Reform of the law - thoughts and reflections following Law Commission meeting

Should the current divorce law surrounding how to divide assets in a divorce be updated?

Written by John Clegg, Family Law Solicitor and Partner

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Divorce law directly affects thousands of of families in South Yorkshire, and many of the laws surrounding divorce and the distribution of financial assets are outdated. Therefore, it was a pleasure to represent Howells Solicitors, and other South Yorkshire family law practitioners, in the Law Commission’s meeting with Resolution on 5th October to review the current laws.

Having practiced extensively in family law over the past 14 years, it is remarkable how little has changed in divorce law relating to financial settlements. Divorce laws themselves have fundamentally changed, such as the introduction of no fault divorce, but how the court deals with finances in a divorce has evolved little in that time.

This, perhaps, is sign itself about need for consideration about whether the law as it stands remains appropriate or fit for purpose.

The current law relating to financial remedies on divorce

The area of finances in divorce is a hot topic at present as the Government is currently considering whether changes to divorce law are due (or should we say overdue!).

Married couples separate with little or no understanding of the financial consequences of their breakup, due to a lack of clarity of the divorce laws surrounding financial assets and settlements. This makes it difficult for them to reach agreement themselves, or in mediation, and places a greater burden on the Court system.

Most divorce cases rely on advisors and litigants being able to understand what a Court is likely to do so they can reach agreement, placing further financial strain (and emotional stress) on the couples.

This has become increasingly problematic in recent months as the average household disposable income has decreased significantly compared to 2021, and most couples struggling ?to be able to fund the purchase of two properties and meet their other financial needs on separation.

Many married couples are under the presumption that when separating, financial assets are separated 50/50, which is not always the case. Most financial agreements are decided on multiple factors, such as ‘needs basis’ (which is a very broad term), income, earning capacity, age, duration of marriage and financial contributions made during the marriage. The lack of clarity in divorce laws makes it very difficult for a couple to reach financial agreements.

The Court’s assessment of the “needs” of the parties on separation is in my experience is the single factor that most impacts upon the terms of any financial settlement but that is not said clearly in the relevant legislation.

Examples of the law could be considered outdated include:

·???????? When divorce law legislation was created 50 years ago, little consideration was made to the length of cohabitation before marriage and at present it is far more common to cohabit for a long period before marriage.

·???????? Whether the principles/possibilities for seeking spousal maintenance remain fit for purpose in an era of dual income households.

·???????? A lack of focus on the needs of children. For example, at present there is little clarity on whether the court should order maintenance/assistance whilst a child is in tertiary education. We are living in times where many more 18-21 year olds remain financially dependent/go to Uni and can’t afford to live separately. In 1973 obviously far more 18-year-olds would just leave home go straight into work and be independent of their parents.

·???????? That care of children is much more likely to be shared between parents than it was 50 years ago and the impact of children needing a home with each parent.

·???????? That the average working life until retirement is now likely to be much longer and how pension provision, particularly in the private sector, is then unlikely to be able to meet needs in the same way as it was and how this can be addressed.

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What are the reforms?

The Resolution’s Manifesto for Family Law sets out what the government should do to improve the lives of separating and separated families across England and Wales.

Resolution is focused on addressing the complexity of the current law and how that affects ordinary people, living in ordinary circumstances and any improvements that can be made to the law to make sure they are fairly provided for after they separate.

In October, senior practitioners, and representatives from Resolution committees across the country, including myself, participated in a meeting with the Law Commission to discuss if the current law surrounding the division of assets in divorce matters.

The committee wanted to discuss if any changes are needed with an emphasis on children’s interests during divorce proceedings, the principles of spousal maintenance, pensions, and clearer guidelines on how the Court will approach dealing with assets on divorce.

