Vanquishing “gold diggers”, disregarding fairness? The future of financial remedies on divorce

The statutory provisions around how finances on divorce are to be approached – as set out in s25(2) of the Matrimonial Causes Act 1973 – are as old as yours truly. That is, VERY old. But what we have is an excellent (by and large) family judiciary which uses the discretion afforded by that statute and flexes decisions to meet changing modern mores and the facts of the individual case, to reach a fair outcome. To a point, that is fine.

However, society has moved on since 1973 and it is not enough to rely on judges to reflect societal changes. Few people who practice in this area (and even fewer who have been through divorce themselves) would say that the current law is perfect and not in need of change. However, when news filtered through last week that a Divorce (Financial Provision) Bill is being introduced for first reading in the House of Lords on 20 January, let’s say I was doing whatever is the opposite of a victory dance. I (along with many practitioners and specialist stakeholders) have been a vocal critic of the Baroness Deech bill which has been around now for some time; and although I have yet to see the detail of this one (and understand it is being introduced by Baroness Shackleton, not Deech), if it is anything like its predecessor (and one is to assume it is a carbon copy, given that Baroness Shackleton has expressed support for the Baroness Deech bill in the past) it is bad news for separating couples (or, more specifically, the financially weaker party).

The problem with the current law about finances on divorce

The Resolution Manifesto for Family Law – launched when I was Chair and somehow 5 years old next month – says of financial remedies reform the following :

The problem

The removal of legal aid has led to a rise in unrepresented litigants, with over 50,000 people representing themselves in family disputes in 2013.

[An aside – this statistic has aged quickly and the problem is ever more acute. The latest statistics – the Family Court Quarterly bulletin for July to September 2019 – show that 81% of private law family cases now involve at least one unrepresented litigant; and that in almost 2 in 5 cases – 39% – neither litigant is represented. The crudely drawn red line in the table below is intended to show when the Resolution Manifesto was published and therefore illustrate how the problem has grown even worse since https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/852097/FCSQ_July_to_September_2019.pdf ]

Divorce law relating to finances is complex and difficult to understand. Outcomes can be difficult to predict, even for legal professions [20 years in, I will admit to this]. Section 25 of the Matrimonial Causes Act 1973…has fundamentally remained unchanged for the last 40 [now add another 5] years. The concern is that people separate with little or no understanding of the financial consequences of their break up, making it more difficult for them to reach agreement and placing a greater burden on the court system.

[Another aside – this is really the crux of it. In an era of limited (and let’s be frank, really no) access to legal aid, those navigating divorce need clarity about likely financial responsibilities/entitlements. Courts meting out justice need fewer cases crossing their threshold. Mediation numbers are down, when many of these cases could no doubt be sorted out away from court. Goodness knows how many more people than pre-LASPO are just not pursuing financial claims on divorce because they don’t know how and becoming dependent upon the state for hand-outs. We know that, statistically, for those who do instruct solicitors the cost of divorce is going up. And the family courts are seeing private law case numbers which are creeping back up to pre-LASPO levels –

The Manifesto continues –

With the average median household income at £32,600, most people do not have huge resources to divide on separation. The complexity of current law affects ordinary people, living in ordinary circumstances. Reform is needed to make sure they are fairly provided for after they separate.

None of that can be at all controversial. Many of us practicing as family lawyers can lose sight of the fact that in the average case, the assets are modest (and sometimes may only comprise debt) and how to provide for two households can be a conundrum. The average reported case, involving as it invariably does multi-millions and disputes about why there should be departure from equality of capital division, or whether the non-working spouse should be compensated in budget/spousal maintenance terms for giving up a potentially lucrative career of his/her own (A – probably not any more), doesn’t speak to the proverbial man (and woman) in the street.

So what, in outline, is the answer?

Our solution

Resolution calls for clear guidance for people entering the court system, so that they are more aware of the potential outcomes and consequences, and for a wide-ranging reform of the financial provision system to achieve more clarity.

[Note – I honestly don’t remember why we said “for people entering the court system’. Elsewhere in the manifesto we endorsed measures to help separating couples reach agreement out of court. Read in tandem with that manifesto ask, the point was really that, whatever the forum for sorting out their divorce, we wanted divorcing couples to have greater clarity about the likely approach to their finances on divorce]

The reforms to Section 25…that Resolution wants to see emphasise independence and greater certainty on the level and timescale for payment of maintenance, with children’s interests at their heart.

[I shall return to this theme as there is a distinction between this position, which is really about more principled discretion than exists at present, and the Baroness Deech/Shackleton bill, which moves more towards straitjacketing and (seemingly at least) disregards fairness/children’s interests].

