Financial remedy orders on divorce and dissolution: the Law Commission reform project

These orders, crucial in divorce and dissolution proceedings, aim to ensure equitable financial settlements for the parties involved.

In April this year, the Law Commission embarked on a new project to evaluate whether the current legal framework governing financial remedy orders is functioning effectively and delivering fair and consistent outcomes for divorcing couples.

Understanding financial remedy orders

Financial remedy orders address the division of assets, income, and responsibilities as between parties on divorce or dissolution. They encompass a range of financial provisions, including maintenance payments, lump-sum payments, and property settlements. The overarching aim is to achieve a just outcome that reflects the contributions of both parties and that meets their future needs.

The current legal framework

The existing framework for financial remedy orders primarily derives from the Matrimonial Causes Act 1973, (mirrored in the Civil Partnership Act 2004), supplemented by case law. Courts have discretion in determining outcomes, guided by principles such as fairness, need, and the welfare of any children involved. However, the subjective nature of these principles can lead to variability in decisions, raising concerns about consistency and fairness.

Identifying challenges in the current system

1. Inconsistency in outcomes: one of the most significant criticisms of the current system is the inconsistency in court outcomes. Similar cases can yield vastly different results, leading to perceptions of inequality and unpredictability in the application of the law.
2. Complexity and accessibility: the legal processes surrounding financial remedy orders are often seen as complex and inaccessible. Many individuals lack the legal knowledge or resources to navigate the system effectively, resulting in potential inequities, especially for those without legal representation.
3. Delays in proceedings: lengthy court processes can exacerbate financial strain on both parties. Protracted litigation not only increases stress but can also lead to deteriorating financial situations for individuals awaiting resolution.
4. Changing social norms: the law has struggled to keep pace with evolving social norms surrounding marriage, cohabitation, and financial independence. Current legal definitions and frameworks may not adequately address the realities of modern relationships and financial arrangements.

Objectives of the Law Commission reform project

The Law Commission’s reform project aims to address these challenges by evaluating the effectiveness of existing laws and considering reforms that can enhance clarity, consistency, and fairness. As part of its analysis of existing law, the Law Commission will consider whether there is potential for reform in specific areas such as:

• the discretionary powers given to judges over the division of financial assets, and whether there is a need for a clear set of principles, enshrined in law, to give more certainty to divorcing couples
• whether there should be wider powers given to the courts to make orders for children over the age of eighteen
• how maintenance payments for an ex-spouse or civil partner should work
• what consideration the courts should give to the behaviour of separating parties when making financial remedy orders
• orders relating to pensions and whether they are overlooked when dividing the divorcing parties’ assets
• the structure of the system for making regular financial payments from one person to another after divorce
• the factors judges must consider when deciding which, if any, financial remedy orders to make.

Stakeholder engagement

To ensure comprehensive reform, the Law Commission is actively engaging with various stakeholders, including legal professionals, family law practitioners, advocacy groups, and the public. Gathering insights from these groups will be crucial in identifying practical solutions that address the real-world challenges faced by those navigating financial remedy orders.

Recommendations

While the specific recommendations from the Law Commission’s project on financial remedy orders will depend on their findings, several potential reforms could be anticipated based on current challenges and trends in family law:

1. Clearer guidelines for judges: establishing standardised criteria for judges to follow when determining financial remedy claims, which could help reduce inconsistency in outcomes.
2. Consideration of non-monetary contributions: developing frameworks that better recognise non-financial contributions to the relationship, such as homemaking and caregiving, ensuring equitable consideration of both parties’ roles.
3. Adjustment for changing circumstances: creating mechanisms for modifying financial remedy orders in response to significant life changes, such as job loss or changes in health.
4. Pre-nuptial agreements: establishing a clear statutory framework that outlines the validity and enforceability of pre-nuptial agreements, providing certainty for couples entering into these contracts.
5. Legal recognition of cohabitation: establishing a clear legal status for cohabiting couples that acknowledges their relationships and provides a framework for rights and responsibilities, similar to marriage.
6. Incorporating modern contexts: updating the legal framework to reflect contemporary relationships and financial arrangements, ensuring that it remains relevant and just.
7. Alternative dispute resolution (ADR): promoting ADR methods, such as mediation and arbitration, as viable options before resorting to court, helping to alleviate backlog and reduce costs.
8. Simplified processes: introducing more straightforward procedures for filing and managing financial remedy claims, potentially including new online services and resources to assist self-representing individuals.
9. Greater transparency: implementing measures to enhance transparency in court decisions, such as extending the publication of anonymised case summaries that highlight reasoning and outcomes, aiding public understanding.
10. Public awareness campaigns: initiating educational programs to inform the public about rights and responsibilities regarding financial remedies, enhancing accessibility to the system.

These recommendations would aim to foster a fairer, more consistent, and user-friendly approach to financial remedy orders.

Conclusion

The Law Commission’s project on financial remedy orders represents a vital step toward reforming a system that is currently perceived as inconsistent and complex.

At the outset of the law reform project, Professor Nicholas Hopkins, Law Commissioner for Property, Family and Trust Law, said:

“The laws governing financial provision on divorce or the ending of a civil partnership should be as fair and simple as possible, minimising the risk of conflict, uncertainty or financial strain.

“Fifty years since the current law was put in place, it’s essential that we look at whether it is working effectively for all parties. This is a hugely important area, affecting separating couples and their children at an incredibly stressful time of their lives. It is essential that any reform in this area is very carefully considered.

“I am therefore pleased that the Law Commission will be undertaking this review, to consider how any reform of this significant area of law could be shaped.”

By addressing the perceived shortcomings of the current law, the Law Commission seeks to foster a more equitable and effective legal framework that better serves individuals during some of the most challenging times in their lives. The outcomes of the project could significantly reshape the landscape of family law, ensuring that financial remedy orders are not only fair but also reflect the realities of modern relationships.

The Law Commission is due to publish its scoping paper in the coming weeks. We will be keeping a close eye on developments and will set out our initial thoughts once the scoping paper is released.