Do laws governing the financial consequences of divorce need modernising?

Each year, around 80,000 couples divorce in England and Wales. Almost all of them will have financial issues to resolve.  

The Law Commission (which researches and recommends policy changes to Parliament) is currently questioning whether the current financial divorce law provides "fair and sufficiently certain outcomes".  Change is not imminent: its first 'scoping' paper is due by September 2024.

The current statute governing the financial consequences of divorce (The Matrimonial Causes Act 1973), which also now applies to the dissolution of civil partnerships, celebrated its 50th birthday last year.  Back in 1973, measurements had just gone decimal, three TV stations had just started broadcasting in colour, and around 60% of homes had a washing machine.  Monopoly, Trivial Pursuit, and Abba were yet to arrive on the scene.

England has moved on since then.  So has its law, but not through any overhaul of the MCA 1973. It is largely the courts, through an exercise of judges' discretion, which have been responsible for the considerable developments in this area, through interpretations and re-interpretations of the legislation.  During the last 50 years, the courts have moved from placing individuals in the position they would have been in had the marriage not broken down, to capping applicants to their 'reasonable requirements', to sharing marital assets equally, which is where we are now.  

What is the current law?

The MCA 1973 contains a list of the wide financial powers the court has when a marriage or civil partnership breaks down.  These include ordering the payment of a cash lump sum, transfers of property, pension sharing and spousal maintenance. 

The MCA 1973 also contains a list of "factors to which the court is to have regard" when exercising these powers.  Known as the 'section 25 factors', these include the ages of the parties, any disabilities either may have, their financial resources, their financial needs, the standard of living during the marriage, the contributions each party made to the welfare of the family, and the conduct of the parties.  

But what the MCA 1973 importantly does not contain is a statement of the overall objective which should be achieved.  When originally drafted, it did contain an objective of "minimising loss", which meant putting the parties in the position they would have been in had the marriage not broken down.  But this was repealed in 1984 and nothing took its place so, at different times since 1984, the courts have filled the gap in various ways.  There was first an approach of meeting a wife's (and it was usually a wife's) "reasonable requirements" and, unofficially, there was a £10 million to £12 million ceiling on such 'requirements'.  But since the year 2000 the courts have said that in the pursuit of fairness, there is no place for financial discrimination between husband and wife such that there should be a departure from an equal division of marital assets if, and only to the extent that, there is good reason for doing so.  The courts have subsequently built on this by saying that two other strands of fairness can be discerned alongside sharing: financial needs and compensation.

Financial need in a family law context is difficult to define.  It does not correspond to the ordinary use of the term in which needs are basic, absolute and can be contrasted with what one might want.  Instead, in family law, needs are an elastic concept and are relative to the individual case.  They are informed by (though cannot be equated with) the marital standard of living.  For some people, their needs might include private jets, designer clothes and security.  But the main component of financial needs in most cases will be the need for housing and the need for a regular income. Compensation, meanwhile, was intended to reflect what one party would have had or been able to earn if certain choices had not been made during the marriage but is, in practice, an argument rarely run.

If there is more than enough to meet needs, a different (i.e. non-sharing) approach tends to be taken to property acquired prior to or after the marriage, and to inherited or gifted property where this has been kept separate from matrimonial property during the course of the marriage.

What are the problems with the current law - the pursuit of fairness?

The current law's strength is also its weakness.  It allows a lot of room for judges' discretion.  This means that while there is room for a judge to do whatever fairness demands in a particular case, there can be a lot of uncertainty as to what the law actually is.  Very little of it is to be found in easy-to-access and easy-to-navigate legislation.  It is instead found spread disparately over a huge number of court judgments, and subsequent judgments' treatment of those judgments.  This makes the law difficult to access for anyone other than lawyers. And this, at a time when there are record numbers of who are unrepresented.

Of the 80,000 couples who divorce every year, only around 40% record a financial agreement in a court order, and this 40% may be a vague proxy for how many couples have the assistance of lawyers.  The other 60% are presumably negotiating 'DIY deals', which may or may not be fair in the eyes of the law. We simply do not know whether these deals are guided by the law, because any settlement negotiated out of court is confidential.

Discretion also leads to regional variations.  Anecdotally, and certainly historically, more generous spousal maintenance settlements can be found in London than outside of it.  

Discretion is also demanding of judges' time, which is contributing to the feeling that the Family Court is 'running up a down escalator' to keep up with demands on its time.  I recently filed an application for financial remedies for a client and the first hearing was scheduled for 8 months' time, double the waiting time the rules set down.

Are current outcomes fair and sufficiently certain?

The question of fairness raises value-laden questions about the obligations which marriage creates and the extent to which they should survive a divorce.  For what it's worth, and if English matrimonial property laws were being designed from scratch, there may well be a place for 'matrimonial property contracts' at the time of marriage for couples to agree how their assets would be shared if the marriage ended by divorce or death.  But that might detract from the romantic element of marriage for many and be is precisely why these questions should be determined by society's values as a whole rather than lawyers…

I doubt the Law Commission will find that outcomes are certain, because of the wide discretion that judges have.  There are ways in which the law could operate in a more certain way, for example Canada has a spousal maintenance formula in place of discretion, which gives couples a much clearer idea of what maintenance might be payable.

Are outcomes in England sufficiently certain though?  For couples who can afford the assistance of lawyers, I think they are.  It's my job to know the law as it stands, to keep up with developments and I am exposed every day to how judges are deciding cases.  This enables me to give clients advice on outcomes from the outset.

I can also help clients navigate alternatives to court where these might be appropriate, for example mediation, arbitration or collaborative law.  Withers also offers a unique service called 'Uncouple' which combines a number of these alternative and less adversarial approaches and allows a couple to work with the same highly experienced lawyer/mediator.

But there are some for whom early advice or alternative dispute resolution is not affordable.  What I think has to be a focus of the Law Commission's evidence-gathering is the 60% of divorcing couples who do not have the assistance of lawyers.  I simply do not know how the current law is working for these couples and it may well be failing the 'silent majority'.