Posted by The Family Law Company on 14th September 2012

Across England and Wales family lawyers are, this week, welcoming a call for ‘fundamental and principled’ reform to clarify and improve certainty with regard to financial provision upon divorce.

Family Law in England and Wales is centred around a principle of fairness. What solution is considered as a fair financial settlement or maintenance provision? At present judicial direction is relied upon to ensure a fair outcome on a case by case basis although the law that guides these decisions is vague and open to interpretation.

Earlier this week the Law Commission published its supplementary consultation on non-matrimonial property and needs in the form of a 131 page paper. This supplementary document forms part of the Law Commission’s ongoing consultation on marital property agreements or ‘pre-nups.’ The purpose of this paper is to examine the current law and propose tweaks to make the process simpler, quicker and hopefully less traumatic and stressful for the parties involved.

Professor Elizabeth Cooke, the Law Commissioner leading the project, noted:

“When two people bring their marriage or civil partnership to an end it is vital that the law is able to help them resolve their financial arrangements as quickly and fairly as possible.”

“The current law creates too much potential for uncertainty and inconsistency.”

The paper examines two facets of the current law in England and Wales, as it relates to financial provision on divorce/civil partnership dissolution.

Needs:

The first consideration is to what extent should one spouse be required to meet the financial needs of the other? At present Section 25 of the Matrimonial Causes Act 1973 says that each party’s needs must be met, however it does not clarify what needs are.

With that in mind consultees have been asked to give their views on the following five possibilities for statutory and non-statutory reform:

  1. Statutory provision to the effect that courts, in making provision for spousal need, must aim to ensure that a payee spouse is enable to become independent within a reasonable period, while bearing in mind also that independence is unlikely to be practicable until the children of the marriage or civil partnership finish their education.
  2. An authoritative source of guidance for the courts and the members of the public about: (a) the considerations involved in an assessment of need; (b) the priority to be afforded to difference elements of need.
  3. Provision about the following either by way of statutory amendment or in the form of authoritative guidance: (a) the time within which independence is to be expected; (b) the normal form of orders for periodical payments (term orders or joint lives); and (c) the financial arrangements to be made after short childless marriages.
  4. Who should provide that guidance? Would it be appropriate for it to be produced by the Family Justice Council in the form of Practice Guidance?
  5. Publication of that guidance on the information hub to be provided in response to the Family Justice Review.

 

Non-matrimonial Property:

The paper also seeks to consider what should happen with non-matrimonial assets, these are assets that are not subject to division following a breakdown of the marriage/civil partnership. A classic example of this would be a property that was owned by one partner before the relationship or acquired during the relationship. This topic raises further questions still:

– If a house/property is brought into a marriage by one partner and is subsequently renovated is it still classed as a non-matrimonial asset?

– Likewise if a business is brought into a marriage and is then made to thrive by both parties efforts, how should the interest in the business be allocated?

The provisional proposals that have been laid out are as follows:

– We provisionally propose that non-matrimonial property, defined as property held in the sole name of one party to the marriage or civil partnership, and:

(1) Received as a gift or inheritance; or

(2) Acquired before the marriage or civil partnership took place

Should no longer be subject to the sharing principle on divorce or dissolution, save where it is required to meet the other party’s needs.

– We provisionally propose that non-matrimonial property should not lose its status as such merely by virtue of having been used by the family.

– We provisionally propose that where non-matrimonial property has been sold and substitute property bought, that property should be matrimonial property if it has been bought for use by the family, save where the substitute property is of the same kind as the property sold.

– We provisionally propose that where non-matrimonial property has been sold and the proceeds invested in matrimonial property, the property (following that investment) should be matrimonial property.

 

Maintenance:

The Law commission has also turned its attention to the issue of spousal maintenance, the rules by which it is deemed necessary, the amount that is decided and the term over which it must continue.

Any principled reform to payment of spousal maintenance would have a huge impact. It is clear that solutions on a large scale are not going to be simple or quick to implement. There are a vast number of difficult questions to be answered before any changes can be introduced.

Implementation of measures that refine the law governing financial provision following divorce is that simplifies the judicial or agreement process is increasingly important. With the vast majority of people being ineligible for legal-aid and unable to afford representation the courts are starting to become swamped by self-represented parties with even less understanding of how Section 25 applies than seasoned practitioners.

In simple terms it has been widely accepted that there are problems with the current situation. There isn’t enough guidance from the current law to ensure that decisions are consistent and ultimately fair across the whole of the country. This document and the proposals that are being considered seek to fix that.

The Law Commission is set to publish its report in Autumn 2013, making formal recommendations on marital property agreements, needs and non-matrimonial property.

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