Is it time to talk about the finances?

Is the current system for the resolution of financial settlements ‘past its sell-by-date?’ Baroness Deech has suggested that it is and has reintroduced the controversial Divorce (Financial Provision) Bill to the House of Lords. There has been an elephant in the room for a while now suggesting that the judicial discretion facilitated by the Matrimonial Causes Act 1973 has branded London as the ‘divorce capital of the world.’ The flexibility awarded by judicial discretion has encouraged several wealthy spouses to seek a divorce in our jurisdiction, in the hope of a more generous settlement.

Former Miss Malaysia, Pauline Chai filed for divorce from her multimillionaire husband in 2013 and was able to have her divorce heard in the UK as she had moved to Berkhamsted. She was successful in obtaining a settlement of £64 million to be paid by her former spouse. This is not an isolated occurrence and Princess Haya similarly filed for divorce in the UK from Sheikh Mohammed of Dubai.

This trend has not gone unnoticed, and Baroness Shackleton has further criticised the law for being ‘hopelessly out of date’ whilst being very vocal about her desire for reform. The Matrimonial Causes Act 1973 is celebrating its 50^th birthday this year and it is not a surprise to many that the common perception of a typical family has undoubtedly changed.

Although the main provocation for this reform is the vast amount of judicial discretion that the financial outcome for both parties hinges on, it is worth acknowledging that this discretion is not entirely unfavourable. It shows that the law understands that there are various functioning family dynamics in our modern society. The current state of the law appreciates that there is no one size fits all approach, and the judges are able to use their discretion to reach a financial conclusion that reflects this. However, with flexibility comes a lack of certainty and it is widely accepted that different judges could reach a range of decisions from the same set of facts.

What are the main changes being proposed in the bill?

• The reduction of spousal maintenance to maximum period of 5 years.

This would bring the English law more in line with the Scottish system which usually provides a maximum of 3 years for these periodical payments. It would also facilitate the court’s intention to establish a clean break as quickly as possible and encourage independence. It should be noted that there is a caveat that the period should only be exceeded if a party would be likely to ‘suffer serious financial hardship’ and that there are no other means of making a provision. However, this does appear to be a high threshold and it is uncertain at this stage what would meet it. Further to this, setting a precedent of five years could be undesirable for parties who have given up their careers to dedicate their time to raising the children and supporting their partner to fulfil their own career aspirations.

• Making Pre-Nuptial and Post-Nuptial Agreements formally binding providing certain criteria are met.

This proposal may well be welcomed with open arms following the court’s attitude to marital agreements after the case of Radmacher v Granatino that was decided in the UK Supreme Court in 2010. The current state of the law enables pre and post-nuptial agreements to be considered as part of all of the relevant circumstances of the case when the court goes through the Section 25 factors to divide up the assets on a divorce. This landmark case confirmed that ‘the court should give effect to a nuptial agreement that is freely entered into by each party with a full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold the parties to their agreement.’ However, this has not been cemented in statute to date and this bill aims to do just that.

• Revising the definition of matrimonial property and limiting the powers of the court to make orders to non-matrimonial property.

The bill aims to clearly identify at the outset what should be regarded as matrimonial property and suggests that primarily, only the assets that fit the definition should be divided between the parties. This approach appears to be methodical and will provide more certainty as to what is in the pot and can be subject to division.

The matter is currently with the Law Commission for review and we await the findings of the Scoping Report that is due to be published in September 2024.

For more information on the contents of this article, please contact Lucinda Holliday on 01494 478603 or via email at ljmh@blasermills.co.uk