Law Commission consults on financial remedies on divorce

[Update: 27 Feb 14 – The Law Commission’s Report on financial needs has now been published and you can read it here]

“Incomplete and uninformative” is how the Law Commission described family law in the executive summary to its consultation paper on family law released yesterday. It also, rather oddly, likened the role of judges deciding family disputes to bus drivers who know how to drive, are told to drive, but not to where or why. (We are not sure that too many judges would enjoy the comparison, and many know exactly where they are going!)

A bit about the Law Commission

The Law Commission is an independent body, which reviews areas of the law and makes recommendations to the Government about law reform. The Law Commission publishes Consultation Papers in which it seeks the views of the public, and of lawyers and other specialists, about possible reforms. Normally after responses are received and considered, the Commission writes a report, in which they make recommendations for changes to the law, and sometimes draft an Act of Parliament (a statute) which if enacted would put into effect their recommendations. However the Government is not required to accept or act on the Commission’s recommendations.

The current project

The Commission is presently looking at family law for the first time since it made recommendations leading to the Children Act in 1989 (unless you count the project on the rights of cohabitants, which the Commission itself counted as a property law project). In 2011 it published a consultation paper on pre-nups, and whether or not they should be enforceable. We have written elsewhere – including last week– about the state of the law on pre-nups. Although it is likely the Commission will recommend a new form of binding agreement (which they are calling “qualifying nuptial agreements” – snappy title!) they are delaying issuing recommendations about pre-nups until they have looked at two other areas of family law which cause concern for people going through divorce or dissolution.

Those two areas are:

1. what amounts to someone’s financial needs when they divorce or dissolve a civil partnership; and

2. how should pre-owned or inherited assets be treated on divorce/dissolution?

The Law Commission is concerned about there being regional differences in how judges apply the law (for example London courts are considered more “wife-friendly” than those in other areas), and that the imminent removal of legal aid for family cases will mean legal advice will be hard to obtain for many. They want to law to be clearer for everyone, and we wholeheartedly agree.

Let’s have a brief look at the two areas on which the Law Commission seeks comments and reform.

You may be aware that in recent years three main principles have been considered by judges when looking at the law and deciding how to divide assets fairly between two people on divorce or civil partnership dissolution. They are needs, compensation and sharing. Compensation may be payable in a few limited cases where e.g. a lucrative career has been abandoned to raise children, but is not being considered in this consultation process.

Needs

Needs refers to each spouse’s obligation to meet the other’s financial needs. However there is little guidance on how to define those needs. Courts look at the idea broadly, so a person’s needs include housing, income and pension provision. But at what level? And for how long?

In a survey carried out by Resolution (the family lawyers’ association) earlier this year, 80% of solicitors said they could “only sometimes” predict how a court would assess their client’s needs after divorce. That is staggering amount of uncertainty that does nothing to reassure clients about the outcome of their cases.

The Law Commission suggests three options (on a sliding scale) could be adopted when assessing people’s needs after divorce:

1. that the less well-off spouse be financially supported until they are able to obtain the earnings or living standard they would have had, but for the marriage/civil partnership;

2. that the less well-off spouse be supported to enable a transition to independence, which may mean maintenance is paid until the children are independent and a career can be resurrected; or

3. that there should be support for a limited time to encourage financial independence – although the Commission is not suggesting English courts adopt the Scottish system where maintenance is paid only for 3 years after divorce.

Importantly the Commission asks whether a formula should be used (rather than a judge’s discretion) to calculate financial support after divorce. At CFLP we welcome an injection of certainty but a mechanism would need to be included to avoid real hardship caused by application of any formula.

Sharing and non-matrimonial property

This is the second area being considered in the consultation. Sharing is the idea that a married couple’s assets should be shared (usually equally) on separation, provided as each person’s needs have been met. Judges have been unsure how to deal with inherited or pre-owned property, where this is not needed to satisfy either person’s “needs” – should it be shared, or ring-fenced and left with the person who inherited/owns it? The Commission is seeking responses about how to define this “non-matrimonial” property and whether it should be shared.

The consultation process is open for responses until 11 December 2012. The documentation can be viewed on the Law Commission’s website here. We will be reviewing the proposals in some depth and responding. Let us know your thoughts!

 

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