For family practitioners across England and Wales, this 1 December was not only the beginning of the Christmas countdown. The window is now open for the Law Commission to publish its scoping report on the review of financial remedies law. In anticipation of its publication, trainee solicitor Victoria Lee Domenech considers the project’s scope and the evidence the report will likely take into account.

On 4 April 2023, the Law Commission announced its intention to review the laws governing financial remedies on divorce and dissolution. Originally set for publication in September 2024, the scoping report is now due on 18 December. Although the Law Commission has confirmed it will not be making specific recommendations at this stage, the scoping report is a significant document that may impact the future of financial remedies law. If the government concludes there is a case for reform based on this report, a full public consultation will likely follow, and law firms and key stakeholders will be invited to respond.

What is being reviewed?

The basis for the law of financial remedies on divorce is well-established in the Matrimonial Causes Act 1973 (MCA 1973), which was subsequently mirrored in the Civil Partnership Act 2004 for couples wishing to end their civil partnerships. In particular, section 25 MCA 1973 lists criteria the court will have regard to when considering the circumstances of the case and exercising its discretion in financial remedy proceedings. This assessment will always be subject to the welfare of any minor child.

More than 50 years since its enactment, the question at the heart of the Law Commission’s review is whether the MCA 1973 has stood the test of time or whether there is a case for reform and, if so, what that reform might look like. The project’s terms of reference are broad, with key areas for review including:

• the discretionary basis of the current system and whether this allows for sufficient certainty of legal outcomes;
• the operation of “conduct” as a factor to which the court must have particular regard when deciding to make financial remedies orders; and
• the treatment of pensions and spousal periodical payment orders.

It is clear from the Law Commission’s communications that the focus is on achieving fairness while enhancing outcome certainty for those contemplating divorce or dissolution of a civil partnership. However, as recognised in the seminal decision of White v White, “fairness, like beauty, lies in the eye of the beholder”. So, meeting these objectives will be no easy feat.

Previous attempts at reform

This is not the first time the Law Commission has considered the issue. In 2014, its Matrimonial Property, Needs and Agreements report reviewed marital property agreements and other specific aspects of the financial consequences of divorce and dissolution. It proposed to clarify the law of “financial needs” to ensure greater consistency with the aid of a formula. The report was accompanied by a draft bill, which would have made qualifying nuptial agreements binding and enforceable in most circumstances. Although the government did not progress these recommendations, reform continued to be promoted and campaigned for by those in support.

Noteworthy were the public and emphatic efforts of Baroness Deech, who has on several occasions attempted to introduce into law her Divorce (Financial Provision) Bill. Indeed, it is likely that her comments during the Lords Chamber debate in March 2023 are what prompted the Law Commission to announce (no less than a month later) its intention to review the law. The most recent iteration of the bill was introduced to the House of Lords in July 2021 but has not made it past the first reading. Despite this, it remains significant, and the Law Commission will undoubtedly consider its proposals when conducting its review.

What does the Divorce (Financial Provision) Bill say?

The bill proposes replacing the section 25(2) MCA 1973 criteria with provisions largely modelled on Scottish financial remedies law. This would mean:

• capital orders would be limited to the sharing of matrimonial property, including pensions. If a share of matrimonial property is not sufficient to meet one party’s needs, there would be no topping-up mechanism from non-matrimonial property based on needs;
• nuptial agreements would be binding, subject to various caveats relating to the fairness of their creation but without there being a fairness or needs “get out” clause; and
• spousal periodical payments would only be available in limited circumstances and generally limited to five years after divorce, unless the recipient could establish this would cause them to suffer serious financial hardship.

With these amendments, the bill aims to remedy issues that arise from the wide range of possible results available in our current discretionary system. These unpredictable outcomes make the law difficult to navigate for those with modest means who may need to act without legal representation. It also has a consequential impact on costs, as parties spend more money fighting over an outcome that was not clear at the outset.

