The Law Commission has today, 27 February 2014, published its long awaited report on reform of family law to address issues which have been troubling those caught up in the family justice system for many years.

With 42% of marriages expected to end in divorce, and publicly funded legal advice increasingly scarce, many couples are forced to resolve their financial arrangements on separation and divorce without recourse to legal advice.  The courts have a very wide discretion in applying the law which has resulted in discrepancies between practice in different courts and even between judges in the same court.  One of the major concerns for The Law Commission was, therefore, to consider the law relating to financial needs and the extent to which one spouse should be required to meet the other’s needs following divorce.

The other major area of enquiry for The Law Commission was the extent to which couples should be able to regulate their financial arrangements through pre- or post-nuptial settlements.

FINANCIAL NEEDS

The Law Commission has recommended that the Family Justice Council, a body made up of family judges and senior practitioners, be asked to publish guidance clarifying the meaning of “financial needs” to ensure that courts, lawyers and people without legal representation have access to a clear statement of the financial responsibilities which former spouses will have towards each other following divorce. 

Importantly, The Law Commission suggests that the objective for couples should be eventual independence from each other following divorce.  It recommended that work be done to assess whether it might be possible to devise a formula to be used by divorcing couples as a guideline to the level of payments which should be made to a dependent spouse.  This would be similar to the system used in Canada and would not be a simple formula but rather a band of possible outcomes within which maintenance obligations would fall. 

The Law Commission has not recommended an automatic term for maintenance orders along the lines of the law in Scotland where maintenance is normally limited to a three year term.

NUPTIAL AGREEMENTS OR ‘PRE-NUPS’

The Law Commission has recommended that “qualifying nuptial agreements” (pre-nups) should become enforceable as contracts.  To qualify, certain procedural safeguards will have to be met.  The requirements are that:

  • The agreement must be contractually valid
  • It must have been made by deed and must contain a statement signed by both parties that they understand that the agreement is a qualifying agreement which will partially remove the court’s discretion to make financial orders
  • The agreement must be made at least 28 days before the wedding
  • Both parties must have received disclosure of material information about the other’s financial situation before entering the agreement
  • Both parties must have received legal advice at the time the agreement is formed.

Note that people will not be able to waive their right to financial disclosure and legal advice and that it will not be possible for couples to contract out of provision for future needs for housing, childcare, income or any other aspect of “financial needs”.  This means that agreements will largely be made by people who have reasonably substantial assets, some of which may have been inherited or gifted by family, and will be of particular importance for older people and those marrying for a second time who want to make provision for their children by a previous marriage or relationship.

NON-MATRIMONIAL PROPERTY

The Law Commission has endorsed the court’s practice of not sharing pre-acquired, gifted or inherited property in cases where resources are sufficient to meet needs without recourse to non-matrimonial property.

The crucial question now is whether the Family Justice Council will be able to provide clarity on financial needs and when parliamentary time will be found to deal with The Law Commission’s draft nuptial agreements bill.