Some of the reforms for consideration included:

·???????? Spousal maintenance

·???????? Pre-nuptial agreements and whether they should be automatically binding with suitable safeguards

·???????? Non-matrimonial property (ie received as a gift or inheritance during the marriage, or acquired before or after the marriage) and whether or not sharing principles should apply, subject to when it is required to meet needs

·???????? Costs in divorce finance cases

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Some of those “hot topics” and the views I expressed were:-

Spousal Maintenance

·???????? At present, there is no limitation on the amount of time the Court can order one party to provide maintenance to the other. Whilst unusual, in some circumstances this can even last for the rest of a lifetime. That legislation was designed in a time where a one income family was far more the norm. There should be better guidance on the principles of the Court making orders for spousal maintenance.

·???????? Consideration ought to be given about an appropriate time limit, perhaps except for cases where this would cause undue hardship for example those who cannot work due to disability or ill health.

·???????? Structures should also be made that helps avoid parties having to return to Court, but do not make any limits that cause hardship to the financially weaker party, particularly if they are older or have not been able to work during the marriage.

·???????? The first consideration should be the needs of any children when dealing with spousal maintenance. It would also be better for the Court to have more jurisdiction to make orders relating to child maintenance. Currently the Court can only order it for one year and otherwise has to go through the child maintenance service.

Pre-nuptial Agreements

Couples need more clarity and understanding about how a court would treat any marital agreement made by them, especially given the increased use of nuptial agreements.

In the case of Radmacher v Granatino, the Court confirmed that it is likely to uphold a pre-nuptial agreement in circumstances where there has been full and frank disclosure by each party of their financial circumstances, where each party has had independent legal advice, where neither party has been subjected to undue pressure to enter it and where broadly speaking the terms would not be seen to cause serious unfairness.

This clearly falls short of being automatically binding and again involves wide discretion (and therefore uncertainty) of the Court.

In my opinion this is an area in which urgent formal reform is required so that those wishing to marry can agree and be clear about the consequences in the event they later decide to separate.

Non-matrimonial property

Property acquired before the parties cohabited or after the conclusion of the parties’ relationship should be defined as “non-matrimonial”. However, property acquired during cohabitation leading to marriage or a civil partnership should be “matrimonial” and sharing principles applied.

In sharing cases, where the assets exceed the parties’ needs, assets received as a gift or inheritance during the marriage or acquired after the marriage should be clearly confirmed as non-matrimonial property and not be shared. However, there would be clear exceptions to both points.

Costs in divorce finance cases

Part 28 of the Family Procedure Rules 2010, needs to be applied far more rigorously in financial remedy cases. A person should be able to recoup their legal costs if their former partner has caused significant unnecessary costs as a result of an unreasonable approach to litigation.

Should there be a time limit on making applications for financial remedies?

At present there is no general time limit on being able to make a financial claim against a former spouse. In the case of Wyatt v Vince, in 2011 Ms Wyatt successfully brought a financial claim against Mr Vince even though they had divorced in 1992 and despite the relevant assets having been acquired long after the breakdown of the marriage.

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The standard advice of every practitioner is the importance of obtaining a “clean break” order and at present, this is the only way to prevent such claims in future. In reviewing the modern state of the law, it would however seem surely we have reached the point that former spouses should not have to worry about the prospect of such claims for the rest of their lives. It would in my view seem far more appropriate to introduce a standard time limit in which to bring claims, to include being allowed to make such claims whilst there are dependent children of the family.

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Who is proposing reform?

The Law Commission is an independent body, to keep the law of England and Wales under review and to recommend reform where it is needed. The Commission’s aim is to ensure that the law in England and Wales is modern, fair, simple, and cost effective.

Resolution is a voluntary organisation including over 6,500 family law practitioners from around the UK and seeks to champion positive change in the law relating to separating couples. I was asked to assist in a collaborative meeting to reflect upon ongoing practices and discuss reform in the divorce law with the Law Commission.

Conclusion

It is of great importance that the Law Commission is reaching out to practitioners in an effort to ensure the laws on divorce and separation remain fit for purpose in the modern era. The prospect of reform and clearer guidance for those going through the unfortunate circumstances of a separation can only be of assistance in keeping the costs and strain that come with the situation to a minimum. That can of course only be of benefit to all those dealing with the difficult issues that naturally arise from a separation and produce better outcomes for separating families and their children.

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