Law Commission publishes scoping report on financial remedies

The Law Commission has published a scoping report dealing with financial remedies on divorce and dissolution on 18 December 2024. This report has been prepared to ascertain whether the current law provides a coercive-enough framework for couples going through divorce or dissolution, to identify problems with the current law, and to suggest models for which reform could be based on. It is important to note that the Law Commission is clear that they are not recommending a reform for the law itself within the report.

Judit Kerese, Associate at Stowe Family Law, explores the report.

The law that governs financial remedies on divorce is the Matrimonial Causes Act 1973. The court has a wide discretion to decide how Orders should be made. Whilst Section 25 of the Matrimonial Causes Act sets out the list of factors that the court would consider when deciding on finances, these are interpreted subjectively by legal practitioners and judges. Another issue is that there is a lack of definition for the purpose or objective of the statute itself. Whilst published case law helps in understanding how the statute is to be interpreted, for example setting out that there is an equal sharing as a starting point, there is no definition of what fairness or what needs are.

The main issue identified by the report is that the wide discretion and uncertainty around the law makes it difficult for divorcing couples to understand what a fair settlement would look like, and the court’s level of discretion encourages a disagreement. Given that each individual situation is interpreted subjectively, people can be given different advice about expectation of an outcome. This is even more problematic for those that cannot afford legal advice. The report is concerned that this level of uncertainty is promoting dispute rather than settlement.

Read about the importance of a financial settlement.

The report sets out recommendations for four models which law reform could be based on:

Codification which brings settled case law principles into statutory form, and whilst the substance of law would not be reformed, it would be presented within a coercive framework.
Codification plus would bring the above-mentioned codification in addition to some reform of the law.
Guided discretion would require that legislation is set out as to how discretion can be exercised and it would provide a similar framework as to what some other countries already exercise.
Default regime would set out a new set of rules to dictate a high level of certainty, retaining the possible use of some limited discretion, this is widely used in some European jurisdictions whereby a number of pillars deal with each aspect of the finances on divorce.

The scoping report and its recommendations are widely welcomed in the family law community. The report is a helpful summary of the issues we face day-to-day. Whilst it is important to remember that no two cases are ever the same, having a framework in which parties can expect a fair outcome would be helpful to provide a level of certainty. Suggestions of further definitions such as setting out what ‘needs’ are also welcomed as parties often have very differing expectations of what they can expect to receive to ensure that their capital and income needs are met.

The Law Commission’s report also touches on other areas of family law that could be considered for reform. For example, the Law Commission previously recommended in their 2014 report that there should be an option for marrying couples to have a “Qualifying Nuptial Agreement” in place. Currently, Pre and Post Nuptial Agreements are not legally binding, however they will be recognised by the court and have a decisive weight as long as they are prepared the right way. This is another example of how the law currently does not provide certainty even when parties have the intention for an agreement to be binding.

Another area of reform recommended is how conduct is considered in financial cases. As the law currently stands, conduct is only considered in very few cases where the conduct is such that it would be inequitable to disregard. It is difficult for conduct to reach this threshold even when there is ongoing serious domestic abuse present in a relationship as it is often difficult to prove that it is “gross and obvious” in the current interpretation. The Law Commission recommends that there should be a review of how conduct is considered and that there should be a greater recognition of domestic abuse itself as conduct. Case law could clarify what forms of behaviour would be considered as contact conduct, the impact that it would have on a financial claim and a process used when making allegations of conduct.

Finally, there is also recommendations within the report for there to be clarity around pensions. The report states that 24% of divorcing couples did not know if their spouse even had a private pension, let alone about the value of the same. Statistically, women are less likely than men to know if their spouse had a pension and men tend to have greater pension provisions. Whilst the court can make Orders dividing people’s pensions, only 11% of divorcing couples had pension sharing arrangements in place. The report expressed concerns over the fact that even if there is pension offsetting, this may leave the financially weaker party in an unfair situation as their long-term financial wellbeing is potentially ignored in favour of ensuring that their immediate needs are met.

Overall, the recommendations of the report are welcomed and it is hoped that the government will consider this with an interim response shortly as well as with a full response in due course. It is hoped that if there was a framework in place, couples could go through divorce more amicably ensuring that they are fully aware of what a fair outcome in a case would be. It is apparent that certain areas such as Nuptial Agreements are due for reform considering that the previous report with recommendations was published 10 years ago. We have seen a significant increase in a number of Pre and Post Nuptial Agreements prepared and it is therefore evident that many couples entering into marriages and civil partnerships wish to have their intentions around financial matters recorded in a legally binding way.