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Divorce and Financial Remedies (4.2) - Coggle Diagram

- - - - First consideration: children
        
        S.25(1): 'It shall be the duty of the court... to have regard to all the circumstances of the case, first consideration being given to the welfare while a minor of any child of the family who has not attained the age of 18'.
        
        2 points to note:
        
        Consider all the circumstances
        
        Children are the first consideration, not the paramount consideration
      - The S.25(2) factors
        
        (2) As regards the exercise of the powers of the court... the court shall in particular have regard to the following matters -
        
        (a) the income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future
        
        (b) the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future
        
        (c) the standard of living enjoyed by the family before the breakdown of the marriage
        
        (d) the age of each party to the marriage and the duration of the marriage
        
        (e) any physical or mental disability of either of the parties to teh marriage
        
        (f) the contributions which each of the parties has made or is likely in the future foreseeable future to make the welfare of the family, including any contribution by looking after the home or caring for the family
        
        (g) the conduct of each of the parties
        
        (h)... the value to each of the parties to the marriage of any benefit... that party will lose the chance of acquiring
        
        (a) Income, earning capacity, property, financial resources
        
        Note the phrasing of the statute:
        
        '... the income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future, including in the case of earning capacity any increase in that capacity which it would in the opinion of the court be reasonable to expect a party to the marriage to take steps to acquire'
        
        What property is susceptible to division?
        
        Inherited property? Pre-marital assets? earning capacity? 3rd parties?
        
        Matrimonial and non-matrimonial assets:
        
        The type of assets may justify a departure from equality, but it all depends on the circumstances
        
        But what is the distinction between matrimonial and non-matrimonial property?
        
        Some disagreement in the case law, but we (arguably) have some clarity following the SC decision in Standish v Standish [2025]
        
        Miller; McFarlane [2006]:
        
        Lord Nicholls:
        
        Matrimonial property - acquired during the marriage other than by inheritance or gift
        
        Non-matrimonial property - acquired before the marriage, or acquired through gift or inheritance
        
        Equal sharing applies to matrimonial property, but non-matrimonial property not necessarily subject to sharing
        
        Baroness Hale:
        
        Matrimonial property (family assets) - acquired during the marriage, other than by inheritance or gift
        
        Non-matrimonial property - acquired before the marriage, or acquired through gift or inheritance, and non-business-partnership non-family assets
        
        Equal sharing applies to matrimonial property, but non-matrimonial property not necessarily subject to sharing
        
        Sharp v Sharp [2017]:
        
        Facts: Parties in early 40s, no children, married for 4 years, respective salaries of both around £100,000, wife received discretionary bonuses. Separate finances during marriage. Assets = £6.9 million.
        
        First instance: No reason to depart from equality - husband awarded 50%, around £2.7 million.
        
        Held per CA: Departure from equality to reflect the way finances dealt with and that the wife's bonuses were non-business-partnership, non-financial assets as described by Baroness Hale (bonuses were unilateral assets) - husband awarded around £2 million
        
        Note - it has been held that it would be discriminatory to exclude unilateral assets from equal sharing in case involving children (XW v XH [2017)
        
        Standish v Standish [2025]:
        
        Facts: 15-year marriage with 2 children. Main issue: how should the court deal with a portfolio of assets worth £80 million comprising of assets acquired both before and during the marriage?
        
        The SC considered whether there is a concept of "matrimonialisation":
        
        [7] "... a concept of "matrimonialisation" has been recognised in some cases according to which non-matrimonial property can become matrimonial property and therefore subject to the sharing principle..."
        
        Held:
        
        The money acquired during the marriage = matrimonial property, so subject to the sharing principle (shared on an equal basis in this case)
        
        The money acquired before the marriage = non matrimonial property, so not subjected to the sharing principle
        
        Standish v Standish Principles (1):
        
        "First, it is important to recognise that there is a conceptual distinction between matrimonial and non-matrimonial property. In general terms, this distinction turns on the source of the assets..." [47]
        
        "Secondly, the time has come to make clear that matrimonial property should not be subject to the sharing principle (though non-matrimonial property can be subject to the principles of needs and compensation)..." [48]
        
        "Thirdly, the sharing of the matrimonial property should normally be on an equal basis. Although there can be justified departures from that, equal sharing is the appropriate and principled starting position". [50]
        
        Standish v Standish Principles (2):
        
