Financial Provision on Divorce or Dissolution (England and Wales)

The law relating to financial orders on divorce and dissolution is to be found in Part II (s.21 to 40A) of the Matrimonial Causes Act 1973 and Sch. 5 of the Civil Partnership Act 2004
1. These acts do not set out principles that determine how a couples' property is to be shared on divorce or dissolution they simply state that the court is to have regard to all the circumstances of the case and that the welfare of the parties' minor children is to be its first consideration, there is a further general requirement that the court must consider whether it is possible to make a "clean break"
Wide Disctretion
1. The Acts give the court a wide discretion to make orders for sharing, selling or settling property and for the payment of maintenance, both for the adults and for any children
2. There is though, a set of statutory criteria - guidance - on the basis of which the court will choose what orders to make
  1. This guidance is set out in s.25 of the Matrimonial Causes Act 1973 (and in equivalent wording in sch.5 pt.5 s.21(2) of the Civil Partnership Act 2004)
Factors to Consider as Specified in s.25 Matrimonial Causes Act 1973
1. (1) it shall be the duty of the court in deciding whether to exercise its powers under s.23/24/24A/24B and 24E and, if so, in what manner, to have regard to all the circumstances of the case, the first consideration being given to the welfare while a minor of any child of the family who has not attained the age of 18
  1. (2) as regards the exercise of powers of the court under s.23(1)(a), (b), or (c) 24, 24A, 24B, or 24E in relation to a party to the marriage the court shall in particular have regard to the following matters
    1. (a) the income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future, including in the case of earning capacity, any increase in that capacity which it would in the opinion of the court be reasonable to expect a party to the marriage to take steps to acquire
      1. (b) the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future
        (c) the standard of living enjoyed by the family before the breakdown of the marriage
        (d) the age of each party to the marriage and the duration of said marriage
        (e) any physical or mental disability of either of the parties to the marriage
        (f) the contributions which each of the parties has made or is likely to make in the foreseeable future to make the welfare of the family, including any contribution by looking after the home or caring for the family
        (g) the conduct of each of the parties, if that conduct is such that it would in the opinion of the court be inequitable to disregard it
        (h) in the case of proceedings for divorce or nullity of marriage, the value to each of the parties to the marriage of any benefit which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring
2. s.25 matters to which the court is to have regard to in deciding how to exercise its powers under s.23/24/24A/24B/24E
3. The order of the s.25 factors does not in any way indicate priority and they are not exclusive
4. Per Lord Hoffman in Piglowska v Piglowski [1999] 1 WLR 1360, 1370: "s.25(2) of the [Matrimonial Causes Act 1973], while listing the various matters to which particular regard should be had, does not rank them in any kind of hierarchy. Which of them will carry most weight must depend upon the facts of the particular case
5. Law Commission in 2012 quoted from a 1999 article by Professor Parkinson who likens the situation facing family law judges; "... a bus driver who is given a large number of instructions about how to drive the bus, and the authority to do various actions such as turning left or right. There is also the occasional advice or correction offered by three senior drivers. The one piece of information which he or she is not given is where to take the bus. All he or she is told is that the driver is required to drive to a reasonable destination"
Analysis of the s.25 Criteria
1. Welfare of children; CA has made clear that this does not mean the welfare of children is the overriding consideration
  1. Suter v Suter and Jones [1987] 2 FLR 232
  2. It is the most important factor, but not the only one
    1. B v B (Financial Provision: Welfare of Child and Conduct) [2002] 1 FLR 555
      1. COMPARABLE WITH
        Peacock v Peacock 1994 SLT 144
        Leadbeater v Leadbeater [1985] 1 FLR 789
Financial Resources (s.25(2)(a))
1. Starting point - all assets considered
  1. English approach - assess all property to decide how to meed the needs of the parties
    1. CANNOT take into account the resources of a 3rd party
      1. Although there are limited exceptions to this rule
        Petrodel Resources Ltd & Ors v Prest & Ors [2013] UKSC 34
        M v M and W Trustees Limited [2011] CSOH 33
2. "other" resources means exactly that - anything
  1. assets acquired before or during the relationship and even after its termination can be taken into account
    1. Wyatt v Vince [2015] UKSC 15
3. Can include property inherited during the marriage
  1. White v White [2000] UKHL 54 at [24], [2001] 1 AC 596 HoL
    1. stated that the factit was inherited is a relevant factor in deciding whether or not to distribute it
  2. B v B (Ancillary Relief) [2008] 1 FCR 613
  3. Norris v Norris [2002] EWHC 2996 (Fam), [2003] 1 FLR 1142
  4. S v S [2007] EWHC 1975 (Fam), [2008] 1 FLR 944
Financial Needs, Obligations and Responsibilities (s.25(2)(b))
