In December 2024, the Law Commission of England and Wales published a long-awaited report entitled “Financial remedies on divorce and dissolution: A scoping report”. A copy of the report can be found here.
The Government committed to reviewing the law on financial orders on divorce and following the dissolution of civil partnerships back in 2020, with the Law Commission starting work on the review in 2023.
The report’s purpose was to ascertain whether the current law in this area is sufficiently cohesive and fair.
What is the current law on finances on divorce or dissolution?
The laws that govern the use of financial remedy orders (i.e. financial orders that can be made by the court on divorce or dissolution) are now several decades old, namely the Matrimonial Causes Act of 1973, which was subsequently mirrored by the Civil Partnership Act 2004.
Section 25 of the Matrimonial Causes Act provides a statutory framework for the court to make a decision about how to allocate financial resources on divorce. There is considerable discretion available to the court when determining a case.
Section 25 sets out a variety of factors for consideration, including the income, earning capacity, property and other financial resources of each of the parties, and the financial needs, obligations and responsibilities that each of the parties have. The Courts also review the outcomes of other cases (known as “case law”) to help them interpret the statutory provisions, including in relation to, for example, the concepts, of what parties “need”, whether assets should be shared, how nuptial agreements should be treated, and what might be deemed to be matrimonial or non-matrimonial, as well as interpreting the overarching concept of “fairness”. The Court must also adhere to The Family Procedure Rules and other guidance.
As such, there are multiple aspects and complexities to the laws of financial remedy.
Why might the law need to be reformed?
The Law Commissions calls the current law “both uncertain and inaccessible for the majority of divorcing couples”. The report states that the MCA 1973 has no clear purpose, and simply asks judges to consider “all the circumstances of a case”.
Many additional reasons were listed in the report as to justify reform, including:
- The law is complex and it is not possible for everyone looking to divorce to understand how their case might be determined by looking at the s25 factors without the benefit of legal advice;
- The discretionary nature of the law equates to a potential lack of certainty;
- Overall there is no consensus about how some legal principles should be applied, which only adds to the potential for uncertainty.
- There can be regional or individual variations in how judges apply their powers due to the discretion available to them;
- Legal principles of fairness and equality can be described as “nebulous” and fact dependent, again accounting for different outcomes;
- Fairness can be an elusive concept;
- Cases reported are often those which have unusual facts or are extremely high in value, and as such do not relate to cases being determined day to day in regional courts.
Law Commission Report
The report concludes that the laws dealing with financial settlements on divorce or dissolution of a civil partnership need to be reformed. It was found that the current law does not provide a cohesive framework allowing parties to expect fair and sufficiently certain outcomes. The Law Commission stated the current discretion and uncertainty within the law can promote dispute between parties, rather than encouraging settlement.
Potential frameworks
The report did not set out what it thought the law should look like, but instead gave a number of frameworks for potential reform, which are summarised here:
Table taken from the Law Commission Scoping Report Summary (page 12) found here.
As you can see the models suggested to date are broad in nature and would only form the basis of a reformed system, which would permit the concerns raised to be addressed to varying degrees.
Next steps
The report does not set out specific recommendations for reform of the law. The Government must now consider the report and respond as soon as possible, and is obliged to do so. An interim report is required within six months of publication, and a full report must be prepared within a year.
How we can help
We are experts in financial remedy law and can advise you in relation to a financial settlement following divorce or dissolution. We fully understand the complexity of the current law and will be able to guide you to a resolution. More details about our services can be found here.
We will keep abreast of any changes to the law and advise you accordingly. It will likely take years for changes to be affected in any event, and as such taking legal advice at the earliest opportunity is highly recommended.