Retrenchment – How does it affect child maintenance under the Women’s Charter?

In a divorce, the soon to be ex husband and wife may agree on the terms of the monthly payments to be made by one party to the other. If no agreement can be reached, they must await determination by the Family Justice Courts. Upon divorce, the terms of such payments will be recorded in a Family Court Order that is binding on the parties.

These payments are commonly referred to as maintenance. There are two types of maintenance – spousal maintenance (or alimony as it is more commonly known) and child maintenance.

While a court order on maintenance is binding on the parties, the terms of such an order can be changed provided both parties agree to the change. Otherwise, the party seeking for the change must convince the Family Justice Court that there has been a “material change in circumstances” in order for the Family Justice Court to order a change to the maintenance terms.

We have seen a rise in numbers of retrenchment and wage cuts, and a corresponding increase in our caseload for applications to vary and reduce maintenance payment obligations.

In this article, we aim to help you better understand the factors that will be taken into account when determining if a variation should be granted in the event of a party’s retrenchment.

For the purposes of this article, we will only be focusing on child maintenance. To determine if a variation of child maintenance ought to be granted, the Family Court judges will look at a variety of factors, which we will elaborate on below.

Overview

According to the Women’s Charter, the Court has the power to vary a child maintenance order if and when there has been a material change in circumstances.

At first blush, retrenchment of the paying party seems to be a material change in circumstances warranting a reduction in one’s maintenance obligations. After all, the paying party ceases to have a source of monthly income. However, a mere change in financial circumstances is generally insufficient. The change in financial circumstances must be adverse towards the party seeking for the variation. The Court will consider other factors to determine this, including the retrenched party’s financial position and if there has been a change in standard of living.

In addition, since the welfare of the child/children would be paramount, the judges in the Family Court will also consider the impact a variation order (if they were to grant it) will have on the child/children.

Retrenched Party’s Financial Position

The Family Justice Courts will look at the retrenched party’s financial position. Income from employment is but just one aspect of a party’s financial position. Other factors to consider would include the amount of savings the retrenched party has, his existing liabilities, and the size of the severance package given at retrenchment are also crucial. The Family Justice Courts will consider these different aspects before making a judgement on the retrenched party’s financial position.

Let’s illustrate this with a hypothetical example.

Ethan has been retrenched from his company and seeks to vary the child maintenance downwards. At time of retrenchment, Ethan only received two months’ salary as his severance package. Since his retrenchment, he has not been able to find a job and has been unemployed for more than six months. As Ethan has an existing mortgage and an elderly mother to care for, he is now gravely in debt. Two of his credit cards have been cancelled, and he is struggling to pay his income tax arrears. In contrast, Ethan’s ex-spouse is well-off and owns two properties and a car.

In such a situation, given Ethan’s impoverished state following his retrenchment, his loss of income will likely be sufficient to constitute an adverse change in financial circumstances. If, however, Ethan amassed huge amount of savings over the years and received a large sum of money in his severance package, the Family Justice Courts may not hold that there has been an adverse change in Ethan’s financial circumstances.

Retrenched Party’s Standard of Living

In addition, the Family Justice Courts will also consider the retrenched party’s standard of living. The applicant seeking the variation must prove that there has been a material change in his own standard of living.

Consider another hypothetical example:

Leonardo has been retrenched from his company. As a result, Leonardo has decided to cut back on his luxury expenses and has sold his Porsche sports car. He has however not moved out of his apartment in Orchard Road, and has not cut down on his food and entertainment expenses. Leonardo now relies on the sale of his Porsche as evidence for a material change in his standard of living to reduce his child maintenance obligations.

In such a case, it is unlikely that the sale of the sports car is itself sufficient to show that Leonardo’s standard of living has materially changed. This is because a sports car is a luxury that Leonardo could definitely live without. When a party is retrenched, it is almost expected that he or she would eliminate luxuries. Thus, such elimination is in itself inadequate to prove that the change in standard of living is indeed material.

To prove that the change in standard of living is material, based on our experience dealing with similar applications, it is necessary for Leonardo to show that he has reduced his personal expenses in a meaningful manner, such as tightening of the belt with regards to necessitates. For example, cutting down on expenses such as hobbies (selling his golf membership, forgoing his weekly karaoke night), and entertainment and dining out.

Impact the variation has on the children

Even if the above two factors lie in favor of finding a material change in the party’s circumstance, the Family Justice Courts may not necessarily grant the variation of child maintenance.

Family law fundamentally recognises that each biological parent has an independent and non-derogable duty to maintain the child. When deciding cases, protecting the children’s welfare will always be the paramount consideration of the Family Justice Courts. Thus, notwithstanding that the retrenched parent’s circumstances has been materially affected, the Family Justice Courts will not automatically grant a variation but will instead take into consideration whether it is reasonable for the welfare of the child that the maintenance be varied.

This begs the question of what is considered “reasonable for the welfare of the child”. To determine this, the Family Justice Courts will need to first consider what the children’s reasonable expenses are and look at the parents’ respective salaries and/or earning capacities as an indicator of the proportion that each party should bear.

In the event that a downward variation of child maintenance will result in inadequate funds to support the child’s reasonable expenses and that it is unfair to expect the other party to increase his or her contribution towards the child’s maintenance, it is unlikely that the variation will be granted.

Conclusion

A party who gets retrenched may be interested in seeking a variation of the monthly maintenance sum. In our view, while the judges are sympathetic to the plight of the retrenched party, they take a wholistic approach to determine if the variation should be allowed.

Ultimately, the Family Justice Court’s decision for any family law matter will always revolve around a balancing game of the interests of the three parties – the Father, Mother and Child - with the child’s interest being paramount.

If you or your former spouse’s ability to maintain the children has been affected by a recent retrenchment, you may have to reach an agreement with your former spouse on how the existing child maintenance order ought to be varied.

To ensure that you can create the right arrangements for you, or if you’re unsure how to approach the issue of child maintenance, it’s worthwhile seeking advice from experienced family law solicitors.

If no agreement can be reached, a contested child maintenance dispute may be inevitable, which will only serve to add stress, costs and increase the acrimony between the parents.

At Jacque Law LLC, we have worked on many divorce cases involving child maintenance disputes, and can guide you through the entire process, providing dedicated advice specific to your circumstances.