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Desperately seeking certainty. And fairness. And equality. And … The Divorce (Financial Provision) Bill

Date:27 JUN 2014
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Senior Associate Solicitor

Having had its first reading on 9 June 2014 the Divorce (Financial Provision) Bill is due back in the House of Lords today, Friday 27 June 2014 for its second reading and general debate. The private member’s bill put forward by Baroness Deech seeks to reform the law relating to financial provision on divorce amending the Matrimonial Causes Act 1973.

The stated aim of the Bill is to make financial settlements on divorce 'simpler, more certain and democratic'. It is certainly succinct. In just 5 pages it seeks to set out how the courts should deal with pre and post nuptial agreements, division of capital on divorce and payment of spousal maintenance.

As the Law Commission pointed out in its recent report on needs, matrimonial property and agreements, for a litigant in person (and for many lawyers) the law in this area is complex and vague. Judicial discretion to achieve a fair outcome taking into account the s 25 factors plus judicial creations such as sharing and compensation combine to make it difficult to predict the result – so often the answer to the client will be 'well, it depends” and “it should be somewhere in this (rather large) bracket'.

The Commission recognised that guidance is needed (and is now on its way) to try to eliminate regional variation in the interpretation of need. However it did not try to grapple with the minefield that is matrimonial/non-matrimonial property. Baroness Deech’s Bill is braver.

Baroness Deech has long been critical of the law of financial provision on divorce, and in particular the way it encourages women to rely on their former husbands for support. In an article in 2009 for the Guardian she called the current situation 'unfair all round' and said 'It is contradictory if family law assumes that a woman can and should stay at home and care for their children and be compensated for that on divorce, while society calls for women to take 50% of top jobs'. She is not alone. A local female district judge is known for being unsympathetic to the non working mother seeking long term maintenance perhaps because she herself has worked full time in a demanding career whilst raising a family.

Family lawyers have long had the task of explaining to a husband that it is reasonable to expect him to hand over more than 50% of the capital assets of the marriage for the purposes of rehousing his ex wife and the children of the family and still have to pay spousal maintenance often on a joint lives basis. It is this sort of scenario that makes husbands feel they are not treated fairly in the divorce courts.

Baroness Deech’s Bill includes provision for pre-nups to be automatically binding subject to compliance with contractual requirements, both parties having legal advice, full disclosure, and the agreement being concluded not less than 21 days before the marriage. Familiar conditions, but the safety net of needs recommended by the Law Commission is notably absent.

Under the Bill the court can make lump sum orders, pension sharing orders and property transfer orders, but these are only to be made in respect of matrimonial property. Matrimonial property is defined as property including pension belonging to both or either of the parties at the date when cohabitation ceased or a petition was issued – whichever is earlier. Property acquired by way of gift or succession from a third party is excluded. Property acquired before the marriage is also excluded unless it was used as or in thefamily home.

Matrimonial property will be shared 'fairly', which means equally. There may be a departure from equality in certain limited circumstances including to take into account the source of the assets, the needs of any children of the family aged under 21 or where one party has dissipated assets, but notably not to meet the needs of one of the parties.

The court would be prohibited from making an order for periodical payments for a term exceeding 3 years and periodical payments should only be awarded if the capital award is insufficient to achieve certain aims including balancing financial disadvantage resulting from the marriage, enabling a transition to independence and prevention of hardship.

All this of course raises those long-running arguments of certainty versus discretion; clarity versus bespoke solutions; predictability versus individual fairness. The off-the-peg solution is likely to be cheaper and offer an easier route to agreement in many cases, but on the face of it could result in a harsh outcome for some people. Where there is a nuptial agreement or negotiation or mediation is possible, more creative and bespoke arrangements would still be possible, but if the court is forbidden from making an order for periodical payments for more than 3 years, it would presumably not have jurisdiction to do so even if the parties agreed, so there appear to be limits to the Bill’s support for individual autonomy.

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It is not difficult to think of scenarios where in the context of the awards we are used to seeing this Bill could result in relative hardship or apparent injustice. For example significant periodical payments can be used to counter illiquidity. The current system allows room to take into account complex human relationships and unusual financial arrangements so that a “fair” result can be reached (fairness always being in the eye of the beholder).

At a debate hosted by Irwin Mitchell in March this year, four eminent barristers argued about the merits of the Scottish model and whether England and Wales should adopt it. The overwhelming majority of the (very English) audience was unsurprisingly against that motion.

Looking at the Bill from a political view point, it may be attractive to government in some respects if it will assist in keeping people out of the over-stretched court system. But restricting periodical payments is likely to result in more people reliant on state benefits. The absence of any underlying principle of meeting needs is not only alien to lawyers but may put off the politicians too.

The Bill helps to keep these important issues on the political agenda. Healthy debate about family law is to be welcomed and well thought out reform is overdue. We can only hope that neglected matters such as cohabitation also receive the political and legislative attention they deserve.

The views expressed by contributing authors are not necessarily those of Family Law or Jordan Publishing and should not be considered as legal advice.

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