Finances on divorce: should the law be changed?

It has recently been announced that the Law Commission has been asked by the Ministry of Justice to undertake a review of the law which determines how finances are divided between couples at the end of their marriage or civil partnership.

The Government has requested a review on whether the current law, which has been essentially unchanged for the last fifty years, is working effectively, and delivering fair and consistent outcomes for divorcing couples.

The review will conclude by publishing a scoping report in September 2024, which could provide the basis for a full review and future financial remedies reform.

This will be the first time that the Law Commission has looked at this area of the law since 2014, when it made a number of recommendations, including that “qualifying nuptial agreements” be made binding (that recommendation was not implemented by the Government).

The question therefore is: should the law be changed, and if so, how?

Calls for change

The announcement, which has been expected for some time, comes after numerous calls for changes to the law.

These have come from various quarters, but one of the most vocal proponents for change has been Baroness Deech, a crossbench peer with a particular knowledge of family law (and also incidentally a non-executive board member of the Law Commission between 2019 and 2022).

Since at least 2014 Baroness Deech has been endeavouring to amend the law by way of a Private Members’ Bill, the Divorce (Financial Provision) Bill.

The Bill essentially seeks to make three amendments to the law: to make pre- and post-nuptial agreements binding, provided certain conditions are met, such as that the parties had the opportunity to receive legal advice before signing the agreement; to make the law clearer by providing that ‘matrimonial property’ (i.e. all property acquired after the parties were married, save for gifts and inheritances) should be divided equally save where unfair; and to limit most spousal maintenance orders to a maximum of five years (thereby doing away with the so-called ‘meal ticket for life’ enjoyed by some former spouses).

Terms of reference

Whether these changes will be recommended by the Law Commission of course remains to be seen, but the Baroness may be encouraged by the Commission’s terms of reference, which state that the Commission will consider specifically (but will not be limited to considering) whether there is scope for reform in relation to the following areas:

1. The discretionary basis of the current law – which gives judges a wide discretion as to what orders to make – and whether this allows for sufficient certainty as to legal outcomes.
2. Whether there may be ways to structure the discretionary basis of the current law with a clear set of underpinning principles, in order to create more certainty as to outcomes.
3. Whether there should be wider powers for the courts to make orders in respect of children of the family who have already attained the age of eighteen.
4. The operation of ‘conduct’ as a factor to which the court must have particular regard when deciding to make financial remedies orders (currently conduct during the course of the marriage is only likely to have a bearing upon the outcome if it is of a particularly serious nature).
5. The treatment of pensions on the division of parties’ assets on divorce – although the court has had powers to make orders in respect of pensions for more than twenty years now, there is still evidence that many spouses are missing out upon their entitlement.
6. Potential maximum periods for spousal periodical payments (i.e. maintenance) orders – as per Baroness Deech’s proposed reform.
7. The principles underlying s.25A of the Matrimonial Causes Act 1973, which imposes a duty upon the court to consider whether it would be appropriate so to exercise its powers to make financial remedy orders that the financial obligations of each party towards the other will be terminated as soon after the making of the order as the court considers just and reasonable.
8. Lastly (although not specified as an area for consideration), the Commission will look at whether the recommendations it made in 2014 need to be reviewed.

It is probably fair to say that many of these issues are not especially controversial. However, as points one and two indicate, the primary issue is clearly that of certainty of outcomes, and that has been the subject of considerable argument.

Baroness Deech and others obviously feel that the present system is not sufficiently certain, leading to difficulties in providing advice as to outcomes, and encouraging litigation.

But not everyone agrees with the Baroness. There is strong support for the status quo, with advocates arguing that only a discretionary system provides the court with the power to tailor outcomes to every possible situation, particularly with regard to ongoing maintenance. In other words, to fetter that discretion is to risk unfair outcomes.

Practitioners are awaiting the outcome of the Law Commission report, as this could potentially change the face of family law, as we know it.