Navigating Financial Settlements: A Series of Guides to Section 25 of the Matrimonial Causes Act 1973 in Family Law – s2(f)
This is the third in our series of articles about the ‘section 25 factors’ which are set out in Section 25 of the Matrimonial Causes Act 1973. The ‘section 25 factors’ are the list of factors that apply and their impact upon, the resolution of financial issues following a divorce or civil partnership dissolution.
Series links:
First, let’s recap…
When a marriage or civil partnership breaks down, the parties will need to consider how best to divide income, any assets including property, savings and pensions as well as any debts. Section 25 of the Matrimonial Causes Act 1973 essentially sets out the factors that the Family Court must consider when making financial orders.
When applying Section 25 of the Matrimonial Causes Act 1973, the Family Court has a wide discretion and looks to provide a fair outcome for the parties. The Family Court does not make the decision based on a mathematical formula and will be tailored to the facts of each case whilst considering the ‘section 25 factors’. The objective is to provide a fair and equitable financial settlement that meets the reasonable needs of both parties and any dependents.
Sub-section 1 states that the first consideration of the Family Court will be given to the welfare of any child of the family who has not reached the age of 18.
Thereafter a range of other factors are set out which the Family Court must consider whilst exercising its powers and these are provided at sub-section 2 and are set out below:
“(a) the 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, including in the case of earning capacity any increase in that capacity which it would in the opinion of the court be reasonable to expect a party to the marriage to take steps to acquire;
(b) the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future;
(c) the standard of living enjoyed by the family before the breakdown of the marriage;
(d) the age of each party to the marriage and the duration of the marriage;
(e) any physical or mental disability of either of the parties to the marriage;
(f) 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;
(g) the conduct of each of the parties, if that conduct is such that it would in the opinion of the court be inequitable to disregard it;
(h) in the case of proceedings for divorce or nullity of marriage, the value to each of the parties to the marriage of any benefit . . . which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring.”
Our previous blogs dealt with s25(a) and s25(b) to (e) of s25(2) and so for the purposes of this blog, I am going to concentrate on s25(2)(f) – ‘contributions’
This factor looks at the contributions each person has made or is likely to make in the future in the marriage or civil partnership, these contributions will include:
The starting point in terms of the division of capital assets is equality and whilst there may be justification to depart from equality in order to meet the parties’ ‘needs’ (or those of their children), simply having contributed more financially does not justify a departure from equality in the majority of cases.
Contributions must be approached in light of the leading cases White v White and Miller v Miller; McFarlane v McFarlane, which made fairness central when resolving finances on divorce and provided that there should be no discrimination between the ‘breadwinner’ and the ‘homemaker’ of the family when resolving financial issues.
It is due to this that the court will generally be reluctant to allow a detailed analysis of the parties’ contributions to the marriage. Further, this would be an expensive, time-consuming process and inevitably counter-productive in reaching a conclusion for the parties.
This leaves ‘contributions’ relevant in only a very limited number of scenarios:
Where one party has made a significant contribution in a short marriage such as where one party has accumulated or inherited significant wealth prior to the marriage and has brought that in, then this should not be ignored and will be very relevant to reaching a fair outcome as it is likely that assets acquired before the relationship will be ringfenced to the contributing party and excluded from the matrimonial ‘pot’. However, it is important to still recognise that even in a short marriage, regardless of it being childless, non-matrimonial property may not be capable of being ringfenced if immediate needs cannot be met from the matrimonial pot.
Where one party’s needs cannot be met without recourse to capital contributed by the other, contributions will be of little relevance, even if the assets in question might justifiably be termed non-matrimonial property. Further, the longer the marriage goes on the easier it is to say that by virtue of the mingling of that non-matrimonial property may mean that even where the parties’ needs (and those of any children) have been met, then what was at one point considered non-matrimonial property may be subject to sharing. If it is clear there is no mingling, the parties’ needs are met by the matrimonial property, then an asset may be classified as non-matrimonial and therefore ringfenced for the party who made the clear contribution towards it.
Stellar contribution is not restricted to financial contributions, but it is difficult to imagine circumstances in which non-financial contributions would be sufficiently exceptional. There are no firm guidelines as to what constitutes a stellar contribution, and at what level of income and assets the issue becomes relevant. In every case the court must undertake an independent assessment depending on the specific circumstances of the case. However, following case law it is clear that a stellar contribution is unlikely to be relevant save in high to very high net worth cases. The size of the matrimonial pot in each of the cases where a stellar contribution has been successfully argued is indicative:
Contributions may still be relevant even if a pre or post nuptial agreement exists but generally the court will give significant weight to the terms of a nuptial agreement. Contributions are only likely to be considered in circumstances where the nuptial agreement is deemed unfair or there are exceptional circumstances that justify departing from the terms of the agreement.
Although contributions under Section 25(2)(f) are only relevant in a limited number of cases, they remain an important factor in achieving fairness. Courts aim to ensure that all contributions—whether financial or non-financial—are recognised and that neither party is unfairly disadvantaged.
Look out for our next two articles which will deal with paragraphs (g) and (h) of the section 25 factors – ‘Conduct’ and ‘Loss of benefits’
For more information about divorce or separation, or to arrange a confidential discussion about your personal circumstances, please do not hesitate to contact us.
Raj Patel is an Associate Solicitor in our Brighton office.