The question most frequently asked by divorcing couples is what would be a fair settlement of our financial situation on divorce?
This is ultimately a question that is key to the court’s consideration when deciding how to divide assets, and is at the heart of the advice given by our team of specialist barristers at The Divorce Surgery.
Unsurprisingly, it is more often than not a difficult question to answer. Fairness has a broad-horizon, and under the principal piece of legislation, the Matrimonial Causes Act 1973, judges have a wide discretion as to the outcome. This makes it difficult to provide a set of concrete rules that are applicable in every case. Broadly speaking however the following principles are relevant:
The court has a duty to consider all the circumstances of the case in addition to the factors under section 25 of the Matrimonial Causes Act 1973. There will be more on this below.
The starting point is an equal division of the matrimonial assets.
Fairness does not however necessarily mean an equal division of assets is appropriate in every case. If there is a good reason to depart from equality, the court may make a different order.
There should be no discrimination between the parties’ respective roles in the relationship. If one party was the sole breadwinner for example, and the other party the homemaker, their roles are to be regarded as equal. This is following the landmark case of White v White .
The first consideration must always be given to the needs of any dependent children of the family.
The court will look at meeting the needs of both parties, including ensuring their housing and income needs are met. If these needs are met from the available assets and there is a surplus, the court may consider the origin of certain assets in deciding how the remainder is divided. This will include whether the assets are matrimonial (assets acquired during the marriage from the joint enterprise of both parties) or non-matrimonial (assets acquired outside the marriage, whether before, post-separation, or during the marriage by way of gifts or inheritance). If there have been unequal contributions due to some of the matrimonial pot being pre-matrimonial, for example, this may be taken into account in deciding whether there should be a departure from equality. This is rare however as it is more often the case that there is simply not enough to meet both parties’ needs in the first place.
The court is obligated by statute to consider whether a clean break is appropriate. If a clean break cannot be achieved due to one party still having unmet needs, the court may order spousal maintenance for a fixed period (or in increasingly rarer cases, indefinitely), and therefore defer the clean break. Spousal maintenance is however always variable in the future if circumstances change. Achieving a clean break does not mean that there may be no child maintenance payable. For more information on this see our article: ‘What is a clean break?’
Under section 25 of the Matrimonial Causes Act 1973 the court has general duty to take into account all the circumstances of the case, in addition to the section 25 factors. These are as follows:
The welfare of the children
If there are dependent children of the family, their needs will be the court’s first consideration. Practically speaking, this means they need to be accommodated and their income needs must be met. In the majority of cases, where this can be afforded and where the children continue to spend time with each parent after separation, the court will want to ensure children have a base with each parent, whether or not the time spent with each parent is equal.
Financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future
Financial needs can be divided broadly into capital need and income needs. Capital needs are most often for a home, furnishings and a car. Income needs is the amount of money each party requires to live on each month.
The court will analyse the expenditure and determine whether it can be met by their income (if they are working), or if there is a deficit that needs to be met at the end of every month. This may mean conducting a detailed analysis of the budget for each household.
If either party has remarried or cohabits with another partner, the court may take into account their new partner’s income and resources, but in most cases only to see the extent to which they can contribute to the budget of the household, for instance by sharing the cost of the mortgage, rent or utility bills.
Whilst the section 25 factors are not ranked in any sort of hierarchy, need is an essential consideration of the court.
Income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future
Before the court is able to divide the assets, the full extent of those assets must be disclosed. A value will need to be determined or agreed for assets such as the former matrimonial home, other properties, businesses, trust assets, chattels and pensions.
The court will also need to ascertain the true nature of the parties’ income from all sources (employment, bonuses, self-employment, benefits, interest on assets etc.) In assessing whether income meets expenditure needs, the court may in turn consider whether a party is able to maximise their earning capacity any further, and when they would be able to do this by. A party may have had to reduce their hours of work to care for dependent children which may have hampered their earning capacity. The court may consider whether it is reasonable for them maximise their earning capacity further, and this may impact on the term imposed on any spousal maintenance payments, and whether there can in turn be a deferred clean break.
The standard of living enjoyed by the family before the end of the marriage
The reality is sadly that the standard of living during a marriage is often unsustainable when trying to meet the needs of two separate families after divorce. This means this factor is relevant in cases where the assets are substantial and exceed the reasonable needs of the parties, but rarely in cases where the court is struggling to accommodate both of the parties.
The age of each party and the duration of the marriage
Age will affect a party’s earnings, mortgage capacity, and their ability to achieve independence. It may be crucial when assessing income or capital needs, and be an important factor when deciding what to do with pension assets, especially if one or both parties are planning to retire sooner rather than later. A mortgage capacity can be crucial to the issue of retention or sale of the matrimonial home.
The longer the marriage, the greater the obligations between the parties, and the more difficult it may be to achieve independence upon marital breakdown. If a party has had a career break to care for children during a lengthier marriage, it may impact on their ability to return to work and achieve financial independence, and therefore restrict the ability of the court to achieve an immediate clean break.
Further, in longer marriages assets that were pre-matrimonial from one party may acquire matrimonial character. For example, if a property was acquired by one party before the marriage, the parties may have lived in it during the marriage.
In the case of a very short marriage the court may seek to return parties to their financial position pre-marriage, and impose a clean break settlement. However, this may not be possible in short marriages with children where the ability of a parent to immediately return to work is hampered by child care needs, or where one parry cannot self-support in the immediate term.
Any physical or mental disability of either of the parties to the marriage
This may affect income or earning capacity, and also their accommodation and expenditure needs.
The contributions which each of the parties has made or is likely in the foreseeable future to make to the welfare of the family including any contribution by looking after the home or caring for the family
Contributions include the degree to which assets are non-matrimonial. If assets were brought into the marriage by one party at the beginning of the marriage, or they were received during the marriage by way of a gift or inheritance, this may be relevant. As outlined above, if needs have not been met there may simply not be the room to argue one party’s contribution should lead to a departure from equality. This reinforces the point that it is crucial to know how a court would be likely to quantify ‘need’, and this will depend on each couple’s circumstances.
The value to each of the parties to the marriage of any benefit which by reason of the dissolution of the marriage that party will lose any chance of acquiring
This can mean for example the loss of pension rights that a party may have been entitled to upon the death of the other party if they remained married.
The conduct of each of the parties if that conduct is such that in the opinion of the Court it would be inequitable to disregard it
This is a factor that is very rarely taken into account in the division of assets. It does not include adultery, and only applies to the most extreme forms of bad behaviour where it would be inequitable for the court to disregard it in the settlement of the parties’ financial position. For more on this, see out article: ‘What does conduct mean in the Form E?’
There is a reason why there remains a great deal of flexibility in the approach judges take to financial settlement. It allows the court to ensure that an outcome is achieved that is fair to both parties, and that neither party nor dependent children are left in need. The disadvantage is of course that without expert legal advice, drawing on the case law, it can be very difficult for couples to predict what a judge would consider a fair outcome in their situation.
At The Divorce Surgery our barristers deal exclusively with family law cases and in front of family judges day in, day out. This puts them in the ideal position to advise couples as to what a judge would be likely to consider a fair outcome in their case. Accessing impartial advice through The Divorce Surgery’s ‘One Couple One Lawyer’ approach provides couples with an indication of what would be considered a likely fair outcome, from an impartial expert barrister, and assists couples in reaching a fair settlement without costly and time-consuming litigation.