based in the City of London regularly acts in divorce cases for high-income families. Whichever party we are acting for, we are expert in preparing your case to achieve your goals on divorce – whether seeking to maximise or minimise a maintenance liability.
For a confidential, no-obligation call-back from one of our family lawyers, please contact Aimee Matthews or another member of our specialist team.
This article is for general information only and does not seek to give legal advice or to be an exhaustive statement of the law. Specific advice should always be sought for individual cases.
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