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A new proposal for finance on divorce

This week a private member’s bill, introduced in the House of Lords by Baroness Deech in February 2014, will receive its second reading. The Bill is known as the Divorce (Financial Provision) Bill and is the Baroness’ attempt to update the law of financial provision following divorce and dissolution.

Baroness Ruth Deech is a cross bench life peer in the House of Lords, a leading academic, former chair of the Human Fertilisation and Embryology Authority, and current chair of the Bar Standards Board. She is a vocal critic of the present law affecting families and its failure to keep up with societal developments, and of concepts inherent within it such as female dependence on men which permeates maintenance laws – see for example her article for the Guardian here.

In her posting on the Lords Blog website (where peers can write about the work of the Upper House), she points out that Parliament has not debated the law in this area for 30 years, and we still base decisions on a statute (the Matrimonial Causes Act) which was passed in 1973, some 41 years ago.  The world has changed a great deal since then.

As our readers will know, that statute (and the corresponding provisions of the Civil Partnership Act) provides a list of factors that a court must take into account when deciding how to divide a family’s assets. Those factors also inform how lawyers advise clients outside the courtroom, and influence discussions in mediation and collaborative law settings as well. The Baroness complains that the great variety of factors which have to be taken into account has caused unpredictability in judicial decision making. In the absence of Parliamentary reform, judges have tried to update the law by introducing principles of general applicability. The needs of both spouses and the children used to be the main consideration, but more recently in an attempt to keep up with the times, the principles of “compensation” and then “sharing” were superimposed by judges. The Baroness says this has made it very hard to predict how the court might divide the family assets on divorce, and points out the generally held perception that different judges in the various regions of the country might come to different conclusions on a similar set of facts.

The Baroness gives other pressing reasons for reform. She highlights the removal of legal aid for all but a tiny minority of family cases, which has led to vast increases in the numbers of people having to represent themselves in court at one of the most difficult times in their lives, without legal assistance to steer them through the process and help clear up some of the uncertainty with the law. Furthermore, judicial guidance tends to arise from “big money” cases that go to appeal, and these are not necessarily helpful for ordinary families. She also bemoans the huge legal bills which can be run up, and believes that increasing certainty of outcome would reduce the number of expensive court battles.

So what does her proposed Bill do?

Firstly it would repeal section 25 of the Matrimonial Causes Act 1973 (which sets out the criteria to which a court must have regard when making a financial decision). That would be replaced by a blanket provision that matrimonial property is to be shared equally between the parties. There are a few circumstances in which a departure from equal sharing would be possible, those include marital agreements, the source of funding for matrimonial assets, the nature of the property (e.g. if it was used for business purposes), the needs of the children, and bad conduct by a spouse in relation to the family assets, namely trying to destroy or dissipate them.

The Bill defines matrimonial property as the family home and its furniture and fittings, whenever that was acquired, and all the property that the couple acquired after they were married with the exception of gifts and inheritances. This system, or a version of it, is used in parts of North America and Scotland, and the Baroness favours its simplicity and clarity.

Secondly the Bill would make prenuptial agreements binding, as long as the parties received independent legal advice, made full disclosure and signed into the agreement at least three weeks before the marriage. It would also make postnuptial agreements binding, subject to similar safeguards. Courts would only be able to make a financial order if the agreement did not provide for it; for example if it dealt only with capital assets, the court could make a maintenance award. At the moment, marital agreements (whether pre or post) are as close to being binding as the judges can get them, but a change in statute law is required to make them binding and enforceable as of right. The Law Commission has already urged the Government to make “qualifying nuptial agreements” binding, without any success.

Thirdly, the bill would limit spousal maintenance to three years, subject to certain exceptions. This is similar to the situation in Scotland.

The Bill does not change the law relating to child support, which remains subject to separate legislation.

The Baroness is realistic about her chances with this Bill, pointing out that the second reading is on Friday afternoon when many peers who have something to contribute will be unable to attend. The Government has unfortunately shown little interest in considering an overhaul of family law and it is unlikely that the Bill will make it onto the statute books.

It is interesting that the Bill goes further than the recommendations from the Law Commission earlier this year, which suggested that the Family Justice Council provide non-statutory guidance on the law relating to financial needs which would help the profession and litigants in person better to understand the law. Baroness Deech’s Bill would make the law much clearer, which has huge advantages. There is, however, a counter argument that the very strength of the law is its flexibility, which allows judges a wide discretion in how to deal with each individual case before them.

What do you think – would you prefer clarity and structure as proposed in the Bill, or the flexibility of the present law? Leave us a comment!

As ever, if you would like to make an appointment with one of us, we can be reached on 01223 443333.

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