Following my separate blog post last week, the long awaited Law Commission Report on Matrimonial Property, Needs and Agreements has been released – but did we breathe a sigh of relief?

As I mentioned in my post ahead of the report’s release, the Law Commission project was to address pre and post nuptial agreements, the financial ‘needs’ of spouses and civil partners upon relationship breakdown and what constitutes ‘non matrimonial property’ when looking at these needs.

I have reviewed the ‘key’ parts of the report and therefore hope you will forgive me for having not read all 251 pages of it! By way of summary the report recommends a number of measures to make it easier for couples to manage their financial affairs on divorce or at the end of a civil partnership. These are:-

  1. Guidance to help couples assess and agree their financial needs.
  2. An assessment of the feasibility of using formulae to help agree financial settlements; and
  3. ‘qualifying nuptial agreements’ to allow couples to decide how their assets should be shared if they separate.

The Law Commission is clearly of the view that the purpose of financial remedy orders made on divorce should enable both parties to eventually achieve financial independence. However they go on to say that that is already the outcome of the majority of cases and therefore there is no need for a change in the law.

However what the Law Commission has picked up on (thankfully) is that there are regional inconsistencies in how the courts’ approach the issue of financial needs and therefore the outcome is very unpredictable for all concerned. It goes on to say that the law is not clear to the general public, many of which are trying to make head or tail of the process without legal assistance (mainly because of the quashing of Public Funding but that’s another blog for another day….).

Financial needs

The Law Commission is recommending that an authoritative guidance on financial needs is produced. The aim of the guidance will be to explain the outcome a judge would aim for and which would include eventual financial independence. It hopes that such guidance would enable couples to reach an agreement that recognises their financial responsibilities to each other and will help to bring more consistency to how the law is applied in the courts across all regions. That said, the guidance would not provide figures per se but more an explanation of the sort of outcome that should be aimed for. Good luck with that!

The Law Commission is also recommending that the government commission a long-term study to assess whether a formula could be produced that would give couples a clearer idea of the amounts that might be needed to meet needs. Formulae are already being successfully applied in other countries such as Canada. A great idea if you ask me, provided it is not too rigid as I would be concerned that it could lead to unfairness in certain cases. To properly consider the basis of the formula used in the jurisdiction you also need to keep a careful eye of the legal principles they apply.

Qualifying Nuptial Agreements

These would enable couples to make a binding agreement about how their property or finances should be shared if their relationship breaks down. The agreements would be enforceable but would apply only after the parties’ financial needs and any financial responsibilities towards children, have been met. They would be binding only if at the time of signing both parties had disclosed their financial situations and both received legal advice. So pretty much what is happening already, right? Yes, but these recommendations do go a little further in providing clarity and if implemented will mean that the court has no power to interfere if the agreement ‘qualifies’, The Law Commission certainly isn’t recommending a radical change but it seems to me they want to ensure that those people unable to access legal advice for whatever reason have somewhere to find simplified guidance and additional information. But if they can’t access legal advice how can the agreement qualify?

The recommendations are helpful and I hope will strive to greater independence and certainty for couples. However, the fact that it will be impossible to avoid addressing the financial needs of the parties and their children the long debate as to what falls under ‘needs’ will probably continue for some time yet with all its regional variations. To put this in perspective the courts across England and Wales differ dramatically from region to region on how long spousal maintenance will last; London being very cautious and what seems like a more cavalier approach in other regions.

Non Matrimonial Property

The Law Commission indicated that agreement could not be reached as to how the law on non matrimonial property ought to be reformed. They said “We do not think that the controversy that would surround any recommendation is worth arousing, given the relatively small population affected and the fact that most of that population will be well supplied with legal advice and well able to resolve uncertainties within the current law by making qualifying nuptial agreements”. And so it seems the current state of play will continue in that the courts will use non-matrimonial property to meet the needs of the parties and only when those needs have been met might the courts say that any non matrimonial property can be ring fenced. As clear as mud!

Having chewed the fat with my colleagues, here are their thoughts on the report….

Alan Larkin….I am struck by the proposal to use formulas for financial settlement. This would be attractive if the formulas could be accepted as being generally fair. This would be a significant departure from the wholly discretionary regime at present which looks at all the circumstances of each case. I how can see how the concept of a given formula would be helpful for those spouses and civil partners who might struggle to afford legal advice now that legal aid has been withdrawn for most types of family law. But my note of caution is that I see reference is made to the use of formulas in Canada. If Canada is to be held up as a positive role model for the adoption of formulas then just be aware that a recent report by the Canadian Bar Association estimated that 95% of litigants in family cases were representing themselves because they could not afford a lawyer. This appears to particularly impact women. The Canadian lesson would appear to be that the adoption of financial settlement formulas alone will not resolve the problems caused in England & Wales by the withdrawal of legal aid.

Robert Williams – I have the same feeling I had when I read the House of Lords” judgment in Miller and MacFarlane. It’s a missed opportunity.That said, the courts and lawyers have tried and failed collectively to grapple with this for years. What it will do is continue the discussion and highlight the fact that in given circumstances pre marriage agreements can be very useful “insurance” policies.

Linda Lamb: Although the aim is to achieve consistency throughout the courts, my concern is that this has not been achieved with the issue of attending mediation before filing an application. Even when this is tightened up this year, there is likely to continue to be variations across the country. There is a need for change and the recognition of Pre-Nuptial agreements.

Chris Maulkin: The difficulty that has always presented itself in financial cases is that each families set of circumstances is different and therefore, it is impossible to give a precise answer as to what the outcome of any individual case will be. With this in mind it is difficult to envisage how the guidance which the Law Commission has recommended will be comprehensive enough to account for all of these circumstances whilst still being accessible and understandable, unless radical changes are brought in.

The team are interested to hear what others made of the report. If you’d like to discuss some of the themes we’ve explored here, please add your comment to the blog or tweet us at @FamilyLawFLP.

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