Family law has been very slow to change in the past, although a major shift took place in April 2022 when ‘no fault’ divorce (including dissolution of civil partnerships) was introduced. Not surprisingly, the focus then turned to the linked financial issues and once again, the Law Commission was called upon to investigate the current law and process.
How many of us actually know what the Law Commission is and what it does? Established in 1965, the Commission is an independent statutory body whose role is to “keep the law of England and Wales under review and to recommend reform where it is needed” (quote taken from the Commission’s home page). Through a process of consultation and research with government departments and the public (including specialists) the Commission produces reports for parliament based on its analysis of the information gathered and in order to advise, update, identify obsolete measures and reduce the number of existing statutes – as appropriate. To quote again from the Commission’s home page, its aim is to “ensure that the law is fair, modern, simple and cost effective”.
Having simplified the divorce/dissolution process it makes sense for there to be a review now of the financial process. Although many clients are unaware when they first consult us, their divorce/dissolution will merely sever their marital/partnership ties and will leave them ‘financially linked’ to each other unless/until a separate court order is made (either by consent or after the issue of contested court proceedings), which order will have to be approved by the court before the terms of any financial settlement become binding and enforceable. That is news that often comes as quite a shock to clients, compounded when they learn just how lengthy, complex and costly financial negotiations/proceedings can be, not to mention how hard it is to predict the outcome with any certainty.
In this instance, the Commission investigated the current law and financial process to ascertain (amongst other things) whether these needed to be simplified, whether the current system delivers a fair and consistent outcome, and whether some parties might be more vulnerable and losing out perhaps because of gender, as victims of domestic abuse or control, or simply because of their reluctance to seek early (or any) legal advice, etc.
The Commission published its report on 18 December 2024. This is a detailed document (over 370 pages and a summary is available to read on the Commissions home page (or https://cloud-platform-e218f50a4812967ba1215eaecede923f.s3.amazonaws.com/uploads/sites/30/2024/12/Financial-Remedies-summary-Dec-24-1.pdf). The report highlights several areas of concern which we will look at in more detail below:
- Wide judicial discretion and equally wide interpretation of ‘reasonable needs’. Discretion within a legal context can be defined as ‘the power of the court to take some step, grant a remedy, or admit evidence or not, as it thinks fit’ (Oxford Reference). Interpretation can be defined as ‘determining the true meaning’. Even within the confines of existing guidelines and formal statutes it is easy to see just how many variables will arise when judges (as variable humans) are required to exercise their individual minds in any given situation. Factor in the vague requirement of meeting ‘reasonable needs’ (which will be a very subjective test in each case) and one could be excused for feeling nervous.
- A lack of clarity, especially for parties who are without legal representation. While there has been a concerted effort to adopt less formal legal ‘jargon’ over recent years, to replace complex forms with more user-friendly versions and even to simply some of the steps and provide on-line guidance, the law governing these finances remains vague and the court procedure is not straightforward. There are so many other options available to parties now outside the court process (including arbitration and mediation) that parties can be left feeling bewildered and out of their depth – certainly out of their comfort zones – even with legal representation.
- Problems predicting the likely outcome. This links in with the comments under 1 and 2 above, to which should also be added the inability to predict how parties will conduct their negotiations; also how those negotiations may be impacted by the approaches of the individual lawyers. When a marriage/civil partnership is working well, parties tend to communicate more openly and levels of trust remain high. When problems arise, we know that communication is often one of the first areas to suffer. Parties withdraw from each other, may be less inclined to share information, and may be wary of trusting information produced by the other side. There may be issues with evidence and a reluctance to properly engage. In this maelstrom of emotions the family’s individual circumstances and needs must be identified, expectations managed, and realistic solutions sought. Under these conditions trying to predict the outcome, other than in very general terms, may be a tall order and incredibly frustrating to clients – increasing their anxiety levels and their dissatisfaction with the system.
- High costs. Put simply, the longer a matter takes to resolve and the greater the involvement of lawyers and the court (whether because of complexity or just prolonged interaction) the higher the parties’ costs will rise. There will always be a few cases where costs are not an issue, either because the parties are very wealthy and have no need to settle early, or (sadly) because they are unwilling to compromise and have less incentive to resolve issues. The majority of parties will wish to minimise costs, however, and will prefer to retain the bulk of the financial pot for themselves rather than paying excessive sums to lawyers in respect of costs, court fees and expensive experts’ fees.
- Uncertainty regarding pre-nuptial agreements, their validity and enforceability. The aim of a pre-nuptial agreement (or a pre-registration agreement in the case of a civil partnership) is to formally record the parties’ wishes regarding their assets, and how these should be divided in the event that they later divorce or have their civil partnership dissolved. They enter into the agreement prior to the marriage/civil partnership and intend their wishes to be upheld regardless of existing law or principles. While these agreements are enforceable in many jurisdictions they are not yet automatically binding in England and Wales. The fairness of each agreement will be considered by the court, on a case by case basis, and whilst it may influence the final outcome, this is not guaranteed. In February 2014 the Commission published a report (“Matrimonial Property, Needs and Agreements” – again, see the Law Commission homepage) recommending the introduction of enforceable agreements. The government has yet to issue its final response!
While a subjective approach may seem preferable, with each case looked at individually, the resulting uncertainty, as identified and underlined by points 1 – 5 above, can have a negative effect on the parties and on their negotiations, and can lead to increased conflict.
As part of its investigation the Commission compared legal systems used in other jurisdictions (including Scotland, parts of Europe and the Nordic countries) many of which provide for ‘community of property’ (ie automatic joint ownership regardless of contribution) and/or ‘default provisions’ (ie automatic application in each case unless the parties opt out and enter into an a binding pre-nuptial agreement).
Ultimately, the Commission’s report identified a need for changes to the current financial procedure and proposed 4 potential models for reform, each applying limitations on the court’s discretion but always aiming to provide parties with more certainty of outcome at the end of the day. The proposed models range from mere codification at the lower end of the scale (producing greater clarity but not involving any significant changes to the existing law) up to an effective default regime (as referred to above) at the higher end, requiring substantial changes to the existing law. For further details see the report summary and link referred to above.
It is now for parliament to decide whether any reforms should be introduced. If so, these will take time and a balance will need to be met between the courts’ present subjective approach and a potential move away from the current (admittedly often vague) law and well-established principles. The government has 6 months from the date of the Commission’s report in which to produce an interim response, with a final response due within 12 months. There is no guarantee that any of the Commission’s proposals will be accepted although roughly 2/3 of all recommendations are usually passed, in whole or part. Having said that, according to an implementation table (available to view on https://lawcom.gov.uk/our-work/implementation/table/ ) there are a number proposals for reform in other areas of the law which still remain ‘pending’ – some dating as far back as 2006/7. We will just have to wait and see.
