Family Law

On the 11 September 2012 the Law Commission launched a supplemental consultation paper entitled Matrimonial Property, Needs and Agreements. The consultation, which closed on 11 December 2012, sought views on whether the law relating to needs and non-matrimonial property should be reformed. Below is Irwin Mitchell Solicitors' response.

PRINCIPLED REFORM

LAW COMMISSION QUESTION 7.2:
Do consultees agree with our central argument that the current law requires reform to ensure that the payment of spousal support is founded on a principled basis that explains what has to be paid by way of spousal support, and for how long?

IRWIN MITCHELL'S RESPONSE:
Yes. However, the theoretical justifications for spousal support proposed by the Law Commission in the Supplemental Consultation Paper ("SCP") are either inadequate or do not tell us how spousal support should be calculated or for how long (see answer to question below).

LAW COMMISSION QUESTION 7.3:
Should spousal support:

(1) be restricted to the compensation of loss caused by the relationship; or

(2) seek to unravel the "merger over time" by redressing the disparity in lifestyle caused by the divorce or dissolution?

IRWIN MITCHELL'S RESPONSE TO 7.3 & 7.4:
Compensation for loss is an inadequate justificatory basis for calculating spousal support for the reasons given by the Law Commission in the consultation paper.

It is backward looking and implies that the party with the higher earnings is somehow at fault. It appears to embody the feeling: "I deserve to be compensated because look what I have given up for you!"

Seeking to "compensate" a party who has prioritised family over career is also demeaning to homemakers because it implies that h/she is a victim. Compensation should not form part of the justificatory basis for financial provision on divorce in a legal system which values the contributions of homemakers and breadwinners equally. There is, after all, no way of compensating the breadwinner for having missed his or her children growing up. The proposal elevates money over emotional advantages.

It seems fairer and less artificial to regard the two parties as having voluntarily assumed varying levels of responsibility for different aspects of their lives, and in some circumstances these responsibilities continue after divorce. This idea may form part of the "merger over time" approach, which is Irwin Mitchell's preferred basis on principle for justifying spousal support.

The major flaw of the "merger over time" approach is, however, that it does not tell us "what has to be paid by way of spousal support and for how long" (quoting question 7.3). It is not clear, for example, why "the length of the marriage" is proposed as the logical duration of support. It is, therefore, necessary to have recourse to other principles to answer these questions.

Irwin Mitchell considers that the appropriate level and duration of support should be determined in accordance with the following principles: 

• Where someone has an earning capacity, they should be expected to become independent after a period if that earning capacity is likely to suffice to meet his/her needs.
• A spouse may need support for a longer period where s/he has a low or no earning capacity because s/he has primary care of the children.
• Where spouses have dependent children, the spouses' respective standards of living are relevant and should be comparable.
• Where someone has an earning capacity and so will be expected to become independent, but his/her earning capacity is such that there would be a decrease in standard of living if there were to be no continuing support, the spouse should be given sufficient time to adjust to the change in standard of living (as in the French prestation compensatoire system).

What constitutes "sufficient time" is not capable of being answered on the basis of principle alone - it is a practical question about the ability of people to adjust to change. It seems likely that it is more difficult, generally speaking, for older spouses to adjust to a change in standard of living, and so unfair to expect them to. But where the payee spouse is young, it may be that no period of adjustment is required and the payee spouse should be entitled only to as much as he/she would need to re-house and start again as a single person.

LAW COMMISSION QUESTION 7.5:
If consultees favour a principled reform of spousal support, should it take the form of:
(1) a reformed discretionary approach; or
(2) a formulaic calculation?

IRWIN MITCHELL'S RESPONSE:
Irwin Mitchell considers that any principled reform of spousal support should take the form of a reformed discretionary approach rather than a formulaic calculation.

It is not clear that fairness would be achieved through a formulaic calculation. The Canadian system calculates maintenance by reference to the spouses' respective gross incomes. It does not, however, address the possibility that a spouse who does not currently have an income may have an earning capacity and could reasonably be expected to go out to work. The flipside of this, of course, is that a formula that did take into account a person's earning capacity would not achieve predictability or certainty, since whether a person has an earning capacity and if so, what that earning capacity is, may not be clear-cut, but are matters that involve discretion.

A formula would also not be capable of addressing attempts to conceal or manipulate income.

Other problems include that the formulae discussed in the SCP do not take into account:

• financial obligations of the parties, for example, to make mortgage payments;
• division of ownership or use of capital assets, including the former matrimonial home;
• the abilities of the spouses to borrow capital, for example, to start a business or buy a house.

