Revisiting the rules about financial claims following divorce

When it comes to resolving financial claims on divorce, which is more important: certainty or flexibility?

This is one of the key questions the Law Commission will try to answer, as part of its recently announced review of the law which applies to such claims.

The current position

The Law Commission’s review comes fifty years after the introduction of the current rules, found in the Matrimonial Causes Act 1973. Section 25(2) of the Act lists the considerations a judge considering a case must take into account when deciding what is a fair outcome. These include:

• the property and other financial resources which the couple have (or may have in the future);
• their incomes and earning capacities;
• the length of the marriage and the standard of living the family enjoyed;
• the future financial needs, obligations and responsibilities of each of them;
• their contributions to the family;
• whether they or any of the children of the family have any physical or mental special needs.

The weight a judge attaches to any one of this factors may differ greatly from case to case, depending on the particular family involved. Ultimately, the court’s goal is to identify an outcome which is fair to both parties, having regard for all the relevant circumstances.

In the years since the Act was introduced, our courts have continually interpreted and applied its provisions in a way designed to keep pace with changing social norms. After fifty years, there is a huge body of previous decisions intended to provide guidance on how the section 25 criteria should be applied, and about how judges should undertake their assessment of what is a fair outcome.

The need for reform?

Critics of the current scheme argue that its flexibility comes at too great a price. Because the weight given to particular factors may vary significantly from case to case, they say it is far too difficult to predict outcomes with any real certainty. The court resources required to resolve disputed cases is an issue, at a time when the Family Justice System is overworked and under-resourced. And there is the perennial issue of cost: litigation can quickly become expensive.

These were amongst the various robust views expressed during a recent debate in the House of Lords about the need to reform the law on financial provision. One contributor described the position in England and Wales as “lagging 50 years behind nearly every other country in the western world, including Australia”. She continued: “The amount of discretion in our law makes it very hard for unrepresented parties. Money that should go to the children is being spent on legal costs”.

What will the Law Commission consider?

The Commission plans to undertake a comprehensive analysis of the current rules, to see which particular provisions are giving rise to issues and how those might be improved.

Particular areas of focus will almost certainly include:

•  whether the current discretionary approach needs to be overhauled, and replaced with established starting points and ground rules about what constitutes a fair outcome;
•  the law on financial provision (maintenance), particularly whether the duration of maintenance claims needs to be time-limited;
•  the weight which should be applied to agreements reached before, during or after the marriage about financial provision on divorce (e.g., prenuptial agreements);
•  a uniform approach to the question of sharing pension assets.

What happens next?

Radical changes to the rules will not come quickly. The Law Commission is due to publish its report on the review in September 2024. Any recommendations the Commission makes must then be proposed as draft legislation, before being debated and scrutinised. Realistically, the current section 25 factors will continue to apply to financial claims on divorce for at least another five or six years.

In the meantime, anybody considering marrying, or who is currently married and contemplating separating from their spouse, should take advice from a specialist family. Even in our discretionary system, an expert solicitor can provide a pretty accurate prediction of the shape and composition of the final financial order in many cases.

And if the Law Commission can identify an alternative framework to achieve fairer outcomes for every divorcing couple, we’ll let you know!

Want to know how the current section 25 considerations apply to you and your family? Please contact one of our family law specialists for advice, and to discuss what a judge might consider a fair financial settlement in your divorce.

The content of this blog is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.