        "Fourthly, what starts as non-matrimonial property may become matrimonial property..." [51] / "There is no good reason to treat matrimonialisation as a narrow concept. It is neither narrow nor wide. Although this has not previously been clearly spelt out, what is important (leaving aside matrimonial property resting on contributions from each party) is to consider how the parties have been dealing with the asset and whether this shows that, over time, they have been treating the asset as shared between them. That is, matrimonialisation rests on the parties, over time, treating the assets as shared". [52]
        
        The fifth and final principle... Tax planning schemes to save income tax, involving transfers of assets from one spouse to another, are commonplace given that there is no capital transfer tax on transfers between spouses. However, transfers of capital assets with the intention of saving tax, do not, without some further compelling evidence, establish that the parties are treating the capital asset as shared between them."
        
        Summary:
        
        There is a distinction between matrimonial and non-matrimonial property
        
        Non-matrimonial property can be 'matrimonialised' and therefore become matrimonial property depending on how the parties have used the property
        
        Where a claim is based on needs or compensation, all property can be divided regardless of its source
        
        This means that for most divorces, the distinction between matrimonial and non-matrimonial property matters little as these will be needs-based cases
        
        Where a claim is based on sharing:
        
        Matrimonial property can be shared. The appropriate starting point is equal sharing
        
        Non-matrimonial property is not susceptible to sharing (unless is has been matrimonialised
        
        (a) Income, earning capacity, property, financial resources
        
        Earning capacity:
        
        Not a matrimonial asset subject to the sharing principle: Waggot v Waggott [2018]. This would undermine the clean break principle (more on this later)
        
        In Miller; McFarlane, Baroness Hale said '[i]n general it can be assumed that the marital partnership does not stay alive for the purpose of sharing future resources unless this is justified by need or compensation'
        
        Practical issues: the court would have to assess the extent tho which earning capacity accrued during the marriage
        
        3rd parties:
        
        The court cannot take the resources fo a 3rd party (e.g. new partner) into account
        
        But a 3rd party may be taken into account in assessing needs (e.g. if someone is living with a new partner and sharing household expenses it may reduce their needs
        
        (b) Financial needs, obligations, responsibilities
        
        S.25(2)(b): 'the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future'
        
        Lots of connections here with other factors!
        
        What do we mean by 'needs'? 2 important points:
        
        Income needs - has either party given up work (wholly or in part?) The court will not assume parties can return to work in later life/recover economically after years out of employment
        
        Housing needs - when minor children are living with primary career, court's priority is securing accommodation for them, that spouse and if possible, the other parent
        
        (c) Standard of living:
        
        S.25(2)(c): 'the standard of living enjoyed by the family before the breakdown of the marriage'
        
        Close connection with 'needs'
        
        Wealth is relevant here, but so is lifestyle:
        
        S v S [2008] - the wife's housing costs included an element that allowed her to keep horses (standard of living / part of her needs)
        
        K v L [2010] - assets (premarital inheritance) were wroth £57.4m but the parties had lived very modestly. Husband received £5m to reflect standard of living
        
        (d) Age of parties and length of marriage
        
        Age of parties:
        
        Relevant as age at divorce can affect ability to join/re-join workforce, obtain a mortgage etc
        
        (e) Disability
        
        Includes physical or mental disability
        
        Connection with needs; needs are likely to be greater as a result of disability even though disability not caused by marriage
        
        (f) Contributions of the parties
        
        S.25(2)(f): 'the contributions which each of the parties has made or is likely in the foreseeable future to make to the welfare of the family, including any contribution by looking after the homes or caring for the family'
        White makes clear that domestic and financial contributions are of equal value (non-discrimination principle)
        
        One area of controversy: 'special' or 'stellar' contributions
        
        See Cowan v Cowan [2001 - 'it was his genius to perceive the potential of bin liners which would revoluntionise the collection and disposal of household waste'
        
        (g) Conduct
        
        Note that having an affair is not relevant conduct (see Miller; McFarlane)
        
        Conduct can include instances of financial or litigation misconduct, and otherwise to be relevant, the conduct must be 'obvious and gross' (Wachtel v Wachtel [1973])
        
        (g) Conduct
        
        How do the court's deal with allegations of domestic abuse?
        
        In short, the high standard for conduct to be relevant continues to apply. e.g. see:
        
        N v J [2024]:
        
        allegations of infidelity which allegedly led to a decline in mental health of one partner was not sufficient for conduct: 'There is no doubt, in my judgement, that personal misconduct, including domestic abuse, must be of a high degree of exceptionality to be capable of consideration... / The increasing awareness of the incidence of domestic abuse, and its harmful and pernicious effects, does not lower the conduct hurdle to be surmounted in financial remedy proceedings
        
        (h) Value of any benefit
        
        Historically, this tended to be a concern in cases in cases where one party had very little pension
        
        The pension orders discussed in first lecture on financial remedies (which are not assessed in MCT) mean that this rarely a relevant factor in practice
- - - - Advantages
        
        Certainty (no concerns about periodical payments increasing, no issues with enforcing payments etc)
        
        Disadvantages:
        
        Financial orders cannot be adjusted in the future if circumstances change
        
        Disadvantages as a result of childcare continue long after the end of a relationship
    - - Court should consider a clean break, but does not have to achieve a clean break
        
        A clean break usually easier in 'big money cases', or for short childless marriages where both parties have established careers
        
        Clean break difficult to achieve in some circumstances, such as:
        
        Longer marriages
        
        Marriages with children (especially young children)
        
        Low-income families
        
        Imbalance in financial position
- - - - The majority decision:
        
        Lord Phillips the all majority more or less upheld the agreement, and made an award to the husband only in his role as parent
        
        Parties must enter a prenup voluntarily, without undue pressure, and be informed of its implications
        
        Is there any material lack of disclosure, information or advice?
        
        When parties entered into prenup in Germany, it was binding under German law and the parties knew that
        
        The status of prenups in England and Wales:
        
        'The court should give effect to a nuptual agreement hat is freely entered into by each party with a full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold the parties to their agreement' (para 75)
        
        The reason for this is to respect for individual autonomy (para 78)
        
        Prenups can now give effect but do not bind hte court's discretionary power to make financial provision orders on divorce - important distinction
        
        The dissenting judgement:
        
        Baroness Hale, the only female judge, gave the dissenting judgement:
        
        'A couple may think that their futures are all mapped out ahead of them when they get married but many things may happen to push them off course'
        
        '... the object of [a prenup] is to deny the economically weaker spouse the provision to which she - it is usually although by no means invariably she - would otherwise be entitled... Would any self-respecting young woman sign up to an agreement which... limited her claim to a pre-determined sum for each year of marriage regardless of the circumstances, as if her wifely services were being bought by the year? Yet that is what these preedents do. In short, there is a gender dimension to the issue which some may think ill-suited to decision by a court consisting of 8 men and 1 woman'
        
        Gender dimension = prenups can contract out of sharing. Sharing emphasises marriage is a partnership and ensures non-financial contributions are valued. So, contracting out of sharing is problematic
      - What makes a prenup unfair?
        
        The meaning of fairness for a prenup is different than fairness when there is no prenup. The 3 strands of fairness (need and compensation) are still relevant, but parties can contract out of sharing
        
        An agreement would be unfair if it left one of the parties in a position of 'real need'
        
        Summary prenups:
        
        Prenups can be given decisive weight, but htey cannot oust the jurisdiction of the court
        
        When deciding on the weight given to a prenup, consider:
        
        (1) The circumstances at the same time of signing the prenup
        
        (2) Would it be unfair to hold the parties to the agreement?
        
        (3) Would it be unfair to hold the parties to the agreement? Would enforcing the agreement mean that one party was left in a situation of real need?
- - - - S..23 MCA 1973 - wide discretion for the court to redistribute property and finances on divorce:
        
        Main objective is fairness (White), and there are 3 strands of fairness - needs, compensation, sharing (Miller;McFarlane)
        
        S. 25(1) MCA 1973 - court to consider all the circumstances of the case, first consideration is welfare of children
        
        S.25(2) MCA 1973 - list of factors for the court ot consider
        
        S.25 MCA 1973 - court must consider the possibility fo a clean break
        
        The court balances these different principles to determine what is a fair result based on the facts fo the case
    - - Must consider the weight the court is likely to give prenup - remember that prenups cannot oust the jurisdiction of the court
        
        Consider:
        
        (1) The circumstances at the time of entering into the judgement
        
        (2) The effect of the agreement - would enforcing the agreement be unfair and leave one party ina. situation of real nead?
        
        Couple can contract out of sharing, but not needs, though needs defined more narrowly in the context of a prenup