As the authors say, the main aim of a new report from the UK Law Commission is to balance personal autonomy and protect the vulnerable - a hard task.

The following article, concerning a major report examining laws in England and Wales (Scotland operates under a different system). The article comes from Harriet Collins, associate, and Katie Longmate, partner, at Russell Cooke, the law firm. The editors are pleased to share these insights; the usual editorial disclaimers apply to views of guest writers. To comment, email tom.burroughes@wealthbriefing.com and amanda.cheesley@clearviewpublishing.com

The long-awaited scoping report from the Law Commission looking at financial remedies on divorce/dissolution of civil partnerships is due to be published in just a few days (anticipated 18 December). 

The current law stems from the Matrimonial Causes Act 1973 – now over 50 years old – and principles developed in case law most notably White v White (2000) and Miller v Miller; McFarlane v McFarlane (2006). These cases established the principles of sharing (i.e. sharing what has built up during the marriage with contributions being deemed equal), needs (making sure both parties and importantly any children can meet what they need - but “needs” itself being an elastic concept) and compensation (i.e has one party suffered from a relationship generated disadvantage which should to be addressed). 

Unlike many other countries, including those which adopt a much more formulaic approach to the division of assets and income, the approach above has resulted in England being one of the most discretionary jurisdictions in which to seek financial orders following divorce/dissolution – often being referred to as one of the most ‘generous’ jurisdictions. 

This has obvious benefits – no two families are the same and it means any outcome can be tailored to each particular set of circumstances to ensure fairness. For example, perhaps there are overseas assets and structures which need to be dealt with carefully, bearing in mind the potential tax implications? Is there a nuptial agreement which needs to be considered? Are there non-matrimonial assets which need to be treated differently? Are there complex trust or company structures that need to be dealt with in a specific way? 

On the other hand, discretion means there can be very little certainty for the parties involved as a particular outcome is far from guaranteed. So long as there is the ability to challenge whether the terms of a nuptial agreement should be applied (or disapplied); whether non-matrimonial assets need to be used to meet needs; or whether a company or trust structure needs to be disentangled, there is uncertainty. 

Bearing in mind the above, the purpose of the scoping report (which is very much just that) is to assess whether the current law is still fit for purpose and whether it provides a cohesive framework where parties can expect a fair and sufficiently clear outcome. This includes carrying out a comparative review of laws in other jurisdictions including other common law jurisdictions (such as Australia, New Zealand, Canada and the US), civil law jurisdictions which operate matrimonial property regimes and those countries which adopt a mix of approaches (like Scotland). 

Some of the key topics to be addressed include: 

-- The discretionary framework and whether a clear set of principles is required; 
-- How maintenance payments should work including whether there should be maximum period for payments and/or a formula; and 
-- The factors a judge must consider when making a financial order. For example, one of the factors is “all the circumstances of the case” which includes the weight which should be applied to a nuptial agreement if applicable. 

It is worth highlighting that these questions have been considered before. The Law Commission produced a report back in 2014 looking at matrimonial property, needs and agreements which amongst other recommendations, advocated the introduction of qualifying nuptial agreements (i.e. binding nuptial agreements or marriage contracts which do not currently exist under English law) and an investigation into whether a formula could be developed to assess a party’s financial needs. For those individual and families seeking to protect their wealth, this move can only be welcomed.

Baroness Deech introduced the Divorce (Financial Provision) Bill which sought to limit capital orders to sharing of matrimonial property only, the introduction of binding nuptial agreements and limited terms for spousal maintenance. The Bill did not make it past its first reading to the House of Lords.

It is not anticipated that the report will make any particular recommendations as such at this stage, but rather will act as a toolkit for the government on whether the law for financial remedies should be reformed and if so, what those reforms could like. It is understood four potential models are being considered - 1) the retention of the current discretionary system and codifying the principles established in case law, 2) codifying the existing law but reforming specific areas where the law is not settled, 3) guided discretion with underlining principles and objectives to provide more clarity on outcomes and 4) introducing a default regime akin to that of a matrimonial property regime therefore effectively limiting discretionary and introducing predictability and consistency (a one size fits all approach). 

Whatever comes of the report, it is not going to be a quick fix and much will depend on whether the government heeds any suggestions for reform and decides now is the time to take steps. 

If reforms are introduced over time that seek to streamline and clarify the principles under English law, then this may well benefit many separating couples by helping to avoid the costs and complexity of such discussions making the process more efficient and predictable. This is particularly so if nuptial agreements do become binding at some point in the future therefore respecting an individual’s autonomy to enter into such an arrangement. That said, a one size fits all approach doesn’t always work and can create unfair outcomes or unforeseen issues where a more nuanced approach is in fact required. 

The fundamental aim of the law is to respect people’s right of personal autonomy, and to protect the vulnerable. It is a hard balance to strike. 

Whilst some feel that the current law can flex and move with the times, others feel that the current law is too old fashioned and paternalistic for today’s society. Clients and advisors await the report with interest. However, with the review initially only looking at the scope of further work, we may well be waiting some time for real reform.