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The Law Commission proposals: A wasted opportunity, passing the reform buck and continued unpredictability for future settlements?

Date:28 FEB 2014
Family lawyer

International Family Law Practice by David Hodson

David Hodson

The English Law Commission has today (27 February 2014) published its long awaited final report and proposed draft legislation on its government prompted consultation on 'Matrimonial Property, Needs and Agreements'. 

While it has the expected recommendation of binding marital agreements, overtaken in part by the Supreme Court in Radmacher and forecast in its first report in 2011, the failure to make specific recommendations for Parliamentary law reform in the other two areas is highly disappointing, frustrating and a wasted opportunity.  These areas are:

  • when should non-marital assets be treated as marital and equally shared; and
  • how to define or at least better understand what are appropriate financial needs. 

Much family law finance litigation concerns one or both areas.  Many family lawyers were eagerly looking forward to the Law Commission recommendations.  In both, we have waited in vain.

It is now 45 years since England had substantive statute law on financial consequences of marriage breakdown.  During this time, our society has changed dramatically as have our expectations of marriage.  Financial wealth has changed.  Gender roles have changed.  But Statute law has stayed the same.  After huge disquiet in the 1990s, the Supreme Court (as it now is) saved the day with its decisions in White and Miller.  They introduced categorisation of assets, marital and non-marital, with financial needs trumping the (respective) sharing or non-sharing principle.  However uncertainty prevailed and, with it, the inevitable encouragement to disputes, litigation and ensuing legal costs.

After calls for the need for reform from, eg Centre for Social Justice (2009) and the Family Justice Review (2011) of Sir David Norgrove, the government asked the Law Commission to look into these problematical areas of marital property and needs.  Specifically the remit was not the whole area of divorce financial provision.  There is no material dissatisfaction with the objective of fairness and the starting point of equal sharing of maritally acquired assets.  This was to be part of the existing consultation on marital agreements.  The final cumulative report was published today.

At the moment English law provides a starting point of equal division of maritally acquired assets but financial needs dictate an applicant can have more than one half.  Whilst non-marital assets are not invariably shared, financial needs will in effect trump this so that one party provides for the needs of the other out of their non-marital resources.  But what are needs?  For how long do they last after the marriage?  On what standard of living are they based?  What principles should be applied?  Is discretion too wide and unfettered and unclear?  Would statutory guidelines of needs lead to more certainty and more settlements?

The Law Commission admits that clear guidance on financial needs would be invaluable in the vast majority of cases.  It would help lay parties, non-lawyer mediators and others to gain a realistic assessment of the appropriate fair outcome.  Guidance would dispel myths of what is the law.  It would overcome regional variations.  But after much debate of having statutory amendments (paras 3.69 - 3.90 of the Report), the Law Commission does not then give that guidance.  It passes responsibility to do so on an ongoing basis to the Family Justice Council, composed of judges and lawyers.  There is no timetable provided and no brief (save the guidance will be "primarily to the courts").  Moreover it is passed to an organisation which is far less constitutionally accountable, less amenable to media and political scrutiny or involvement and crucially is comprised of lawyers whereas many consider lawyers are arguably part of the problem.

There is reference to calculations and formulae being possible in the future to give guidance.  I have been arguing for this for a long time.  It was much discussed in consultations including models abroad.  But many of us hoped this report would go much further in looking at specific arithmetic or flow chart type starting points.  It does not

But what of non-marital property?  This is pre-marital, gifted or inherited assets.  They are not presently divided unless required for needs.  What about non-marital assets which are mixed and mingled with marital assets?  What about non-marital assets used for marital purposes e.g. buying a second property?  What about non-marital assets used partly for family expenditure?  Are these now marital assets and so shared equally?  European civil law jurisdictions have hard and fast rules.  We were looking forward to the Law Commission making statutory proposals.