Enforceable agreements (commonly known as “pre-nups”) should be permitted with suitable safeguards. This would provide certainty to people entering the courts that a previously made agreement will generally be binding, unless it does not satisfy clearly identified criteria. The independent Law Commission has also called for change in this area

[Likewise, where the previous bill was apart from this was on the question of fairness, about which it was silent]

Clear guidelines are needed on the division of capital resources and pensions. Resolution proposes a distinction between matrimonial property and non-matrimonial property in cases where resources exceed the needs of the separating couple.

[The rub here is the final part of the second sentence – in cases where resources exceed needs. The bill, in its last iteration, seemed unconcerned about outcomes/fairness; the principle was all about the ring-fencing].

What does the Law Commission say?

In 2009 (how is it now 11 years ago?), the Law Commission started a project to look at the status and enforceability of marital property agreements. A consultation was opened in January 2011 but the project was (logically) extended in 2012 to cover two further aspects of finances on divorce – financial needs and non-matrimonial property. As such, a supplementary consultation was commenced in September 2012. It was not a full-scale reform project directed at the entirety of the law of financial orders, but aimed to bring clarity to areas of the law that cause particular difficulties.

The Law Commission’s report, Matrimonial Property, Needs and Agreements was published in February 2014. It was a thorough, considered piece of work, based on the many responses it received (and, at 231 pages, a rip-roaring bedtime read) https://s3-eu-west-2.amazonaws.com/lawcom-prod-storage-11jsxou24uy7q/uploads/2015/03/lc343_matrimonial_property.pdf For those with a lesser stomach for detailed treatises, a bite-sized (14 page) summary was also produced https://s3-eu-west-2.amazonaws.com/lawcom-prod-storage-11jsxou24uy7q/uploads/2015/03/lc343_matrimonial_property_summary.pdf

Recommendations for reform were intended to :

  • Clarify, through the provision of guidance by the Family Justice Council, the law relating to “financial needs” to ensure that the law is applied consistently by the courts.
  • Give guidance to give litigants in person access to a clear statement of their responsibilities and the objective of a transition to independence that a financial settlement should achieve.
  • Investigate the possibility of whether an aid to calculation of “financial needs” could be devised; specifically it was envisaged that formulae, if developed, would take the form of non-statutory guidance and give a range of outcomes within which a separating couple might negotiate.
  • Introduce “qualifying nuptial agreements”, enforceable contracts enabling couples to make binding arrangements for the financial consequences of divorce, subject to certain procedural safeguards being met.

One of the areas which particularly piqued the interest of readers of the report was the suggestion of non-statutory guidance. The Law Commission pointed to the experience of other jurisdictions who have produced such guidance and suggested that work be done to gauge whether an aid to calculation could be devised and found useful. The relevant paragraphs of the (detailed – sorry) report are 3.121 to 3.159, which concluded that Government should support the formulation of a working group, to be convened once suitable empirical data become available, to work on the possible development of a formula to generate ranges of outcomes for spousal support. It was envisaged that the project, which would be populated by those from a range of relevant backgrounds, could last for some five years. That in itself emphasises what a complex area this is and the need for an evidential basis for any reform.

The Family Justice Council has produced (helpful) guidance on needs (for both the judiciary, now on its second edition https://www.judiciary.uk/wp-content/uploads/2018/04/guidance-on-financial-needs-divorce-2nd-edition-april-2018.pdf and the public https://www.familylaw.co.uk/docs/pdf-files/family_justice_council_fjc_-financial-needs-april-16-final.pdf )

The Ministry of Justice also undertook some scoping work on the feasibility of developing non-statutory and numerical guidance on the calculation of financial needs. However, no substantive steps were taken in the 2010-2015 parliament as government considered that there was unlikely to be time for matters to progress (and, particularly, for the nuptial agreements bill appended to the report) before parliament was dissolved in March 2015. There have been no subsequent developments (need I say, the Tories having secured a 12 seat majority in the 2015 election, but then everything having been eclipsed by the Brexit vote in 2016 and the ruling party’s loss of its small majority in the 2017 elections).

The Divorce (Financial Provision) Bill 2017-19

Practitioners have long had a (wary) eye on the Divorce (Financial Provision) Bill 2017-19, which also featured in the previous parliament. It was beginning to pick up pace through the House of Lords in late 2018, completing its House of Lords stage and being presented to the House of Commons on 19 December 2018 (where it was being sponsored by Tim Loughton MP, who also sponsored the bill which led to civil partnerships for all from 31 December). However it never reached second reading stage and fell with the general election.

A link to the Bill in its previous guise is here https://publications.parliament.uk/pa/bills/cbill/2017-2019/0310/cbill_2017-20190310_en_2.htm#l1g3 I shall update this blog once I have seen the version of the Bill being presented to the House of Lords on 20 January 2020 and highlight any changes.

