The Future of Financial Remedy on Divorce – The Law Commission’s Financial Remedy Scoping Report
The financial aspects of a divorce, referred to as “Financial Remedy”, is, essentially, the resolution of the financial aspects of divorcing couples financial issues and is, therefore, relevant in the vast majority of divorce cases.
To resolve the financial aspects resulting from the ending of a marriage, can often be the most demanding aspect of the ending of a marriage.
The current system in respect of financial remedy aspects on divorce in England and Wales is largely based on the Matrimonial Causes Act 1973. Many feel that the current system is out of date and long overdue for review and reconsideration.
The Law Commission’s Financial Remedy Scoping Report was published on 18th December 2024 with its purpose being to consider potential reforms that could change the future of Financial Remedy Orders on divorce.
The Law Commission began its review in April 2023 following a commitment made by the government going back to March 2020, that the matter of financial remedy needed to be considered from the point of view of review, in circumstances where the financial remedy laws are based on a piece of legislation, namely, The Matrimonial Causes Act 1973, which is now over 50 years old.
The Law Commission has concluded that the current law on financial remedy requires reform.
The purpose of the Law Commission’s Report is not to determine what the changes to the law should be, but to assess the options available and provide information and guidance as to the various models on which law reform could be based.
As yet, the government has not yet decided whether it will implement legislative reforms based on the work of the Law Commission’s Report, however, it is anticipated that the Law Commissioner’s Report may trigger the start of some shift in the legal framework governing financial remedies relating to divorces.
The Law Commissioner has put forward effectively four models on which the law reforms could be based, which could result in a move away from the current system, which has a heavy emphasis on the discretion of the Courts, through to a more certain situation, known as a Default Regime, which would create much more certainty and involve far less discretion, as to how financial remedy issues should be resolved.
The intervening two models, between the current system of discretion and the more extreme default regime, which would involve far more certainty, include models known as Codification Plus, whereby Courts retain discretion, but with limitation on discretion, through to a more guided model, known as Guided Discretion, whereby there could be an introduction of a set of underpinning principles and objectives, which would provide guidance for the exercise of the Courts discretion.
The current system which is in force, and essentially derives from the largely unchanged Matrimonial Causes Act 1973, provides the Courts with a high level of discretion when deciding financial settlements, thus allowing Judge’s the ability to make financial settlement Orders based on the facts of each individual case. However, because of the high level of discretion, this can create uncertainty as to outcomes, and with the lack of certainty, often resulting in the following:-
(a) Difficulty to predict outcomes;
(b) Sometimes leading to lengthy and costly disputes;
(c) A tendency that because of the nature of the system, there is encouragement to disagreements rather than making couples reach agreements quickly.
In numerous jurisdictions outside of England and Wales, many countries have a default system which results in an automatic 50/50 sharing of property acquired during a marriage, shared on a 50/50 equal basis in respect of a divorce settlement.
The Law Commission’s Report has identified the marked differential between a system, such as the current system, based largely on the discretion given to Judge’s and the Courts and those systems that involve a more certain approach, based on a more formulaic process which creates more certainty, but may detract from the concept of fairness, given that the current system allows each individual case to be considered entirely on its own merits.
There are pro’s and con’s in respect of both of what could be termed as the extreme models of discretion on the one hand, and the certainty or default regime on the other. The default regime involving a high degree of certainty will effectively mean that from the outset the parties will know what their rights from the start will be upon marriage and how that will follow up to what their rights and obligations will be on divorce.
As to their actual role in the process of change, the Law Commission have been very clear to point out that they themselves are not making any actual recommendations or any specific proposals for reform and that this is for the relevant government to consider, and that their work is simply to put forward options for a future government to consider, in terms of what choices are open and available.
Given that the current system in England and Wales is based heavily on discretion stemming from the Matrimonial Causes Act 1973, many relevant professionals may take a view that to change to a system which involves a high degree of certainty is too much of a move to expect within the jurisdiction of England and Wales. This in turn may lead many to think that the more possible model for future reform to be based upon would be the more middle ground options, including Codification-Plus and Guided Discretion, whereby there would be some varying degree of the reduction of discretion, with, perhaps, the possibility of a set of underpinning principles laid down which would guide the exercise of the Courts discretional powers.
Other issues which the Law Commission Report (the Law Commission Scoping Report) has touched upon include the following:-
- Nuptial Agreements – whether they be pre or post Nuptial Agreements. Looking in more detail at their enforceability, in circumstances whereby at present Nuptial Agreements, whether pre or post Nuptial are not actually legally binding, albeit often highly influential.
- In the area of spousal maintenance, whether or not the system should be moved towards fixed terms limits, in terms of time to prevent long term financial dependency and reduce legal disputes.
- In the area of pensions, whether or not these should be a default provision of division of pensions, so as to ensure that both parties receive a fair share of retirement saving, thereby removing the option whereby one party retains the entire pension provision, whilst the other party receives, perhaps, more of the other assets, such as the family home, but which may not provide long term financial security as a pension would.
- Another area of consideration is on the issue of child maintenance and whether it should remain in its current position, whereby it ends when a child/young adult attains the age of 18 years or finishes fulltime education, or whether it should be extended to a greater age, given the increase in costs of education and the difficulty that young people find on entering the housing market.
Given that the Law Commission’s Scoping Report was published in December 2024, it is now over to the government to consider its next steps. An interim response is due within 6 months, and, therefore, by 18th June, from the government and a full response is due within 1 year.
In the meantime, in respect of all financial remedy issues, they must continue as they currently are in accordance with statute, caselaw and Family Proceedings Rules.
How rapid any remedies will actually be put in motion is difficult to determine. It could be months, years or even decades.
Anyone considering going through a divorce should make themselves aware of potential changes, given that financial remedy law is currently under review.