The Law Commission admit that at the outset they felt statutory rules would be useful.  They accept the courts had not yet been able to provide clear answers.  But then they make no reform recommendations.  They explain consultation responses were that it would be 'unacceptably controversial' (para 1.25 of the Executive Summary).  Instead they say these matters should be determined by the parties in marital agreements or left to the courts.  It is said this only affects a relatively small number of couples although this is very arguable

With all due respect to the Law Commissioners who were keen to produce a clear and certain law for our country, this is a missed opportunity and hugely disappointing that they have not made recommendations for this reason.  Law reform is often controversial.  Otherwise it goes through with cross-political party support.  It is where law reform is difficult and controversial that we need the Law Commission, with widespread public consultation, access to academia and the law and statistical studies and with the opportunity of taking a broad view of the big picture.  Instead we will continue to rely on judge made law, too often confusing, contradictory, highly discretionary, referable to the more unusual fact circumstances before the court and rarely with the benefit of broad policy considerations.

Having travelled 35 years since the last statute law reform, our English financial provision law is at a historic crossroads.  We are the original common law jurisdiction based on discretion, fairness criteria and flexible judge led law.  Whilst some common law countries such as New Zealand have attempted some sort of codification and categorisation, England and other common law countries have strongly remained discretion based.  This has been our path to the crossroads.  But we have met another, very different path.  We are in the EU and in Europe.  Our European neighbours are civil law states, with community of marital property and with fairness and justice found not in discretion but in clarity, certainty and predictability. 

These two very historic paths could have met in a magnificent Law Commission set of proposals.  They could have told us how to preserve some discretion yet have more certain laws for more certain outcomes.  They could have written a plain English family law code, understandable by the public and litigants in person, to inform fair settlements and avoid unnecessary litigation.  They could have led the common law world to meet the civil law world and helped both in a joint way forward.

But sadly they have not. 

We must hope that as we stand at this crossroads England does not find ourselves on a detour into a jurisprudential cul-de-sac.  We are unlikely again to have this chance of statutory reform within a decade.  We may be pleasantly surprised at the direction and guidance from judge led case law or the Family Justice Council.  But it would have been so much better if this could have been under the full gaze of political, media and public scrutiny as occurs from Law Commission proposals.

Of course there is the very welcome recommendation of binding marital agreements.  This has always been anticipated from the first report in 2011.  The Law Commission has highly commendably avoided the problems experienced in Australia with over complex and demanding qualifying conditions.  Equally they have commendably required that disclosure and separate legal representations are preconditions for a qualifying marital agreement. 

There are still huge concerns that marital agreements often work to the disadvantage of women, especially when coupled with the uncertainties regarding financial needs and non-marital resources. 

These excellent recommendations about marital agreements deserve prompt statutory endorsement from Parliament. 

But we must acknowledge this new law would not be us joining with our civil law neighbours.  English marital agreements are and will be much closer to the Australian and US models than the civil law which invariably disregards disclosure and separate legal representation.

The full Report is very comprehensive, setting out the arguments for the various positions and potential recommendations and explaining strengths and weaknesses, giving direct quotations from many of those making representations and looking to other possible ways forward.  It deserves to be read by all interested in family law finance

Perhaps unrealistic hopes prevailed of this Law Commission consultation.  Perhaps England is not yet ready to be a dating agency between the common law and our European civil law colleagues.  Perhaps the uncertainty and complexity of the law will soon be met by other forms of resolution outside of the purity of the law of the courtroom. 

Resolving disputes through the family justice system has become so expensive and so lengthy that it is in reality getting out of reach of all bar the relatively wealthy.  Might this be one of the last throws of the dice for a clear, codified and constructive law applicable for our entire country?    

David Hodson is a Partner at The International Family Law Group LLP. He acts in complex family law cases, often with an international element.  

He is an English specialist accredited solicitor, mediator, family arbitrator, Deputy District Judge at the Principal Registry of the Family Division, High Court, London and also an Australian qualified solicitor, barrister and mediator. He is a Fellow of the International Academy of Matrimonial Lawyers and chair of the Family Law Review Group of the Centre for Social Justice.

David is the author of a new major reference work, The International Family Law Practice as well as A Practical Guide to International Family Law (Jordan Publishing, 2008). He can be contacted on dh@davidhodson.com.

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