The scheme of the Bill, in a nutshell, is to :

  • Limit the assets up for grabs on divorce to “matrimonial property” (as fairly narrowly defined in the Bill), without regard to fairness of outcome, and have a strict accounting exercise as to how that gets divided;
  • Give nuptial agreements a statutory footing along similar lines as recommended by the Law Commission, save for (a) only needing pre-nups to be signed at least 21 days before a marriage and (b) (crucially) making no reference to fairness, as a factor which dictates whether or not a nuptial agreement should be upheld (why the heck not?)
  • Have a spousal maintenance regime which focuses on economic advantage gained/economic disadvantage suffered and which caps spousal support at 5 years (having previously been 3 years in the Bill) save in only extreme circumstances.

The Bill as it stood does not have much (if any) support among practitioners in England and Wales and is not (or was not) understood to have government support. To avoid reinventing the wheel, I have included below the text of a detailed letter I sent to Peers in November 2018, which explains the scheme of the Bill and my/Resolution’s opposition to it. (The backdrop to the letter was that I had spoken at a House of Lords round table some months prior about the Bill, making clear that it is a bad Bill, and one or two Peers asked that we write to set out a line by line critique of the Bill and what we were content with/what we felt needed amending; the reality is that the whole premise of the Bill is flawed and so any line by line analysis is impossible).

An evidential basis for reform?

It is apparent, from reading the transcript of the second reading debate of the Bill in the House of Lords on 11 May 2018, that in certain quarters there is significant strength of feeling about financial remedy reform. The problem is (and I say this with the greatest of respect), the focus seems to be all wrong.

https://hansard.parliament.uk/lords/2018-05-11/debates/89A33706-7DCD-4FA0-AE0D-B06E11FAF264/Divorce(FinancialProvision)Bill(HL)

  • It is based on sensational stories on the Archers and in the tabloid media. Is this really the most sound footing for law reform?
  • It references cases which hit the media in which the legal costs have become disproportionate to the assets actually being fought over. Clearly this is regrettable (to say the least) and gives our profession a bad name (ditto). But are those cases the norm? (Clue – no). And isn’t that about looking at the costs rules which operate in these cases (as indeed is happening at this very moment)? And surely if the law changed as this Bill envisaged, the focus of the debate would just become something different – e.g. what falls within and without the new definition of matrimonial property, or does a particular case meet the (limited) circumstances in which more than 5 years’ spousal support would be ordered? The costs of those investigations may well be just as high as the costs at present.
  • It is premised on the assumption that most people who make claims to the family courts are gold-digging hussies who should be given short shrift. Is that really our day-to-day experience? For every forum-shopping gold digger, I will give you 1,000 spouses who have worked hard in the home, been out of the workplace for 15 or 20 years, have contributed little to the marriage in financial terms (but masses in other ways) and come to the family courts in a position of real, sometimes dire, need. Are they to be prejudiced because the perception is that WAGs and gold-diggers is the typical demographic? And only recently I have been involved in a case where the wife (30 odd years younger than the husband, from what may be regarded as a jurisdiction which produces gold-diggers) has been branded a gold-digger yet the marriage has been of goodly length and produced children.
  • It pays no regard, in fact, to the detailed work of the Law Commission (which spanned several years and received responses from all the key stakeholders in this area) and the detailed further work which it says ought to be undertaken before any reform happens.

I could go on.

Others’ views

Others with far greater intellect (not difficult) than me have highlighted their concerns around this Bill.

In terms of concerns about the lack of evidential basis for reform, in August 2018 Emma Hitchings and Jo Miles, respectively of Bristol and Cambridge Universities, wrote a (brilliant – please read) paper setting out their findings from a mixed methods study of financial settlements on divorce, drawing on data from a Court filed survey of c400 cases https://www.nuffieldfoundation.org/sites/default/files/files/briefing%20paper%20Jun%202018%20FINAL.pdf

Also worthy of mention is a (similarly great) paper by Sharon Thompson of Cardiff University, “In defence of the gold-digger” https://poseidon01.ssrn.com/delivery.php?ID=979021004069088095084100081031094107101092046084012032073080067028119031007083096031042098107042116029053066098081097095015074017020005001059070074010095026086027097086009039066029094024072113071086027010117109099125114010078077069067092028113104082112&EXT=pdf

Brenda Hale at the Resolution conference, April 2018

But the final word on the subject has to go to Baroness Hale, recently stepped down from the Supreme Court presidency and well known for her steely intellect, warmth and impressive collection of brooches. She has been a vocal critic of the Divorce (Financial Provision) Bill, attracting comment from the legal press about how unusual it is (or now, was) for a President of the Supreme Court to express criticism of legislation before parliament (though we know now that our beloved Brenda doesn’t shy away from political controversy – legality of prorogation, anyone?). https://www.lawgazette.co.uk/news/hale-risks-political-storm-by-questioning-legislation-before-parliament/5070911.article