1. Needs are assessed subjectively - from the perspective of the particular spouses.
  1. The needs of a rich couple are not the same as the needs of a poor couple. This was why the expression "reasonable requirements" emerged with regard to rich divorcing couples
Previous Standard of Living (s.25(2)(c))
1. Again, relevant for the very rich
  1. evidence will have to be provided as to what expenditure was during the marriage - lawyers for the weaker spouse will then argue that he/she spent X amount of money
    1. McCartney v Mills-McCartney [2008] EWHC 401 (Fam), [2008] 1 FLR 1508
Age and Duration of Marriage (s.25(2)(d))
1. Length of marriage a key factor when the courts exercise discretion
2. In a short marriage, the court may be more likely to exclude non-MP such as inheritances, or assets accrued before the marriage
  1. C v C (Financial Provision: Short Marriage) [1997] 2 FLR 26
  2. Miller v Miller [2006] UKHL 24, [2006] 2 AC 618
Physical or Mental Disability (s.25(2)(e))
1. May have huge impact on proportions awarded
  1. C v C (Financial Provision: Personal Damages) [1995] 2 FLR 171
Contributions to the Welfare of the Family (s.25(2)(f))
1. 2 Key issues
  1. 1. Now settled that there should not be discrimination between the contributions of the money earner and the homemaker/childcarer
    1. In White, Lord Nicholls stated: "If, in their respective spheres, each contributed equally to the family, then in principle it matters not which of them earned the money and built up the assets..."
    2. 2. Special contributions: if a spouse has generated assets through particular hard work/entrepreneurial flair, should that be a factor for said spouse to receive more? Position - only in exceptional cases
      1. Sorrell v Sorrell [2005] EWHC 1717 (Fam)
      2. Charman v Charman No 4 [2007] EWCA Civ 503
The Conduct of the Parties (s.25(2)(g))
1. Watchel v Watchel [1973] Fam 72
  1. conduct would only be considered where "obvious and gross"
    1. Therefore, something more than responsibility for breaking down the marriage
      1. Evans v Evans [1989] 1 FLR 351
      2. K v L [2010] EWCA Civ 125
Evolution of Case Law
1. Whilst the Acts do not set out principles about dividing matrimonial/partnership property, principles have been developed by the courts for the exercise of the wide discretion which exists
  1. Firstly, needs formally known as 'reasonable requirements' in big money cases
    1. needs include' provision for income, provision for accommodation, where possible by the provision of a capital sum, provision for old age in the form of pension capital, provision for travel, holidays and luxuries
      1. Courts understanding of "needs" extremely wide
    2. If payee unlikely to become financially independent in the relatively short term (3-5 years) the ideal is that an award to meet the needs will enable the payee to live at the marital standard of living for life
      1. Regularly not the case, after divorce a drop in the quality of life can be expected in most cases
        not enough money to go around
        Courts therefore seek to establish a reasonable standard of living for both parties, albeit at a lower level of affluence than was experienced during the marriage
        Where the couple were extremely rich and assets far surpass needs or reasonable requirements?
        until 2000 where assets were more than sufficient, no further financial adjustment was made, meaning where most of the wealth stood in the name of one party - usually the husband - the wife took no share
        in such cases an applicant would almost never receive more than £10m - £12m, although a little extra may have been awarded for special circumstances (particularly domestic or social) £15m was essentially a ceiling
        Conran v Conran [1997] 2 FLR 615
Reform of Case Law
1. Change began after White v White [2000] UKHL 54 at [24], [2001] 1 AC 596 where Lord Nicholls said "the present case is a good illustration of the unsatisfactory results which can flow from the reasonable requirements approach"
  1. Stressing that "... there is one particular principle of universal application which can be stated with confidence. In seeking to achieve a fair outcome, there is no place for discrimination between husband and wife and their respective roles. Typically, a husband and wife share the activities of earning money, running their home and caring for their children. Traditionally, the husband earned the money and the wife looked after the home and children. This traditional division of labour is no longer the order of the dat. Frequently both parents work."
