The impact of a divorce can go far beyond just the divorcing spouses themselves and their children. Today, particularly as wealth has generally become bigger (we are all aware of the story of the rise of The Super Rich – and indeed Forbes recently reported that in 2020 billionaires on average got 20% wealthier by mid-December), issues around family money have become more complex.
Now a HNW family will likely have issues that not only cross jurisdictional borders, but also cross lines between business and personal interests. This makes the exit of one person from a marriage more complicated, potentially impacting other members of the family in a business sense, as well as a personal one.
Although Brexit has made it easier for HNW expatriates to issue divorce proceedings and financial applications in England & Wales there are still pitfalls. Expert legal advice that takes into account the myriad of complications that HNW expatriates face despite this ease of issuing is now so very much needed, especially such advice that acknowledges how these complex maintenance orders can be enforced in other jurisdictions.
So what has changed and what do family lawyers need to consider so they can offer more holistic advice?
What has changed
From 1 January 2021 Brussels IIa and the Maintenance Regulation ceased to apply. The legal position is complex but in general terms it means that divorce petitions can be issued on the grounds of sole domicile without the petitioner losing the right to apply for a financial claim for maintenance or capital division based on financial needs.
To issue divorce proceedings in England and Wales it is necessary to establish habitual residence and/or domicile. The application form for divorce includes the following general definitions; Habitual Residence is the place in which your life is mainly based. You must be settled there and intend to stay settled there. Some of the following may apply, you work there, own property, your children are in school there, and your main family life takes place there. Domicile. Your domicile is the main permanent home in which you live, or to which you intend to return. ….
In applying for divorce it is necessary to tick which reasons apply from a list which includes one or both parties position specifically in relation to England/Wales:
- a. Both parties are habitually resident
- b. Both parties were last habitually resident and one of them continues to reside there
- c. The respondent is habitually resident
- d. The applicant is habitually resident and has resided there for at least one year immediately before the application was made
- e. The applicant is domiciled and habitually resident and has resided there for at least six months immediately before the application was made
- f. Both parties are domiciled
- g. The applicant or the respondent is domiciled
It is (g) that is referred to a sole domicile. Prior to Brexit Art 3c of the Maintenance Regulation prevented the English court from making a maintenance order (unless both parties consented).
The jurisdiction now means the Court is no longer restricted in its power to make needs-based provision when the only connecting feature to England/Wales is sole domicile.
Is London still the divorce capital of the world?
In England and Wales, matrimonial finances are governed by the Matrimonial Causes Act 1973 together with a wealth of subsequent case law creating precedents on how s25 is applied. This remains a desired jurisdiction as the outcome is frequently much better than would be obtained for the weaker financial party in many other countries. Matrimonial Assets can be shared equally, or a weaker party given a larger share based on financial need. Maintenance orders can still be for life, although this is now less usual. Furthermore, the Courts are more regularly considering a limited term of maintenance to enable the weaker party to adjust without undue hardship but with a greater expectation of that weaker party achieving financial independence.
Effect on the Court system
The Court system is struggling and lawyers are seeing increasingly long periods of time before hearings are listed, and with Brexit changes opening the door to more applications from expatriates, pressure on the system will increase. However, there are still significant benefits in applying in England and Wales.
Once the application is issued, the weaker party has the benefit of the Court system in directing what the other party has to provide by way of financial disclosure, including experts’ reports, forensic accounting, as well as property and business valuations. Once all this has been provided the parties can ask the Court to adjourn the proceedings for a Private Financial Dispute Resolution (FDR) hearing. They can agree a person (usually a barrister who also sits as a District Judge) to preside, hear all the evidence and provide an indication on how they would adjudicate.
This is often enough to enable the parties to reach a settlement and agree an order by consent. The case is still within Court proceedings and both parties know they can go back before the Judge if this private FDR fails. They also know that it will be decided against the criteria applied at that private FDR. A significant benefit to the parties is that it can be arranged quickly to avoid the long Court delays and it assists, where successful, in reducing the pressure on the Court system.
Amidst all these changes, it is vital that lawyers bear in mind to provide holistic legal advice for their clients. With wealth ever-growing, and divorce matters often blurring the lines between personal and business needs, lawyers must be equipped to resolve the vast array of complex issues faced by HNW expatriates.
Marilyn Bell is a Partner and head of the Family Law team at SA Law.