The government has indicated its intention to ask the Law Commission to review the law determining financial provision on divorce in England and Wales. This falls on the 50^th anniversary of the enactment of the relevant legislation, the Matrimonial Causes Act 1973 (the provisions of which are essentially replicated in the Civil Partnership Act 2004) (“the MCA”). Voirrey Ward and Matthew Humphries review the current law and why changes may be necessary.

Why is a review necessary?

There is concern that the legislation is outdated and out of touch with social changes over the last 50 years, such as the strides made to promote equality and non-discrimination.

Currently, these changes can only be addressed through the decisions of the senior judiciary of the Family Court. The complaint is that the high degree of discretion awarded to the judiciary under the MCA can result in uncertainty, confusion and inconsistency in applying the law. If you put the same set of facts before different judges, each may find a different outcome.

This uncertainty can make it difficult for lawyers to advise clients and for cases to be resolved, which often results in increased legal costs.

The law is also often criticised for producing financial awards that are considered overgenerous, with payments to the financially weaker spouse being far larger than other jurisdictions around the world. This has resulted in London often being labelled as “the divorce capital of the world”.

The current law

The key provision is section 25 of MCA. This directs judges to have particular regard to certain factors, including the welfare of any child, financial resources, financial needs, conduct, the duration of the marriage and the parties’ standard of living. It requires the court to achieve a clean break, severing financial ties between spouses, where possible.

Alongside this legislation, judges consider decisions in previous cases, which set out that the overriding objective on the division of assets is to achieve “fairness”. This requires the court to consider three ‘strands’ or principles:

• “Needs” – the parties’ future financial needs in respect of capital and income,
• “Compensation” – redressing relationship-generated disadvantage (in practice rarely used), and
• “Sharing” – based on the principle that marriage is a partnership of equals.

In many cases, the outcome will be dictated by “needs” unless there is surplus wealth, such that “needs” are subsumed by the principle of “sharing”. Where there is surplus wealth, it has become commonplace for the parties to divide assets equally. The strong presumption is that each spouse has an equal “sharing entitlement” to assets built up during the relationship; this avoids discrimination between a breadwinner and a homemaker.

What changes could be considered?

The Law Commission previously reviewed the MCA and issued a report in February 2014. It made several recommendations, including for non-statutory guidance on calculating needs on divorce to encourage consistency within the courts and wider transparency, and recognition and enforcement of ‘qualifying nuptial agreements’ (ie, pre-nuptial agreements that met certain criteria). While not all these recommendations were implemented – perhaps a missed opportunity – they indicate the changes and reform that might now be considered to reduce judicial discretion. This might be in the form of guidance or a framework covering:

• The meaning of financial needs
• Whether pre- and post-nuptial agreements should be contractually binding?
• Whether maintenance/alimony should be paid, and if so, for how long and at what amount?
• Non-matrimonial property (to which the presumption of equal sharing does not apply). This concept is, arguably, already clear but has been entirely developed and refined through case law. However, it may benefit from some clarity, including a definition of what constitutes non-matrimonial property and when it can become “matrimonialised” (ie, subject to the sharing principle).

The government has indicated it is likely to look to other jurisdictions that have more recently reviewed and developed their laws and, in some cases, use a formula for calculating financial provision. Canada follows a set of principles to generate a range for spousal maintenance, which appears to be relatively successful. America and many European countries use a more rigid formula, but whether this produces an appropriate and fair outcome is often debated.

Is change necessary?

The Family Court in England and Wales is renowned for achieving fairness and avoiding discrimination. Any reform must balance maintaining its reputation against the desire to avoid uncertainty.

While the legislation is old, that in and of itself does not mean it is no longer fit for purpose. The factors to be considered under the MCA remain clear and relevant, and the flexibility afforded through judicial discretion ensures fairness can be achieved.

Decisions are made by senior experienced and well-respected judges, who are constantly accounting for social change. These judges gain a high degree of confidence through their interpretation of the statute and ability to adapt and achieve the right outcome in the circumstances of each case. There is a debate as to whether the updating and development of the law should be by way of judicial interpretation of the MCA or new law made by parliament.

While the resulting law might be criticised as being too generous, that generosity avoids discrimination. For example, should a homemaker receive less of the wealth after a 30-year marriage and three children because the other spouse went to work and earned the money while they stayed at home and supported the family? Spouses can make very different contributions, but why should one be more valuable than the other simply because you can place a monetary value on it?

There is likely to be concern that any new law or guidance will be too rigid. In some cases, it could result in hardship and injustice, which imposes a cost on society as a whole. There are almost certainly other areas of family law, such as the law relating to unmarried couples, that have a far greater claim to a pressing need for reform.

In an ideal world, everyone would have access to legal advice and judicial discretion to produce tailored approaches to achieve fairness. However, the difficulty is that this is simply not the reality. Arguably a more significant issue in the Family Court, rather than the MCA, is the ability of divorcing spouses to access advice about it. This is due to the removal of legal aid for the vast majority of cases in the Family Court .

The relevance of pre-nuptial agreements

Divorcing spouses can now enter into pre-nuptial agreements (also post-nuptial agreements) designed to avoid the uncertainty presented by the MCA.

These agreements are not strictly legally binding. However,  in the well-publicised case of Radmacher v Granatino [2010], the Supreme Court held that in certain circumstances, such agreements would have decisive weight in deciding the financial terms of any divorce settlement. Fair and properly entered into agreements are now likely to be upheld. As such, the concept of a pre-nuptial agreement is becoming more common and popular in England and Wales. This is a topic where the MCA would benefit from being updated.

Matthew Humphries, a partner at Stewarts, comments: “The MCA is a relatively old piece of legislation but one that continues to work well, providing fairness and being adaptable to the vast array of cases before the Family Court. However, it could benefit from a revision, perhaps most needily in relation to the duration and amount of spousal maintenance and in relation to nuptial agreements.”

Voirrey Ward, a senior associate at Stewarts, says: “The MCA could benefit from some revision or the implementation of accompanying guidance. However, while the tailored discretion it affords still works, there is some concern that energies would be better applied on more pressing areas for reconsideration and reform, such as the provision for unmarried/cohabiting couples and access to legal advice and family justice following the ongoing impact of legal aid cuts.”

Matthew was also quoted in an FT article about this topic recently, which said:

‘Maintenance is another area where greater clarity is needed. Matthew Humphries, partner at Stewarts, said: “I do agree that nuptial agreements are the most obvious example of what needs to be reformed. Maintenance is another area where the courts may have gone too far — on the question of quantum and duration.”’

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