Law Commission publishes scoping report on financial remedies on divorce

Today the Law Commission has published a scoping report on the laws governing finances on divorce and the ending of a civil partnership. The Commission has concluded that the law needs to be reformed and presents Government with four models that reform could take. These range from codifying the current case law to introducing default rules to determine the division of assets.

The laws which govern the use of financial remedy orders are now several decades old, dating back to the Matrimonial Causes Act 1973, and subsequently mirrored in the Civil Partnership Act 2004.

The Law Commission finds that the law does not provide a cohesive framework in which parties to a divorce of dissolution can expect fair and sufficiently certain outcomes. The law confers on the court a broad discretion. The resulting uncertainty operates to promote dispute rather than settlement.

The four models the Law Commission presents to Government provide different approaches to the amount of discretion the court should have and how far the division of a couple’s assets could be based on clear rules.

Key Criticisms of the Current System

The overarching criticisms of the current law are that are mentioned in the report:

• Inaccessibility and Uncertainty: The law, shaped by case precedents, is difficult to navigate without legal expertise. The discretionary approach offers little clarity to couples trying to negotiate fair settlements
• Inefficiency and Costs: Discretion promotes litigation rather than settlement, increasing costs. Even with legal advice, couples may receive conflicting views on likely outcomes
• Outdated Framework: The MCA 1973 reflects societal norms from the 1970s, failing to account for modern family dynamics, gender roles, and economic realities. As Sir Paul Coleridge remarked, the statute “is no longer fit for purpose”
• Inconsistent Outcomes: Judges’ broad discretion results in inconsistency, undermining public confidence in the law.

Procedural inefficiencies further compound these issues. Delays, high legal costs, and barriers to enforcement prevent fair and timely outcomes. Stakeholders also highlight the treatment of conduct – such as domestic abuse – and financial provision for children over 18 as areas in need of reform

Models for Reform

The Law Commission identifies four potential models for reform, each addressing different degrees of certainty and discretion:

Codification

Codification involves consolidating settled case law into statutory form without fundamentally altering the law. This approach simplifies the existing framework, making it more accessible and transparent. The principles of fairness, needs, and sharing would be explicitly defined in the statute. However, judicial discretion would remain largely intact

For instance, codification could formalise the treatment of matrimonial and non-matrimonial property, aligning with current case law. While this model offers minimal change, it enhances clarity without disrupting established principles.

Codification-Plus

Codification-plus builds on the codification model but introduces targeted reforms to address unsettled areas of law. For example:

• Nuptial Agreements: Clarifying the enforceability of pre- and post-nuptial agreements
• Spousal Maintenance: Reforming maintenance awards to ensure consistency.
  Conduct: Reviewing the treatment of misconduct, particularly domestic abuse, to reflect its financial consequences
• Financial Provision for Adult Children: Extending support for children over 18, particularly those in education or financially dependent

Guided Discretion

Under a guided discretion model, the statute would prescribe clear objectives and principles to guide judicial decision-making. This approach reduces unpredictability while retaining some flexibility. For example:

• Explicit rules could govern the treatment of matrimonial property, limiting discretion while ensuring fairness
• Principles could clarify how courts balance needs, sharing, and compensation

The guided discretion model draws inspiration from systems in Scotland and New Zealand, where legislation combines clear principles with limited judicial discretion

Default Regime

A default regime represents the most significant reform, according to the report, replacing judicial discretion with predetermined rules for dividing property on divorce. Similar systems exist in many European and Commonwealth jurisdictions, where matrimonial property is shared equally unless couples opt out via binding nuptial agreements

Key features of a default regime include:

• Certainty: Couples know in advance how assets will be divided.
• Limited Discretion: Courts retain minimal discretion, improving consistency and reducing litigation.
• Flexibility: Spouses can opt out of the regime through nuptial agreements

The Law Commission concludes that the current law does not provide a “cohesive framework” for fair and certain outcomes.

The Financial Remedies Scoping Report highlights a pressing need for reform in financial remedies law. The current discretionary system fails to provide divorcing couples with clarity, certainty, and fairness. Commissioner for Property, Family and Trusts, Professor Nick Hopkins said:

“The end of a marriage or civil partnership is a stressful time for couples. It is important that when this happens, people should be able to understand what the law says about how their finances will be divided. Our report concludes that the current legislation, which has not been updated for 50 years, does not provide couples with a cohesive framework for a fair or sufficiently certain outcome. We offer several models for reform for Government to consider and are well placed to provide final recommendations for reform once Government has decided which of these models to adopt.”

This report asks Government whether it agrees that the law needs to be reformed, and to choose the model for reform that should be adopted. Chris Lloyd-Smith, family law partner at Anthony Collins, said:

“The Law Commission’s decision to review financial remedies law (as part of the Matrimonial Causes Act 1973) is understandable as it is more than 50 years old. It is perhaps time to review the legislation and the case law that has built up subsequently. However, there are much more important areas in need of change – for example, unmarried cohabiting couples should benefit from the same legal protections as married couples when they separate. Resolution has been calling for this change for years, but as yet there is no sign of it happening.

Case law related to divorcing couples – even in relatively niche areas such as those with pre or post nuptial agreements and those that have been in a long marriage – is well established and well understood in the UK. Legal practitioners can give clear guidance to their clients and new legislation is not needed.

We should also bear in mind that most divorces in the UK are settled out of court, and those that do go to court tend to be ‘needs cases’. In most needs cases there isn’t enough money to go round, and the role of the judiciary is to try to ensure that the needs of the parties and their children are met. Needs cases would not be made any easier by the reform of financial remedies law.

The Law Commission’s report describes four different potential models for financial remedies reform with decreasing levels of judicial discretion proposed. This could be a backward step – it would prevent existing legislation from continuing to evolve, as it does currently via case law, to meet the needs of modern society as it has done for the past fifty plus years. Removing court discretion would leave England and Wales with a one-size-fits-all approach to divorce settlements, which is unable to deliver consistent outcomes. This will ultimately be less effective when it comes to meeting parties, and particularly children’s needs.”

Jo Edwards, Chair of Resolution’s Family Law Reform Group said:

“Resolution welcomes today’s report and the thoughtful work the Law Commission has done, with which we engaged over the last 18 months and to which we await hearing government’s response in due course.

Whilst it is true that legislation in this area is over fifty years old, how it is implemented in practice has moved forward significantly in those years to reflect societal changes. Our members’ experience is that the element of judicial discretion within the current system builds in enough flexibility to ensure fair outcomes in most cases. It also gives those who don’t go to court a framework within which to agree something which is fair in their circumstances. One of the key statements of the report correctly identifies the challenge for Government: how to promote increased certainty without losing that flexibility and ability to craft fair outcomes.

Our concern is that any moves to too rigid a system could act as a straitjacket, placing restrictions on judges and a default framework which could actually lead to less fairness for many. The lack of access to early legal advice is a fundamental flaw in the current process; if policymakers were to address this, then couples would have a greater understanding of likely outcomes and what their future finances may look like under the current law.

It is also important to note that, whilst it is right that we should keep the laws surrounding divorce and separation under review and ensure they continue to be fit for purpose, this was not an area identified by Resolution members as a priority for reform when we launched our Vision for Family Justice last year.
“Resolution is committed to engaging with any Government work arising from this report, and any suggested reforms should be evidence-based and relevant to the average couple. We are also clear that it should not detract from nor delay more urgent reforms, most importantly the introduction of legal protections for cohabitants, which was a manifesto commitment from the current government in this year’s election.”