The Family Justice Council is an advisory body that monitors the family justice system and promotes an inter-disciplinary approach. It has released an interesting report that aims to give guidance to courts and legal advisers about how to approach the issue of ‘financial needs’ in family law proceedings – basically, how peoples’ needs are met after divorce, and when and how maintenance should be paid. It is available here. Although it is not really aimed at lay users of the system, it does give some insight into the way the courts work.
The background to the report is a Law Commission report from 2014 on Matrimonial Property, Needs and Agreements, which raised concern about significant regional differences in the levels of needs-based support likely to be awarded in different parts of the country, and the lack of clarity in the law governing the question. It recommended that the Family Justice Council prepare guidance for the courts with a view to achieving both greater transparency and consistency of approach across the jurisdiction in such cases.
The report’s stated aims are to clarify the meaning of ‘financial needs’ on divorce, particularly for the most common cases where the assets available are not enough to fulfil the parties’ needs; to provide a clear statement about what financial orders meeting needs should achieve where possible, and to encourage consistency of approach by courts across England and Wales (in this regard, practitioners and courts outside the south of England may see the composition of the working party as rather disappointing).
The principles stated in the report are pithy, useful, and interesting. In terms of the basic law on needs after divorce, it endorses the Law Commission position that financial orders are made to meet needs to enable a transition to independence as far as possible, and that needs may well, and commonly do, provide a justification for a departure from equal sharing of the assets. In plain English: a 50/50 split is not fair if one person needs more than that, for reasons we will consider below.
The report observes that marriage typically creates a relationship of interdependence, and the dependence of one adult on another is commonly created by the presence of children. It acknowledges that long-term dependence can be created by decisions made that one person should take on family obligations at the expense of the development of their employment potential, and notes that it is generally right and fair that the financially stronger party should meet needs generated in this way for the other, if resources permit.
The prevailing needs after divorce are usually for housing, and for present and future income. This includes a need for income in retirement, and pension provision cannot be overlooked even where the former couples are relatively young. The court’s role is to assess the level and duration of need as a question of fact, and then to decide whether the needs can best be met by capital or income provision. Need is measured by assessing the available financial resources – obviously, the court can only distribute what’s available, and that’s why it’s so important to have full and frank financial disclosure in every case.
In term of working out how needs are to be met, the court will strive to stretch finite resources. Where resources are modest, the children’s needs may predominate – in most cases, the money follows the children. The concept of ‘need’ is unique to each case and will be measured by assessing the standard of living during the relationship, more so the longer the relationship was. It is clear that a person may be expected to suffer some reduction in standard of living after divorce, and there is an overall objective in most cases of a transition to independence. In terms of process, the report is clear that in order to measure need and the ability to meet it, both parties will be expected to present detailed budgets to the court, clearly showing their expenditure needs.
The court will assess the needs of both people. Before requiring one person to make maintenance payments to the other, the court will stand back and consider what portion of the payer’s resources should fairly go to the recipient. Clearly, where resources are modest the children’s need for a home with their primary carer may be the most important thing but, if possible, the court will strive to stretch resources to provide a home for children with each of their parents.
Where housing is concerned, the court will consider the difficulties inherent in requiring one party to remain on the mortgage of the other’s home for an indefinite period. If the needs of the children require one person to sacrifice an entitlement to capital in favour of the primary carer then the court will consider reimbursement to the sacrificing party through a Mesher order. A Mesher order is an order that requires the house to be sold and the proceeds split at a future date, usually when the children have become adults. The report acknowledges that these orders are not always appropriate, and carry problems, but it is possible that we may start to see a greater use of them again in needs cases.
To answer the question of for how long needs should be met by maintenance, the report considers that most outcomes tend eventually not towards life-long support but towards independence. If needs are to be met through a periodical payments order then the court must consider (whether making an initial order or a variation order) whether to make a joint lives order, an extendable term order or a non-extendable term order. Ending maintenance should not be achieved at the expense of a fair result, and should be determined by a firm evidential foundation, not “crystal ball glazing” [sic]. It also observes that there is a distinction between “undue hardship” and “hardship”, and a maintenance recipient might be expected to suffer a degree of hardship – not all reductions in the standard of living amount to undue hardship.
This is nothing but a ‘highlights’ show of the full report, which it is certainly worth reading if you are currently working through financial issues following a separation. It is a technical companion piece to the very useful Advice Now Surivial Guide: Sorting Out Your Finances When You Get Divorced. If you have any questions about how what you’ve read here might affect your own position, or any other aspect of family law, please give us a call on 01223 443333 and make an appointment to speak to Gail, Sue, Adam, Simon or Tricia, who will be happy to help.