Irwin Mitchell considers that a formula simple enough to be easy to use by most people, and therefore capable of securing the benefits of predictability and certainty, would not adequately cater for the infinite variety of factual scenarios and ways that individuals have chosen to arrange their person lives.

Irwin Mitchell notes, however, that the existence of regional differences in the amount and durations of awards is a strong argument in favour of a formula. There may, however, be other ways of addressing this issue, for example, through guidance of the kind discussed in the SCP at paragraph 5.40-5.42.

LAW COMMISSION QUESTION 7.6: 
To what extent do consultees think that either a reformed discretionary basis or a formula should embody incentives towards independence by placing limits on the extent of support that might be given?

IRWIN MITCHELL'S RESPONSE:
Irwin Mitchell considers that the law should place time limits on support to encourage independence, with exceptions to cater for individual circumstances.

The following factors would be relevant in determining the time-limits on support:

Children
Where a spouse has primary care of children, it seems reasonable to expect a spouse to return to work and thereby achieve financial independence after the youngest child reaches an age at which it is generally regarded as safe for the child to travel to/from school and be at home unsupervised. It may be that further research or a study would be required to determine this age, but it is likely to be less than 18 but more than, say, 11.

No children
Where there are no children and the payee spouse has sufficient earning capacity to meet his/her needs, the duration of support should be for such period of time as would allow the spouse with lower (or no) earnings to adjust to any change in standard of living.

Age
Irwin Mitchell considers that there should be no time limit where the payee spouse is over a certain age and as a result (and taking account of any period to allow for adjustment in standard of living), his/her earning capacity would not generate enough earnings to meet his/her needs. Further research or a study may be required to determine this age.

Irwin Mitchell regards the length of the marriage as less significant than the age of the parties in determining the duration of support, since there is a more direct relationship between a person's age and his/her earning capacity.

Extension of the period of support
Orders should be made extendable in certain circumstances. Where an order is made extendable, it should then be possible for the payee spouse to apply to extend the period of support providing that certain conditions specified in the order have been met.

LAW COMMISSION QUESTION 7.7:
What preliminary work would be needed to research and pilot a new approach?
In particular:
(1) who should do that work;
(2) what methodology should be adopted;
(3) what sort of timescale and investment would be required?

IRWIN MITCHELL'S RESPONSE:
Irwin Mitchell agrees that substantial research and piloting would be required to devise a formula that could work in the UK.

An adequate assessment of any wholly new approach would need to do more than simply compare the results produced by a formula with the numbers produced under the current approach. Ideally, a pilot would involve an assessment of the impact of any new approach on test cases at the time of the financial provision proceedings, during the period of maintenance, and after maintenance had ceased. A pilot would also need to capture data from a broad range of families of different incomes, capital assets and ages, and seek the views of industry professionals such as family lawyers, mediators, judges and therapists/counsellors.

IMPROVING THE CURRENT LAW RELATING TO NEEDS

LAW COMMISSION QUESTION 7.8:
Consultees are asked to give us their views about the following possibilities for statutory and non-statutory reform.
(1) Statutory provision to the effect that the courts, in making provision for spousal need, must aim to ensure that a payee spouse is enabled to become independent within a reasonable period, while bearing in mind also that independence is unlikely to be practicable until the children of the marriage or civil partnership finish their education.
(2) An authoritative source of guidance for the courts and for members of the public about:

• (a) the considerations involved in an assessment of need;
• (b) the priority to be afforded to different elements of need.

(3) Provision about the following either by way of statutory amendment or in the form of authoritative guidance:

• (a) the time within which independence is to be expected;
• (b) the normal form of orders for periodical payments (term orders or joint lives); and
• (c) the financial arrangements to be made after short childless marriages.

(4) Who should provide that guidance? Would it be appropriate for it to be produced by the Family Justice Council in the form of Practice Guidance?
(5) Publication of that guidance on the information hub to be provided in response to the Family Justice Review.

IRWIN MITCHELL'S RESPONSE:
Irwin Mitchell considers that the statutory direction should be upgraded to one which directs the court to bring the financial obligations of each party towards the other to an end where possible. As further explained at 7.6 above, Irwin Mitchell considers that, subject to exceptions, there should be time limits on support, which in some circumstances should be extendable.

Irwin Mitchell considers that it would be helpful to have guidance, and in particular, on:

• the circumstances in which the period of maintenance should be extendable; and
• the considerations involved in an assessment of need and the priority to be afforded to the different elements.

Irwin Mitchell supports the suggestion of including case studies in authoritative guidance.

Irwin Mitchell also supports the suggestion to create a database of anonymised case studies alongside the authoritative guidance provided that the organisation responsible ensured that the database included case studies that were consistent with each other on principle, and was accompanied by a note of caution that each case will turn on its own facts etc. Consideration would need to be given to the action to be taken if a large number of cases proved not to be consistent.

