The
Law Commission has published its much anticipated report Matrimonial
Property Needs and Agreements. The
report, which includes a draft Bill, recommends a set 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:
- guidance
to help couples assess and agree financial needs;
- an
assessment of the feasibility of using formulae to help agree financial
settlements; and
- 'qualifying
nuptial agreements" to allow couples to decide how their assets should be
shared if they separate.
The
Law Commission believes that the objective of orders made in financial remedy
cases on divorce should be to enable both partners eventually to achieve
financial independence. The Law Commission believes that there is evidence of regional
inconsistencies in how the courts approach orders for financial needs, which
can make the outcome unpredictable. Furthermore, while the law is largely
well-understood by family lawyers, it is not clear to the general public who
are increasingly dealing with the financial consequences of separation without
legal assistance.
Agreeing financial needs
The Law Commission
is recommending that the Family Justice Council produce authoritative guidance
on financial needs. The guidance would explain the outcome a judge would aim
for in determining a settlement, including achieving eventual financial
independence. This would enable couples to reach an agreement that recognises
their financial responsibilities to each other. The guidance would also help to
bring more consistency to how the law is applied in the courts.
Making
settlements more predictable
Guidance from the Family Justice Council
would provide an explanation of the sort of outcome that should be aimed for
but it would not provide figures. The Law Commission is also recommending that
the Government commission a long-term study to assess whether a workable,
non-statutory formula could be produced that would give couples a clearer idea
of the amounts that might need to be paid to meet needs. Formulae are already
used successfully in other jurisdictions such as Canada, where they produce a
guideline range of outcomes within which couples can negotiate.
Qualifying
nuptial agreements
The Law Commission is recommending the introduction
of "qualifying nuptial agreements".
Qualifying nuptial agreements
would enable married couples and civil partners to make a binding agreement
about how their property or finances should be shared if their relationship
breaks down. The agreements would be enforceable as contracts but would apply
only after both partners' financial needs, and any financial responsibilities
towards children, have been met. And they would be binding only if, at the time
of signing, both parties had disclosed material information about their
financial situation and both received legal advice.
Under the current law,
couples can make pre- and post-nuptial agreements. The courts may follow these
agreements but they are not binding and the parties cannot be certain they will
be upheld.
Professor Elizabeth Cooke, Law Commissioner for property, family
and trust law, said:
"We
believe that married couples and civil partners should have the power to decide
their own financial arrangements, but should not be able to contract out of
their responsibilities for each other's financial needs, or for their children.
The measures we are recommending would help couples understand and meet their
financial responsibilities and, where appropriate, achieve financial
independence.
"Pre- and post-nuptial agreements are becoming more
commonplace but the courts will not always follow them and lawyers are
therefore not able to give clear advice about their effect. Qualifying nuptial
agreements would give couples autonomy and control, and make the financial
outcome of separation more predictable. We have built in safeguards to ensure
that they cannot be used to impose hardship on either party, nor to escape
responsibility for children or to burden the state."
The
Law Commission's report, Matrimonial Property Needs and Agreements,
includes a draft Bill that, if implemented, would bring qualifying nuptial
agreements into effect.
Resolution reaction
Resolution welcomed
the report.
Resolution vice-chair (and chair-elect) Jo Edwards commented on
the recommendations concerning pre-nuptial agreements:
"This
latest development ... should give people confidence that marital agreements
will be upheld. This should also help reduce the burden on the
courts.
"We don't expect this measure to lead to every engaged couple in
the country seeking a pre-nup, but for those couples who want to have one in
place, it will make their legal situation much clearer and reduce uncertainty
upon separation.
"It's also important to note that the court will still
have the ability to review agreements in so far as they deal with people's
financial needs.
"Individuals' financial needs – in particular those of
any children – are still the overriding consideration, and couples will not be
able to make binding agreements which allow them to avoid future consideration
of financial needs.
"There is, therefore, a risk that we could end up
with a two-tier arrangement, where one type of agreement is legally binding,
and others still open to challenge – couples need to be aware of this, and
that's why the recommendation that people are required to seek legal advice is
so important.
"We would prefer to see change which would open up binding
pre-nups to a wider group of people, with appropriate safeguards. Nevertheless,
we welcome the fact that this will allow some couples to create certainty about
their financial settlements should their marriage sadly come to an end."
On
the need for further guidance on needs, she said:
"Guidance
on needs should encourage consistency, dispel myths and manage expectations.
This will help anyone going through separation, even if they don't have access
to legal advice and support, or are trying to reach agreements on their own,
during a very traumatic time."
However,
she hoped for further reform of divorce law and financial provision on divorce:
"The
last major reform to divorce law was in 1973, and we believe more changes are
needed to make the law relevant to modern day. For example, Resolution wants to
see the removal of the need to assign blame if a marriage breaks down, which
can often ramp up the conflict and cause unnecessary emotional distress.
"We
would also like to see more wholesale reform of the law about financial
provision on divorce, to provide clearer guidance about likely outcomes. It's
important that anyone going through a divorce has some degree of certainty
about how long it will be before they achieve financial independence and have
some degree of closure.
"Resolution is currently undertaking a major
consultation exercise with its members in order to establish a series of policy
proposals which will help support separating couples in England and Wales, and
we will be publishing these later in the year."
This article first appeared in Family Law Week on 27th February 2014