Speaking at the Resolution conference in April 2018, our Brenda sought to answer those who say that adopting the Scottish model of financial provision (as the current Bill effectively seeks to do) is the answer south of the border. Her view that this is not the right answer was made clear :

An alternative view is that marriage is a partnership which should be dissolved with equal sharing of assets accumulated during the marriage but no provision for future needs unless there would otherwise be grave hardship. This is more or less the law in Scotland and Baroness Deech’s Bill would introduce something very similar for England and Wales. It is unsurprising in Scotland, for two reasons. There was no history there of long term periodical payments, whereas periodical payments were the typical form of provision south of the border. And the highly-respected Scottish Law Commissioner, Professor Eric Clive, who was responsible for most of the Commission’s work in family law, had long held the view that there is ‘something fundamentally repulsive about the whole idea of dependent women’. Research by Mair, Mordaunt and Wasoff has found widespread satisfaction with the Scottish law among lawyers and judges; but it is not able to tell us what the parties think or what happens in practice to discarded homemakers with little hope of returning to the job market on the same terms as when they left it.

I agree entirely that it should not be assumed that the highest aspiration for a woman is to become dependent upon a man. It was that assumption which meant that my mother, a trained teacher, had to give up work when she married my father in 1936. But that assumption has long gone and women have the possibility of independence both during and after marriage. However, we cannot ignore the fact that marriage is a partnership in which the spouses (whatever their sex) often play different roles – and often varying over time – for their mutual benefit and that of their children and elderly parents. There are some men who happily undertake the housekeeping and child caring responsibilities traditionally undertaken by women. There are some women who pursue exactly the same working pattern as men have traditionally done. Most are probably somewhere in between. Research has clearly shown that a person who gives up work, even for a few years, in order to concentrate on child care or other family responsibilities will never make up what they have lost. It is a dilemma for us all, but particularly those in the professions who would dearly love to ‘have it all’.

My own view is that the goal of divorce settlements should be, as I said in Miller, ‘to give each party an equal start on the road to independent living’. But that equal start is bound to involve, for most couples, an element of compensation for the disadvantage, often the permanent disadvantage, resulting from the choices made by both parties during the marriage. Sometimes, but not always, the only way to do this is by open-ended periodical payments. To refer to this as a ‘meal ticket for life’ is indeed patronising and demeaning, but making an award for those reasons is not.

Conclusion

Few would defend the current law and argue that it is fit for purpose. It is clear that, for the benefit of all going through divorce (whether trying to self-navigate or asking two sets of solicitors to advise them as to outcome and hoping that they will not get two markedly different answers), something needs to change. And although there is a lot of innovation – the needs guidance note, more online signposting, those who are offering “one couple one lawyer” services and giving couples a common steer – fundamentally, there needs to be a clearer, more principled approach to financial outcomes on divorce.

It shouldn’t be assumed, however, that this is a straightforward choice between discretion and rules. At the moment, the English court has very broad discretion, whilst being bound by reported decisions which go before. The Bill, if enacted, would move things across to the very much more straitjacketed end of the spectrum. But, as with our political climate at the moment, the centre ground is likely to be more palatable. As Jo Miles has said, we are not confronted with a stark choice of discretion or rules. There are in fact many different shades within the palette of colours. The question is the right blend – what is the appropriate mix of rules and discretion? As she also says, there are other colours which can be brought into the mix – unfettered or fettered discretion, rules, rules with exceptions, presumptions, standards, guidelines and principles.

With the greatest of respect, the Divorce (Financial Provision) Bill is too simplistic, lacking in an evidential basis for the stark outcomes it would lead to and highly likely to lead to huge unfairness if ever it were enacted. It is for that reason, and not reasons of protectionism, that all working in this area – lawyers, judges and even those who have been through divorce – must oppose the Bill vocally and campaign for the work suggested by the Law Commission 6 years ago to be started, finally. Who knows, BoJo may soon have ‘Brexit done’ and with what looks like the first period of political calm since the Family Justice Review started in 2010, and a government with a working majority, there may be time properly to focus on this. But please – let’s make sure that the focus is the right one and that any reform in this area is on a solid evidential basis. And let’s get no fault divorce and cohabitation reform over the line first.

Jo Edwards

Published by joedwardsfamilylaw

Chambers HNW Family Lawyer of the Year 2019, Head of Family Law Team of the Year 2017, directories-ranked and featured in Tatler’s new Address Book of HNW family lawyers. Over 20 years’ experience working as a solicitor and mediator with separating families; since February 2016, Head of Family at Central London firm Forsters LLP. Separation & divorce, money & children, nuptial/cohabitation/separation agreements. Adept at court but prefer DR. Former Resolution chair, media commentator, campaigner for family law & family justice reform.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: