When a marriage breaks down questions of finance and property are inevitably of fundamental importance. It is possible for certain financial and property matters to be determined independently of divorce proceedings but in the vast majority of cases financial and property issues are dealt with in a divorce or a judicial separation since the powers of the Court in that context are more widely drawn and flexible than under separate statutes.
Before a Decree is pronounced
The Court has power to deal with certain financial claims before a Decree has been pronounced. These consist primarily of maintenance pending suit and interim periodical payments for the claimant or a child of the family. The Courts recognise that in many cases there will be the need to provide provisional or temporary financial support for one party or the other and also children before the Decree is granted and before final financial and property orders can be made.
Financial support orders
Once a Decree has been pronounced the Court then has power to make orders for full financial support (commonly called maintenance or periodical payments) for the Applicant (who will usually be the wife) and any children of the family. With regard to the latter, the Court's powers are somewhat more limited since the Child Support Act came into force with some exceptions. The Child Support Agency has basic jurisdiction to determine the amount of maintenance to be paid for children of the family but the Court does retain a jurisdiction to decide the amount of maintenance for children where the parties consent to the Court exercising that power, usually in the context of an overall financial settlement.
Further Orders that the Court can make include a lump sum payment to be made by one party to the other or for periodical payments to be secured in such manner as the Court sees fit. The Court can also order lump sums to be made for the benefit of the child of the family although it is more rare for this sort of order to be made. The Court can order a property to be sold and order a transfer or adjustment of property between the parties. The Court can also order a settlement of property to be made by one part to the other or vary an existing settlement which may exist between them.
An Application for financial and property Orders in divorce or judicial separation is termed an Application for Ancillary Relief, that is for orders ancillary to the divorce which relate to finance and property. The manner in which the Court approaches an application for such orders is laid down in Section 25 of the Matrimonial Causes Act 1973. Under that section the Judge who decides the application has discretion as to the manner in which he will exercise the powers of the Court, if indeed he decides to exercise them at all in a given case. In dealing with the matter he is obliged to have regard to all circumstances of the case, but first consideration must be given to the welfare of any child of the family who is below the age of eighteen.
Other factors which the Court has to take into account include the respective financial positions of the two parties including resources which they are likely to receive in the foreseeable future. This includes any earning capacity which the Court considers it would be reasonable for one party to acquire. Other factors include the financial needs and obligations of the parties, the duration of the marriage and the age of the parties, the standard of living enjoyed by the family before the breakdown and contributions made by each party to the welfare of the family. In rare cases the Court will also take account of the conduct of the parties if that conduct is such that it would be inequitable to disregard it. It is a matter for the Judge to weigh the relative merits and strengths of each of the above factors in a particular case.
White vs. White
In October 200 in a reported case "White vs White", the house of Lords gave new and far-reaching guidance as to how the division of assets should be approached in cases where there is a sufficiency of resources. Historically applicants, usually wives, had been confined to their "reasonable requirements" whatever the overall extent of the available assets. The traditional role of a wife and mother in looking after the house and children had become diminished in the way in which the law evaluated contributions to the family's financial position. The House of Lords stated in "White" that in seeking to achieve a fair outcome there is no place (in the modern law) for discrimination between husband and wife and their respective roles. There should therefore be no bias in favour of the wage earner or against the home-maker and child carer. As a general guide the case said, equality of division of assets should only be departed from if and to the extent that there is good reason for doing so.
This decision has led to a major impact upon the manner in which cases have been decided over the ensuing 2 years and further reported decisions have explored more precisely the details of this new approach.
Since the Pensions Act 1996 the Court has had the power to make an Order earmarking the Pension entitlements of one spouse in favour of the other. This involves earmarking a proportion of the Pension fund in favour of one party against the other which means that any part of the Pension entitlements (including death in service benefits, Pension receipts, lump sum commutations or other benefits) can be earmarked to provide Pension benefits for the Applicant spouse as and when the Pension holder spouse actually retires or the benefits come into effect.
As from 1st December 2000 the Court has also had the power to make a Pension Sharing or Pension Splitting Order. Such an Order is however only available to people commencing divorce or nullity proceedings on or after the 1st December 2000. Very simply, Pension sharing enables the Court to split or share a Pension at the time of the divorce so that the Applicant spouse either becomes a member of the Pension holder's scheme in her own right or alternatively takes a transfer of a designated amount into her own Pension Scheme. A Pension Sharing Order is irrevocable i.e. it cannot be varied whereas an Earmarking Order is always open to variation. As with the other Orders that the Court can make in the context of the divorce, a Pension order can be made only after the pronouncement of Decree Nisi but will not in fact take effect until the Decree has been made Absolute. The Court is obliged to take account of any views expressed by the Pension Fund Trustees and will insist upon them being notified of the Application and being given an opportunity to make representations to the Court should they see fit.
Presenting a claim
The procedure for presenting a claim for financial and property Orders commences with an Application being filed at the Court in Form A detailing the financial provisions being sought. The Court then fixes a date for the first Court Hearing, referred to as the First Appointment, which will be between 12 and 16 weeks ahead. This creates a time frame in which the case is to run and which cannot be altered without the permission of the Court. During that period of time several documents need to be completed and filed, the main one being a Financial Statement known as Form E. Both parties are required to complete a Form E setting out full details as to their financial circumstances supported by documentary evidence. There is a duty upon each party to give full and frank disclosure of their financial circumstances and a failure to do so may result in any Order made by the Court subsequently being set aside. The purpose of the First Appointment is to allow the Court to monitor the Application and its progress from an early stage, to limit the issues and to save costs. Requests for further information and documentation will be considered at that Hearing in the light of the issues and circumstances of the case and consideration given to whether any valuations of assets are required. The Court will also decide how the Application should proceed from then on and usually it is listed for a further Hearing referred to as the Financial Dispute Resolution Appointment. The purpose of the FDR Appointment is for the Court to guide the parties towards settlement by exploring with them the common ground and attempting to ensure that neither party has any unrealistic expectations. Both parties are expected to have carefully considered their respective positions by the date of the Financial Dispute Resolution Appointment and to come to Court with a view to settling the matter. If no settlement can be reached at the FDR Appointment then the Court will make any necessary further Directions and fix a date for a Final Hearing. That Hearing is an informal and private one in the District Judge's Chambers and evidence is given orally by each party. The Court will then take into account the factors contained in Section 25 of the Matrimonial Causes Act 1973 and will determine the issues and make the final Order.
Achieving a just settlement
The overriding objective of the Rules relating to Ancillary Relief Applications is to enable the Court to deal with cases justly. This includes ensuring that the parties are on an equal footing, minimising expense, dealing with cases in a manner proportionate to the amount of money involved, taking into consideration the importance of the case, the complexities of the issues and the financial positions of each party, ensuring that cases are dealt with expeditiously and fairly and allotting to it the appropriate share of the Court's resources whilst taking into account the need to allot resources to other cases. The Rules require both parties to a case to help the Court to further the overriding objective. The hope is that fully contested Hearings can become the exception rather than the rule and that the parties can be assisted by the Court in achieving a settlement without the necessity for a full Hearing.
Financial and property orders can only become enforceable and binding when a Decree Absolute is pronounced in the divorce. If the full contested hearing is to take place concerning financial and property matters this often is not reached until well after the six week period for the obtaining of the Decree Absolute. If financial and property issues are still outstanding, many practitioners postpone the obtaining of the Decree Absolute until financial and property issues have been decided. The making of the Decree Absolute does have implications for certain financial assets and issues including for example pensions, where a change in status which would be caused by the Decree Absolute would dramatically affect one party's entitlement to share in a pension. It is for this reason that it is preferred by many practitioners to leave to making of the Decree Absolute until financial matters have been finally determined.
Enforcing full disclosure of assets
As stated, financial issues can only be determined against a background of full and frank disclosure of financial assets and details by the parties. If either party fails to make such disclosure, orders can be made compelling documents to be produced and information to be provided and these orders can be backed up by Court sanctions if such disclosure is still withheld. It is also possible for the Court to make orders in the context of financial proceedings regarding assets which one party may have transferred, sold or attempted to deal with in order to impede or frustrate the Court's powers in relation to the claim. If necessary the Court can grant an injunction preventing any transactions taking place. The Court can also revoke any transactions previously made if the Court is satisfied that that transaction was made with a view to defeating the claim for financial relief. If such disposition is found to have taken place less than 3 years before the date of application the Court can presume that the disposition was intended to defeat the claim for financial relief. However insofar as such a transaction may have taken place involving a third party who acted in good faith and without notice of any intention to defeat the claim, the Court has to take account of the rights of those third parties in dealing with the matter.