    1. Despite the judgements that there was no starting point or principle of EQUAL division, White marked a sea of change in the way that the courts began to allocate money on divorce. In Miller Lord Nicholls later said that "the glass ceiling ... was shattered by the decision ... in the White case". The decision therefore ushered in an entirely new approach
  2. "sometimes it is the wife who is the money earner and the husband runs the home and cares for the children during the day. But whatever the division of labour chosen by the husband and wife, or forced upon them by circumstances, fairness requires that this should not prejudice or advantage either party"
    1. where the assets exceed financial needs, why should the surplus belong solely to the husband? (or the money-earner) "I can see nothing, either in the statutory provisions or in the underlying objective of securing fair financial arrangements to lead me to suppose that the available assets of the respondent become immaterial once the claimant's wife's financial needs are satisfied. Why ever should they?"
      1. "Sometimes, having carried out the statutory exercise, the judge's conclusion involves a more or less equal division of the available assets. More often, this is not so/ More often having looked at all the circumstances of the case the judge's decision means that one party will receive a bigger share than the other. Before reaching a firm conclusion ... a judge would always be well advised to check his tentative views against the yardstick of equality of division. As a general guide, equality should be departed from if, and only to the extent that, there is a good reason for doing so"
2. The aftermath and issues debated after White
  1. how did a "yardstick of equal division" operate?
    1. Was there a status for such criteria? No basis in statute
      1. Exceptional circumstance
        Charman v Charman (No.4)
  2. HoL stated no gloss should be put on s.25 Factors, but it had imposed "fairness and equality" as glosses
Non-Matrimonial Property
1. What if the spouses' assets include property acquired before the marriage or inheritance of the property?
  1. Lord Nicholls in White; "... this distinction between inherited property and property owned before the marriage is a recognition of the view, widely but not universally held, that property owned by one spouse before the marriage, and inherited property whenever acquired, stand on a different footing from what may be loosely called matrimonial property"
    1. Plainly, when present, this factor is one of the circumstances of the case. It represents a contribution made to the welfare of the family by one of the parties to the marriage. The judge should take into account. He should decide how important this is in the particular case. The nature and value of the property, and the time when and circumstances in which the property was acquired, are among the relevant matters to be considered. However, in the ordinary course, this factor can be expected to carry little weight, if any, in a case where the claimant's financial needs cannot be met without recourse to this property
      1. Robson v Robson [2010] EWCA Civ 1171, [2011] 1 FLR 751
        included inherited/acquired before marriage but did not share 50/50
        Husbands net worth of around £22m from a farm inherited by family, wife given 3rd of matrimonial assets of around £8m
        Jones v Jones [2011] EWCA Civ 41, [2012] Fam 1
        excluded property inherited/acquired before marriage but split remaining MP 50/50
        husbands company valuated at £9m, assets of £16m, based on sharing principle wife should have received £8m but decided that shares of husband would not be considered MP
2. Miller and McFarlane
  1. three elements or strands which are readily discernible in a fair financial split
    1. 1. Meeting of Needs
    2. 2. Giving of compensation
    3. Sharing - being the division of material assets and that being equal subject to provision for needs
  2. based on two principles - one being equality i.e. breadwinners contributions not to be valued more highly than domestic contributions
    1. the other being that marriage is a partnership, natural for partnership property to be shared at the end of the relationship, same for Scotland and continental Europe
Compensation
1. McFarlane v McFarlane [2006] UKHL 24
  1. Miller-McFarlane guidance - the three strands will be prioritised by categorisation of wealth
2. Most recently discussed in SA v PA [2014] EWHC 392 (Fam) per Mostyn J: family assets of £3.8m, matrimonial home worth £2.2m, considered the husband would have to retire within the following 5 years, high rate of pension, main issue in case was compensation for wife who had given up working, had been a lawyer before giving up work to have children. In this case compensation was not relevant, not convinced a track record of high earnings could be followed. Giving up work was not her only option
  1. (i) only in very exceptional cases will the principle of compensation be invoked
    1. (ii) such a case will be one where the court can say without any speculation i.e. with almost near certainty, that the claimant gave up a very high earning career which had it not been foregone would have led to earning at least equivalent to that presently enjoyed by the respondent
      1. (iii) such a high earning career will have been practised by the claimant over an appreciable period during the marriage. Proof of this track record is key
        (iv) once these findings have been made compensation will be reflected by fixing the periodical payments award (or the multiplicand if this aspect is being capitalised by Duxbury) towards the top end of the discretionary bracket applicable for a needs assessment on the facts of the case Compensation ought not to be reflected by a premium or additional element on top of the needs based award
The Standard Cases
1. different issues arise in standard cases than in big money cases, they are not a scale model
  1. all that can be achieved is an order that meets the needs of both parties, because there is not enough MP to do any more. indeed in most cases there is insufficient MP to do even that
2. B v B (Ancillary Relief) [2008] EWCA Civ 284
  1. Lord Justice Wail commented "the big money cases which have reached this court and the HoL are, in my judgement, of only limited assistance in dealing with a case such as the present, and of even less assistance in dealing with smaller cases in which there is simply not enough money to go around. Thus, as I see it, the principal lesson to be learned from the leading case of White is that the court's objective is to achieve an outcome which is fair"
3. M v B (Ancillary Proceedings: Lump Sum) [1998] 1 FLR 53
  1. "In all these cases it is one of the paramount considerations, in applying the s.25 criteria, to endeavour to stretch what is available to cover the need of each for a home. Particularly where there are young children involved. Obviously, the primary carer needs whatever is available to make the main home for the children, but it is of importance, albeit it is of lesser importance, that the other parent should have a home of his own where the children can enjoy their contact time with him."
