By Alison Green, Partner and Head of the Family and Relationship Team

The recent publication of a scoping report by the Law Commission on financial remedy orders on 18 December 2024 has highlighted the pressing need to revisit and potentially reform the law governing financial orders made in divorce and civil partnership dissolutions.

As a family lawyer with extensive experience, I have seen the significant impact financial disputes can have on separating couples.

The current legal framework, rooted in the Matrimonial Causes Act of 1973 and echoed in the Civil Partnership Act 2004, now faces a critical evaluation to ensure it meets the contemporary needs of families.

The current challenges of financial remedy orders

Annually, numerous individuals confront the complex process of divorce or dissolution, seeking orders that determine the post-separation distribution of assets.

These include property transfers, maintenance payments, and pension sharing.

The existing law, however, provides broad judicial discretion, which often leads to unpredictable and inequitable outcomes.

The Law Commission’s report acknowledges that this uncertainty fosters disputes rather than resolutions, highlighting a system that fails to provide a fair and sufficiently certain framework for couples.

The Law Commission’s financial remedies scoping report

The scoping report does not recommend specific reforms but identifies key issues with the current legislation and presents four potential models for reform.

These range from minimal changes with the codification of current case law to establishing default rules that could significantly reduce judicial discretion and increase certainty.

Potential areas for reform under the new scope

The report covers several areas for reform, however, here are some of the key matters to consider:

  1. Judicial discretion and principles: The report suggests that the vast discretionary powers of judges could be curtailed to increase predictability and fairness in financial settlements.
  2. Support for adult children: It considers whether financial orders for children over the age of eighteen should be expanded, reflecting changes in societal norms. Stakeholders to the report recommended that courts should have extended powers to provide financial support for children aged 18 and over, suggesting an increase in the default age limit for provision from 18 to 21.
  3. Maintenance payments: The need to re-evaluate how maintenance is calculated and its duration to ensure fair outcomes is highlighted in the report based on research conducted with key stakeholders, many of whom have suggested potentially limiting spousal maintenance. Many favoured retaining judicial discretion to adapt to specific circumstances, though consensus on the scope of exceptions to ensure fairness is lacking.
  4. Consideration of conduct: Courts can take into account the conduct of parties when issuing financial remedies orders if it would be inequitable to ignore it, as stated in subsection 28(2)(g) of the Matrimonial Causes Act 1973, though no statutory definition of “conduct” is provided. The report discusses how the courts should factor in the serious misconduct of parties, including domestic abuse when making financial remedy orders.
  5. Pension rights: There’s a call to ensure pensions are fairly considered, as they often represent significant assets that are overlooked or undervalued in divorce proceedings. Stakeholders and research by the Commission indicate that pensions are often perceived as complex and undervalued in divorce proceedings. There is a consensus on the need for legal reforms to address how pensions are handled, including potential provisions to explicitly include pension sharing in the law or make it the default method of division.
  6. Nuptial Agreements in England and Wales: The Law Commission some years ago recommended legally binding Qualifying Nuptial Agreements (QNAs) with safeguards like independent legal advice and full financial disclosure, provided they ensure that financial needs are met, though the Government has not enacted these recommendations. Currently, courts may deviate from agreements if they fail to meet financial needs.

A project based on this report will evaluate domestic law and incorporate international perspectives to offer a broader view on handling similar challenges.

The Law Commission has set the stage for transformative changes. These could align financial remedy law with modern families’ realities.

Final thoughts

This review by the Law Commission signifies a crucial step towards modernising the financial aspects of family law.

As legal professionals, our engagement in this process is vital. We can actively influence the development of laws that more effectively address the financial ramifications of relationship breakdowns.

The potential reforms could lead to clearer guidelines that facilitate better outcomes for all parties in a divorce or dissolution.

For further guidance on any elements of a financial remedy order, please contact Alison Green directly.

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