Irwin Mitchell considers that the Family Justice Council would be well-placed to prepare the authoritative guidance which should, as a minimum, be published on the internet.

NON-MATRIMONIAL PROPERTY

LAW COMMISSION QUESTION 7.11:
We provisionally propose that non-matrimonial property, defined as property held in the sole name of one party to the marriage or civil partnership and:
(1) received as a gift or inheritance; or
(2) acquired before the marriage or civil partnership took place should no longer be subject to the sharing principle on divorce or dissolution, save where it is required to meet the other party's needs.

Do consultees agree?

IRWIN MITCHELL'S RESPONSE:
Yes

LAW COMMISSION QUESTION 7.12:
We ask for consultees' views on whether the family home should be excluded from the definition of non-matrimonial property proposed above.

IRWIN MITCHELL'S RESPONSE:
Irwin Mitchell considers that the former matrimonial home ("FMH") should be excluded from the definition of non-matrimonial property.

It should, however, be possible to categorise the FMH as non-matrimonial property in a pre-nuptial or pre-civil partnership agreement.

Furthermore, in deciding how the FMH should be divided on divorce, the origin of the FMH (e.g. whether it was inherited) and the parties' respective contributions to the purchase or improvement of the FMH should be relevant considerations, even though the property is matrimonial.

LAW COMMISSION QUESTION 7.13:
We ask for consultees' views on whether property acquired by one party during cohabitation with the other party should be excluded from the definition proposed above.

IRWIN MITCHELL'S RESPONSE:
Irwin Mitchell considers that property acquired during cohabitation should be regarded as matrimonial property where the parties subsequently get married or enter into a civil partnership. Irwin Mitchell agrees with Mr. Nicholas Mostyn QC in GW v RW [2003] EWHC 611 (Fam) that for the purposes of section 25(2)(d) of the Matrimonial Causes Act 1973, "where a relationship moves seamlessly from cohabitation to marriage without any major alteration in the way the couple live, it is unreal and artificial to treat the periods differently".

Irwin Mitchell notes that it would always be open to the parties to exclude pre-acquired property, subject to it being available to meet needs, by entering into a nuptial or civil partnership agreement.

LAW COMMISSION QUESTION7.14:
We provisionally propose that non-matrimonial property should not lose its status as such merely by virtue of having been used by the family.

Do consultees agree?

IRWIN MITCHELL'S RESPONSE:
Yes, although its exclusion from division may have a knock-on effect in relation to the assessment of needs - for example, if the property is a much-used holiday home that minimized the family's holiday expenditure.

LAW COMMISSION QUESTION 7.15:
We provisionally propose that where non-matrimonial property has been sold and substitute property bought, that property should be matrimonial property if it has been bought for use by the family, save where the substitute property is of the same kind as the property sold.

Do consultees agree?

IRWIN MITCHELL'S RESPONSE:
Yes

LAW COMMISSION QUESTION 7.16:
We provisionally propose that where non-matrimonial property has been sold and the proceeds invested in matrimonial property, the property (following that investment) should be matrimonial property.

Do consultees agree?   

IRWIN MITCHELL'S RESPONSE:
Yes

LAW COMMISSION QUESION 7.17:
We ask consultees to tell us whether they think that it is possible to devise rules - or a guided discretion - for the treatment of cases where non-matrimonial property has grown due to the investment of one or both the spouses? What values should be expressed in those rules?

IRWIN MITCHELL'S RESPONSE:
Irwin Mitchell considers that any reform should take the form of guidelines rather than rules.

Irwin Mitchell agrees that property should not lose its non-matrimonial character as a result of the owner-spouse investing in the property during the marriage.

It would be unusual for a family business which represents the owner's career and full-time occupation not to have provided financial benefits to the family. In such a case, it would seem fair to regard at least a portion of the business as matrimonial property since it was used by the family.

On the other end of the spectrum is a person who has invested in non-matrimonial property not as a full-time occupation and which, consequently, has not been used to benefit the family. In these cases, it would seem fair that the non-matrimonial property should retain its non-matrimonial character.

In cases where the non-owning spouse has invested time and/or money in the business, but has not become a formal business partner, Irwin Mitchell considers that the area is too fact-specific to seek to devise abstract general principles. But the following considerations would be relevant:

• the nature of the contribution; for example, a spouse who works on the owning-spouse's farming business but doing similar tasks and expending equal effort to the owning-spouse may be considered to be entitled to more of the business than a spouse who performs administrative tasks for his/her spouse who is a sole practitioner solicitor; and
  
• the extent of the contribution.