    1. There are cases where there is not enough to provide a home for either, or only enough to provide a home for one, but in any case where there is, by stretch and a degree of risk taking, the possibility of a division to enable both to rehouse themselves, that is an exceptionally important consideration and one which will almost invariably have a decisive impact on outcome
Big Money Cases
1. in wealthier cases where assets exceed needs, the courts generally make no order specifically in respect of needs, as needs are met by an award of half the MP pursuant to the sharing principle
  1. this brings position in England closer to that of the position in Scotland
2. still important differences
  1. equal division is not an absolute rule
    1. lack of clarity as to what is or is not MP for purpose of sharing
      1. uncertainty where a marriage is short, or where there is a form of unusual property - whether pre-acquired, gifted, inherited, or generated by exceptional and solo business efforts of one party
3. "Clean Breaks" in ENGLAND and in SCOTLAND
  1. s.25A(1) of the 1973 Act directs the court to consider whether it would be appropriate to exercise its power to make financial orders in such a way as to terminate the parties' financial obligations to each other "as soon after the grant of the decree as the court considers just and reasonable"
    1. Wright v Wright [2015] EWCA Civ 201
      1. "may invoke capital orders or make order for periodical payment "for such term as would in the opinion of the court be sufficient to enable the party in whose favour the order is made to adjust without undue hardship to the termination of his or her financial dependence on the other party"
        see s.25A(2)
  2. an order that imposes no ongoing financial obligation - in particular one that involves only capital orders, or only an order for division and sale of proceeds of property - is known as a clean break
    1. Orders which provide for the ending of obligations in the future by imposing a term upon periodical payments, is known as a deferred clean break
      1. only deferred if accompanied by a direction pursuant to s.28(1A) of the 1973 Act that there can be no order to vary it in the future
      2. payments can be calculated by the Duxbury formula
        Duxbury v Duxbury [1987] 1 FLR 7, Waterman v Waterman [1989] 1 FLR 380, CA
Agreements
1. What effects should be given to pre and post nuptial agreements?
  1. Radmacher v Granatino [2010] UKSC 42, [2011] 1 AC 534
    1. under the English law, it is the court that is the arbiter of the financial arrangements between the parties when it brings a marriage to an end. A prior arrangement between husband and wife is only one of the matters to which the court will have regard
      1. The court shall give effect to a nuptial agreement that is freely entered into by each party with a full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold the parties to the agreement
2. SA v PA [2014] EWHC 392 (Fam)
  1. approach approved in Granatino, Mostyn J; "although it is true that the agreement was entered into on the very eve of the marriage, at a time when the wife was pregnant, and where she had only the impartial but not strictly independent advice of the notary I am satisfied that the wife freely entered into it with a sufficiency of advice to enable her to appreciate its implications"
Orders
1. Acts enable the courts to make a wide range of orders set out in s.23
  1. Order for periodical payments (periodical allowance)
  2. Order for lump sums (order for the payment of a capital sum)
  3. Order for the transfer, settlement or sale of property (order for transfer or property or an incidental order which includes an order for the sale of property)

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Financial Provision on Divorce or Dissolution (England and Wales)

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	Created by Ruaraidh Simpson about 7 years ago