Financial Provision on Divorce/ Dissolution

Family and Child Law

Financial Provision on Divorce/ Dissolution

  • Presenter: Melissa Murray

The Family Law (Scotland) Act 1985

Overview

  • The Act aimed to achieve several significant policy objectives:

    • Move away from broad judicial discretion.

    • Encourage a ‘clean break’ following divorce or dissolution.

    • Remove the concept of 'fault' in financial provision considerations.

    • Recognize non-financial contributions made during the marriage.

The Available Orders under the Act

Section 8: Types of Financial Orders

  • The Family Law (Scotland) Act 1985, Section 8 outlines various orders that may be granted:

    • Order for payment of a capital sum

    • Order for transfer of property

    • Order for making a periodical allowance (available only under sections 9(1)(c), (d) or (e))

    • Order for pension-splitting, pension-sharing, pension compensation sharing, or lump sum order

    • Incidental orders

Court's Authority under Section 8(2)

  • According to Section 8(2), upon an application made under subsection (1), the court shall make an order that is:

    • (a) justified by the principles set out in Section 9 of the Act;

    • (b) reasonable given the resources of the parties.

Conduct in Financial Proceedings

Section 11(7): Conduct Consideration

  • Family Law (Scotland) Act 1985, Section 11(7) states that the court shall not consider the conduct of either party unless:

    • The conduct adversely impacted the financial resources relevant to the court's decision regarding financial provision claims.

    • It would be manifestly inequitable to disregard the conduct.

Case Example

  • Skarpaas v Skarpaas (1991) SLT (Sh. Ct.) 15 - A notable case regarding conduct.

Principles of Financial Provision

Section 9 Principles (S9)

  • The court applies the following principles when determining what financial provision order to make:

    • (a) The net value of the matrimonial or partnership property should be shared fairly between the parties.

    • (b) Fair account should be taken of any economic advantages or disadvantages derived from contributions made by the parties.

    • (c) Any economic burden of caring for a child under 16 years should be shared fairly.

    • (d) A dependent spouse should be awarded reasonable financial provision to adjust after the loss of support within a three-year period post-divorce.

    • (e) The court may award reasonable financial relief to prevent serious hardship post-divorce or civil partnership dissolution.

Detail of Principles - S9(1)(a)

  • Principle S9(1)(a): Net value sharing

    • Fair sharing of the net value of matrimonial property or partnership property.

  • Section 10(1) Interpretation: The sharing is considered fair when divided equally or in justified proportions based on special circumstances.

Defining Matrimonial Property

  • Matrimonial property is defined under Section 10(4) as:

    • Property owned by the parties at the relevant date acquired other than by gift or succession:

    • (a) Before the marriage to be used as a family home or for its furnishings.

    • (b) During the marriage but before the relevant date.

Special Circumstances and Property Division

Section 10(6) - Concept of Special Circumstances

  • The term “special circumstances” includes but is not limited to:

    • (a) Terms of any agreements on ownership or division of matrimonial property.

    • (b) Source of funds not derived from parties' income or efforts during marriage.

    • (c) Any destruction or alienation of property.

    • (d) Nature and intended use of the matrimonial property.

    • (e) Liabilities for expenses related to property valuation or transfer due to divorce.

Economic Advantages and Disadvantages - S9(1)(b)

  • Principle S9(1)(b): Economic advantages or disadvantages for contributions made.

  • Definitions:

    • “Economic advantage” includes capital gains, income increases, and earnings capacity improvements.

    • “Economic disadvantage” is defined correspondingly.

  • Contributions account for both direct financial contributions and indirect or non-financial contribution (e.g., caregiving).

  • Section 11(2): The court considers:

    • Balance of advantages/disadvantages sustained by both parties.

    • Imbalances to be rectified by property sharing or otherwise.

Economic Burden of Caring for Children - S9(1)(c)

  • Principle S9(1)(c): Financial burden sharing for children under 16 years.

  • Section 11(3) Considerations:

    • Existing decrees for child support.

    • Loss of earnings capacity due to caregiving.

    • Need for suitable accommodation for the child.

    • Child's health, age, educational, financial circumstances.

    • Availability and cost of childcare resources.

    • Overall resources and needs of the parties involved.

Dependency and Adjustment - S9(1)(d)

  • Principle S9(1)(d): Provision for dependent spouse.

  • A dependent party should receive financial support reasonable for adjustment within three years of divorce.

  • Case Example: Neill v Neill (2021) Fam LR 2.

Serious Hardship Provision - S9(1)(e)

  • Principle S9(1)(e): Financial provision to prevent hardship at civil partnership or divorce dissolution.

  • Case Example: Haugan v. Haugan (1996) SLT 321.

Calculating Financial Provision

Step-by-Step Process

  1. Identify Matrimonial Property: According to Section 9(1)(a), determine assets considered matrimonial or partnership property per Section 10(4).

  2. Calculate Net Value: Establish net value of property.

  3. Ownership Determination: Identify ownership of each piece of matrimonial property.

  4. Split Property: Initially split the property equally (50/50).

  5. Assess Special Circumstances: Apply Section 10(6) to see if equal division is warranted based on special situations.

  6. Consider Additional Principles: Analyze Sections 9(1)(b-e) for relevance and available orders based on the circumstances of the case.

Example Problem: Zach and Lara

Case Background

  • Zach and Lara married in 2018, having three children born in 2019, 2021, and 2024.

  • Relationship breakdown leads Zach to file for divorce.

Property Overview

  • Family Home: Valued at £120,000; no mortgage (not matrimonial property).

  • Joint Bank Account: £15,000 (matrimonial property).

  • Antique Painting: Valued at £10,000; bought with Zach's inheritance (matrimonial property).

  • Lara’s Car: Valued at £5,000, purchased in 2021 (matrimonial property).

  • Zach’s Car: Valued at £7,000, purchased in 2023 (matrimonial property).

Total Value of Matrimonial Property

  • Total value classified as matrimonial property:

    • Joint bank account = £15,000

    • Antique painting = £10,000

    • Lara’s car = £5,000

    • Zach’s car = £7,000

  • Total Value: £37,000 for matrimonial property.

Ownership Breakdown

  • Joint Bank Account: £15,000, owned 50/50.

  • Antique Painting: £10,000; presumed 50/50 ownership.

  • Lara's Car: Ownership by Lara.

  • Zach's Car: Ownership by Zach.

Redistribution Calculation

  • Net Assets for Each:

    • Lara: £17,500

    • Zach: £19,500

  • Since Zach is £2,000 ahead, he would need to transfer £1,000 to balance.

Further Considerations

  • Evaluate principles under Section 9 (S9(1)(b-e)) and determine if any apply in this scenario:

    • What further orders may be necessary under each principle discussed?

Upcoming Topics

  • Focus for the next session:

    • Cohabitation

    • Cohabitation Agreements