This briefing note is only intended as a general statement of the law and no action should be taken in reliance on it without specific legal advice.

Reform of matrimonial finance laws: flexibility vs. certainty
01 August 2014

Reform of matrimonial finance laws: flexibility vs. certainty

Last month saw the second reading of Baroness Deech's Bill which recommends wholesale reform of the existing matrimonial finance laws.  Those existing laws were first introduced in the 1970s.  The last time they were debated by Parliament was during the early 1980s.  Since then, the law has been developed in reaction to societal change by the judiciary, rather than our elected representatives.

Whilst we agree that it is time Parliament debated the issue of financial provision following divorce, we believe that the proposals contained in Baroness Deech's draft Bill are manifestly unfair.

As we await the Government's response to the Law Commissions' recommendations for law reform in this area, this latest blog explains why we feel Baroness Deech's reforms miss the mark, and asks the question: can you have a system of matrimonial finance law that is both certain and fair? And if so, what would it look like?

For the last 30 years, judicial developments in the law on financial provision on divorce have been driven by societal change.  Marriage is now viewed as an equal partnership, with no distinction made between the contribution of the home maker compared to the wealth generator.

This change in emphasis has seen increasingly generous financial awards being made by the courts following divorce.  This, in turn, has led to London becoming the divorce destination of choice for the world's wealthy.

One could be forgiven for believing that Baroness Deech's proposals have also been made in response to societal change – namely, the increased incidence of dual income households where both parents are in employment.  This appears to have influenced her recommendation, in particular,  that lifetime spousal maintenance should come to an end and the period during which spousal maintenance is paid should be significantly curtailed.

However, empirical evidence confirms that there remains a significant pay gap between men and women.  Furthermore, Baroness Deech's proposal fails to recognise the significant economic disadvantage faced by mothers who return to work following a career break taken to raise a family.

Rather than responding to societal change, Baroness Deech's Bill anticipates a future where there is neither a gender pay gap nor a reduction in earning potential as a result of a career break.  This begs the question: should family law react to societal change or pre-empt it? Deech's proposals are certainly ahead of where society is currently in terms of the ability of wives to achieve financial independence from their husbands.

At the other end of the financial scale, the recent removal of legal aid from most matrimonial cases has left families struggling to resolve disputes whose consequences will affect them and their children for years to come.  The family courts system is at breaking point due in part to increasing numbers of unrepresented litigants struggling with an archaic system and arcane laws.

Clearly, change is needed. We have a choice between certainty of outcome, or the flexibility to deal fairly with individual families. The default position we are left with at present is flexibility, but this means uncertainty and consequential significant pressure on the Courts and the legal system.

In February this year, The Law Commission recommended a set of measures to make it easier for couples to manage their financial affairs on divorce or at the end of a civil partnership. These included:

  • guidance to help couples assess and agree their financial needs
  • an assessment of the feasibility of producing a formula or narrative to help couples understand the parameters of any likely financial outcome, and
  • “qualifying nuptial agreements” to allow couples to decide how their assets should be shared if they separate.

Again, we welcome this attempt to encourage debate. However, as we pointed out at the time, the proposal for written guidance or a formula to help people agree financial settlements may provide a ball park in which to play, but offers no certainty that the rules of the game will be any clearer. Written guidance and formulae still leave significant scope for dispute. We have our doubts that they will reduce the pressure on the courts sufficiently to make any significant difference.

As we await the Government's response, we shall in the coming months, explore the alternative proposals in more detail and examine their likely impact if they are implemented.