Family Law and Practice - Week 6: Finances in Divorce

Family Law and Practice - Week 6: Finances in Divorce

Learning Outcomes

  • By the end of this session, students will:

    • Have a sound understanding of the law regarding finance in divorce proceedings.

    • Be aligned with learning outcomes pertaining to:

    • Financial consequences of dissolution of marriage (Outcome 1).

    • Understanding and applying practice, particularly through Form E (Outcome 2).

  • The session will be divided into three sections:

    • The Law/Orders available.

    • The Procedure.

    • Alternatives to court.

Financial Orders

  • Financial orders are legal directives replacing the formerly termed "ancillary relief."

  • The relevant laws governing financial remedies during divorce are specified in:

    • Part 9 of the Family Procedure Rules (FPR) 2010, which deals with financial remedy proceedings.

    • Part 2.3 of the FPR 2010, which provides definitions for financial remedies.

  • The key legislation outlining the nature and scope of financial remedies is found in the Matrimonial Causes Act 1973 (MCA 1973).

Types of Financial Orders

  • The three main categories of orders available to the court include:

    1. Orders Affecting the Capital of the Parties:

    • Relate to division of property and assets.

    1. Orders Affecting the Income of the Parties:

    • Primarily concerns maintenance payments.

    1. Orders Affecting the Pensions of the Parties:

    • Addresses variations in pension entitlements and distributions.

  • Timing Requirement:

    • Financial orders can only be made once the petitioner has reached the Decree Nisi stage. Exceptions include interim orders or orders affecting children.

    • Question: Is there a time limit by which a petitioner is barred from making a claim for a financial order to the court?

  • Time Limits for Applying:

    • No absolute time limit; however, stale claims with no real prospects may not be entertained by the court.

    • Case Study: Vince v Wyatt [2015] UKSC 14 illustrates that a claim 18 years post-decree absolute was allowed.

    • Remarriage barring: According to s. 28 (3) of MCA 1973, if a petitioner remarries, they lose the right to apply.

Considerations in Financial Orders

Factors Considered by the Court:

  • Section 25 (2) MCA 1973 mandates consideration of:
    a) Each party's income, earning capacity, property, and financial resources (both current and potential).
    b) Financial needs, obligations, and responsibilities of each party.
    c) The standard of living enjoyed by the family prior to marriage breakdown.
    d) The ages and durations of the marriage of both parties.
    e) Any physical or mental disabilities of either party.
    f) Contributions made by each party toward family welfare (including homemaking and caregiving).
    g) The conduct of either party, particularly if it would be inequitable to ignore.
    h) The value of any benefits lost due to divorce (e.g., pension benefits).

Types of Financial Orders Explained

Maintenance Orders

  • Governed by Section 22 MCA 1973:

    • Orders may require periodic payments for maintenance, intended to support a spouse financially.

    • Payments may be backdated to the petition date (but not further back).

    • Designed for addressing immediate cash flow issues; these can sometimes be substantial.

    • Case Reference: F v F [1995] 2 FLR 45 established case where maintenance was set at £360,000 p.a.

Lump Sum Orders

  • Statutory Basis: Section 23 MCA 1973 allows lump sum payments, which can be deferred and paid in instalments.

  • Typically used to allocate shares of major assets or to compensate for interests in shared properties/pensions.

Property Adjustment Orders

  • As per Section 24 MCA 1973:

    • Allows for adjustment of property ownership between parties.

    • Can involve transferring property or adjusting shares of property ownership.

Sale and Division of Property Proceeds

  • Detailed in Section 24 MCA 1973, which allows for property sales by court order.

  • Parties can have proceeds paid out based on court directives, often utilized for securing maintenance or lump sums.

Pension Orders

  • Three pension options:

    1. Off-setting: One party takes the pension while the other receives alternative assets.

    2. Ear-marking: A portion of the pension is earmarked for one party's future benefit.

    3. Pension splitting: The fund is split between the two parties directly.

  • Requires clear financial disclosure to accurately establish the values and future needs regarding pensions.

Child Support Laws

  • Historically governed by court until delegated to the Child Support Agency (CSA), now transitioned to the Child Maintenance Service.

  • The provisions for child maintenance can be negotiated in court orders and are enforceable through judicial mechanisms.

  • Applications can be made under Schedule 1 of the Children Act 1989 for periodical payments or property transfers for children of the family.

Application of S.25 Factors

  • The presumption is that assets will be split equally unless substantial justification arises.

  • Influential cases:

    • White v White [2000] - established fairness as a guiding principle.

    • Miller v Miller & McFarlane v MacFarlane [2006] - expanded on three strands of fairness: needs, compensation, sharing.

  • Various factors can necessitate deviations from equality:

    • Inheritance

    • Pre-marital contributions

    • Post-separation benefits

    • Value and control over business assets.

Wealth Consideration

  • Wealthier parties often have their needs interpreted generously, but marriage length influences outcomes (e.g., McCartney v Mills- McCartney [2008]).

  • Less wealthy parties focus primarily on needs and protection of children is paramount.

Legal Procedure for Financial Claims in Divorce

Steps in the Court Process

  1. Application Form: Initial form submitted to the court.

  2. Serve the Respondent: Notification to the other party about the application.

  3. Complete Form E: Must be filed at least 35 days prior to the First Appointment (FA).

  4. Followed by a statement of issues and other documents, leading up to the first formal hearing.

  5. FDR Hearing: Discussion and negotiation session aimed at mutually agreeable settlements.

  6. Final Hearing: If no settlement is reached, the court imposes a financial order.

Form E Requirements

  • Form E serves as a detailed account of assets, liabilities, income, and more, critical for financial proceedings.

  • Must include:

    • Personal details of both parties and children.

    • Dates relevant to marriage.

    • Detailed listing of all financial details and needs projections.

  • Full disclosure is emphasized to maintain fairness in proceedings.

Importance of Financial Dispute Resolutions

  • Aimed at encouraging negotiation and settlement; offers the court a statement of parties’ positions.

  • Provides a mechanism to avoid costly prolonged litigation, promoting fairness and informed decision-making.

Alternative Dispute Resolution (ADR)

Mediation

  • Involves an independent mediator who assists parties in disclosure and settlement discussions.

  • A neutral approach that can offer informal resolution settings.

Collaborative Law

  • Each party retains a lawyer and engages in a collaborative process, maintaining transparency and cooperation throughout.

Arbitration

  • Parties appoint an arbitrator for binding resolution outside court.

  • Guarantees confidentiality, contrasting with traditional court settings.

Solicitor Negotiation

  • Exchanges, written offers, and meetings between solicitors aim for settlements.

Separation Agreements

  • Non-binding documents that outline terms of separation; may influence future court proceedings.

  • Must follow full disclosure, fairness, and proper legal advice guidelines to reinforce enforceability.

Conclusion

  • Encouragement to come ready for the next weeks workshops on practical aspects of family law.