Another interesting theme underpinning the bill is the feminist repositioning of women as equal partners to marriage. Baroness Deech argues her bill would empower women by encouraging the independence and autonomy of spouses post-separation. In her recent article, she says the law has strayed too far in the length and generosity of its maintenance awards, thus presenting a serious impediment to equality.

The bill has been criticised by Lady Hale for its “one size fits all approach” and by Lord Wilson for its potential for “grotesque consequences”. Professor Emma Hitchings, who led the Nuffield Foundation’s Fair Shares research (see below), has raised concerns that the proposals would not achieve fair outcomes for the many couples with little to share. In practice, many women and perhaps particularly those who make career sacrifices for their children, would not be treated advantageously by the proposed changes. Those women often require further financial support from their spouses to enable them to stand on their own two feet.

What else will the Law Commission consider?

The project’s terms of reference refer to the Nuffield Foundation’s 2023 Fair Shares report, which will be examined by the Law Commission to ascertain how financial remedies currently operate in practice for most couples. The report found that there are barely enough assets in most divorces to meet both parties’ needs. Of those cases in the study (which mostly comprised couples of modest wealth), the median value of total assets owned by divorcing couples, including home and pensions and taking into account any debts, was just £135,000. The study found that equal division of this joint pot was not the norm based on decisions made regarding need, individual circumstances and differing motivations among divorcees, such as opting for a clean break. The suggestion, therefore, is that departing from equality is not only justified but likely necessary to achieve fairness in many cases.

When considering “conduct” under MCA 1973, the Law Commission will have the benefit of Resolution’s October 2024 Domestic abuse in financial remedy proceedings report. Section 25(2)(g) MCA 1973 expressly allows the court, when determining its award, to consider the parties’ conduct. Where such conduct includes domestic abuse, case law authorities militate firmly in favour of financial consequences being a necessary ingredient of a conduct claim, meaning that the bar for domestic abuse to be considered by the courts when making a financial remedy award is very high.

It is, therefore, perhaps unsurprising that Resolution’s report found a significant difference between the incidence of reported domestic abuse in cases and the frequency with which this is raised within financial remedy proceedings. Mr Justice Peel’s recent comments in N v J do not suggest the courts intend to modify their approach. However, Resolution’s hot-off-the-press findings will be difficult for the Law Commission to ignore. The scoping report must reconcile the increasing industry-wide concern about this issue and Resolution’s latest findings with the firm indications given in recent case law.

As for pension provisions, this is a complex and specialist area. The Law Commission may take into account the Pension Advisory Group’s recent update to their PAG2 Guide, as well as the second edition of their Guide to the Treatment of Pensions on Divorce. The 2023 Fair Shares report found pensions to be especially poorly understood and underutilised assets. More than a third of divorcees did not know the value of their own pension pot, let alone their spouse’s. This is of particular importance given that the report also found that two thirds of divorcing couples finalise their finances without court orders. With so many cases currently bypassing the legal system, this lack of understanding and appreciation of pensions is arguably something the Law Commission should address.

Finally, the scoping report is unlikely to be complete without mention of the difficulties caused by the decade-long dismantling of legal aid funding, which have been exacerbated by the pandemic. With the recent Fair Shares report finding that the resulting lack of access to justice was “clear” among surveyed divorcees, the question of whether the focus should be on enhanced resourcing and funding (as opposed to wide-sweeping reform) has been repeatedly raised by some practitioners.

What’s next?

With the scoping report expected in the next few weeks, family law practitioners eagerly await its publication following months of enthusiastic debate and speculation. It is evident that clarity and consistency of outcomes for divorcing couples are the driving force for this review, but any potential reform will take time given the major significance of such changes in the law on society.

Partner Matthew Humphries comments: “I hope the Law Commission recognises the benefits of the current, albeit elderly, system that provides judges with the flexibility to achieve fairness in every divorce situation. A fixed solution regime will arguably create more problems than it shall solve, although undoubtedly some areas could be clarified – particularly in relation to the duration of spousal maintenance and nuptial agreements. It will be interesting to see what the Law Commission’s scoping report has to say and whether the government decides to push for reform”.

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