After much campaigning, the move to modernise the process of getting divorced happened with the introduction of no fault divorce in April 2022. It was heralded as a huge step forward in family law. There are now calls to focus on reforming the process of how the assets are divided – a separate process to the actual mechanism of getting divorced. The Law Commission launched a review in April 2023 to examine the current law; so what are the issues and why does it need reviewing?
There has recently been a rise in commentary about whether the Matrimonial Causes Act 1973, which deals with how assets should be dealt with on divorce, is outdated after 50 years, and if it is fit for purpose. The criticism levelled at the current law is that it leaves judges with a great deal of discretion about how to deal with assets on divorce, based on a number of factors and broadly what is “fair”. Despite the use of the word “fair” not appearing in the statue, the focus on “fairness” and “equality” is an approach that has increased over the years and been developed by case law. This discretion is distinct feature of the law in England and Wales, and is the reason that London is often referred to as the “divorce capital of the world”. Many European countries have matrimonial regimes where the parties elect at the time of marriage whether to own property and assets together or separately and that regime is applied during their marriage and on divorce. In the absence of an election, a default regime applies.
In England it is not possible to oust the discretion of the court. Whilst pre-marital agreements are increasingly common and the courts will take them into account in most cases, the court is still able to exercise their discretion when determining the division of assets. As case law has developed, there is a now a broad starting point for judges to work from, which is that the matrimonial assets should be divided equally. They will then consider all the factors in the case when considering a financial settlement as to whether to depart from equal sharing.
There is a framework set out in the Matrimonial Causes Act 1973, often referred to as the section 25 factors, that the court must consider when determining what orders to make. The court’s first concern is always about meeting the needs of any children of the marriage, but after that, the court does not place particular weight on any one factor above another. It is easy to see how judgments may be different depending on the judge hearing the case and the weight that particular judge puts on each factor, which is why English family law is can be unpredictable. The section 25 factors are set out below.
The income, earning capacity, property and other financial resource which each of the parties to the marriage has, or is likely to have in the foreseeable future
The court considers earning capacity as that which someone could be reasonably expected to earn (in the court’s opinion), based on the circumstances in the case. The court expects individuals to maximise their earning capacity. The court will also consider what assets each party has or may have the benefit of, both at the time of divorce and in the foreseeable future.
The financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future
Financial needs include capital needs, predominately housing, and also income needs in terms of what each party reasonably needs to live on. This should not be a wish list, and family lawyers spend a long time with their clients considering this. The needs of a party are considered with an eye on the standard of living, referred to below.
The standard of living enjoyed by the family before the breakdown of the marriage
This is not something the court will always seek to replicate as one household becomes two. However, the court will take note of how parties lived when they were married when assessing what a party needs. The longer the marriage, the more relevant this becomes.
The age of each party to the marriage and the duration of the marriage
Longer marriages are likely to lead to the assets being divided equally and shorter marriages may lead to an unequal division of the assets, although each case is fact specific. The age of the parties will also be considered and may be relevant to pension provision and earning capacity.
Any physical or mental disability of either of the parties to the marriage
This would inform both the needs, and earning capacity of a party, as someone with a disability may need more capital to meet their needs, or be less able to earn enough to meet their needs.
The contributions which each of the parties has made or is likely in the foreseeable future to make to the welfare of the family, including any contribution by looking after the home or caring for the family
There is case law confirming that contributions are not limited to financial contributions. If one spouse stays at home to run the home, or raise the family then their contributions will be considered equally to the spouse who went out to earn.
Another aspect of contribution is whether one party has made such a significant contribution to the marriage that it should not be ignored. This is more relevant to shorter marriages, but could be when one party has accumulated (or inherited) significant wealth prior to the marriage and brought that in. These arguments hold less weight if there is not enough to meet needs – if there is only enough to meet needs, then arguments about where certain assets came from become less significant.
The conduct of each of the parties, whatever the nature of the conduct and whether it occurred during the marriage or after the separation of the parties or (as the case may be), dissolution or annulment of the marriage, if that conduct is such that it would in the opinion of the court be inequitable to disregard it
Whilst many people might suggest that their ex-spouse has behaved badly in their marriage/divorce, the threshold for a court to consider that behaviour should impact on the financial outcome is very high – it has to be considered so bad and relevant, it could simply not be ignored.
In the case of proceedings for divorce or nullity of marriage, the value to each of the parties to the marriage of any benefit (for example, a pension) which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring
The court may consider the loss of retirement income in the form of the other party’s pension. Similarly, if by virtue of being married, someone is entitled to a spousal pension, the court may factor in the loss of this into their consideration.
In cases where there are young children, the Court’s first concern will always be the welfare of those young children and how their needs will be met.
As stated, the decisive factor in the majority of cases is the needs of the parties and the children of the family.
What is probably clear from the above, is that there is no formula or obvious outcome for dividing assets on divorce. One judge might place particular weight on one factor, whilst another places greater weigh on another factor. This ultimately means that there is no right answer about the financial outcome of divorce. There are parameters within which a court can make an order, but these parameters can be broad and heavily influenced by the arguments made by each party, the evidence they put before the court and judge considering a case. Whilst not every case goes to court, how a judge would determine a case, and years of jurisprudence, form the parameters for giving legal advice. The result of this is that there is an element of the unknown for those getting divorced and it can be very hard for a separating couple to reach agreement of dividing their assets without clearer guidance. This is the key criticism of the current system.
Whilst many think that the legal framework could benefit from being updated to provide greater certainty and allow couples to separate amicably and without the need for a court to make a determination, other’s think there is a risk of a system being too rigid which would lead to unfair and wrong decisions. Perhaps the answer lies in some form of hybrid system with rules or a formula, but the ability to deviate from those where necessary to achieve fairness. But could such a system really address the failings of the current law and would it simply lead to arguments about when to deviate for fairness?
It remains to be seen how the law might be reformed, and there are strong arguments on both sides of the debate. Whatever the outcome of the Law Commission review, it is likely to be many years before the law changes. So, for now, we will continue applying laws made in the 1970s, albeit with more recent judicial gloss, and the discretionary system will remain very much in place. What is crucial then, is that those who are separating take legal advice to enable them to reach (hopefully) an amicable financial resolution with their former spouse.
This article was written by Hebe Thorne (Associate, Family Law and Divorce team).