Law Commission concludes law on financial remedies requires reform

As an early Christmas present, on 18 December 2024, the Law Commission published its Scoping Report on ‘Financial remedies on divorce and dissolution’.

The Report was long-awaited, being the result of a commitment by the Government back in March 2020 leading to the Law Commission beginning its project in March 2023. The aim of the report is to identify issues with the current law on financial remedies, consider whether it needs reform and propose models on which future reform could be based. It does not make specific recommendations on reform itself.

What is the current law?

The financial remedies law is first and foremost based on the Matrimonial Causes Act 1973. Section 25 of the statute provides a framework for a judge to make decisions about how to allocate financial resources on divorce or dissolution. But this is not the only source of law for family law judges and practitioners. Use and interpretation of the statute has been developing through caselaw which, not only builds upon the section 25 factors but has also introduced new legal concepts to the decision-making process.

For example, caselaw has meant that when interpreting ‘fairness’, the court needs to consider principles such as needs, compensation and sharing. Other caselaw also addresses topics such as the meaning of ‘needs’, matrimonial vs non-matrimonial property, and use of nuptial agreements. These decisions are not codified into statute but must still be considered by a court.

In addition to statute and caselaw, the court must also be aware of the financial remedies procedure which is contained within the Family Procedure Rules 2010, as well as various judicial announcements and notes. Even after this, the court (and family law practitioners) should also be aware of the constant stream of studies, reports and recommendations that come from relevant organisations including Resolution and CAFCASS.

What are the issues with it?

The Law Commission summarises the main criticism of the current law as follows: ‘The current law governing financial remedies on divorce is that the law is both uncertain and inaccessible for the majority of divorcing couples’. It goes on to list numerous issues which justify this conclusion including:

• There is no clear purpose or objective to the Matrimonial Causes Act 1973. Judges are simply asked to consider all the circumstances of the case.
• The discretionary nature of the law means there is a lack of certainty to parties involved.
• Because the court’s powers are discretionary, there are individual and regional variations in how their powers are applied.
• ‘Fairness’ is an elusive concept and the lack of clarity about its meaning may prove unfair, as only those with sufficient time and resources can seek legal advice on what it means, and even then, it is not certain.
• Legal principles such as equality and fairness are too ‘nebulous, fact dependent and judge-made’ so it may be a lottery in how they apply to any case.
• For most divorcing couples, the current law is not relevant as it is based on big money cases. In most divorces, there aren’t sufficient assets to meet even the basic needs of the parties, let alone discuss what might be ‘fair’ with reference to discretionary powers and legal principles.
• There is no real consensus on how some legal principles should be applied. For example, topics such as compensation, sharing, and the duration of the marriage all provoke mixed opinions from judges, practitioners, academics and the wider public.

The Report also goes on to list criticisms of the Financial Remedies Procedure which includes consideration of standard forms such as Form E, the overall costs of litigation, and variations in interpretations of procedure, amongst other things.

Does it need reform?

The short answer is yes. Having garnered views from numerous stakeholders including judges, lawyers, academics, legal representative organisations, other Government departments, and the general public, the Law Commission conclude that the current law of financial remedies requires reform.

What could future reform look like?

Four models are used to summarise what future reform to financial remedies could look like. The Law Commission summarise them neatly as follows:

Throughout the Report, the Law Commission identified a tension between discretion and certainty. On the one hand, having judicial discretion allows each case to be considered on its own facts and merits, and allows the court to determine what is ‘fair’ in each case.

On the other hand, certainty means that the law is clear, enabling parties to understand exactly what their rights and obligations on divorce will be. There is no right or wrong here, nor conclusion on which end of the spectrum is better.

The Law Commission is at pains to point out that they are not making any specific recommendations for reform; this is for Government to consider. Their four models simply represent options for Government to consider in future.

What’s next?

Now that the Scoping Report has been published, it's over to the Government to consider the next steps. Protocol dictates that the responsible minister will respond as soon as possible, but in any event, they must provide an interim response within six months and a full response within one year.

In the meantime, all those working in financial remedy proceedings must continue to apply the law as it stands: statute, caselaw and all.

The Law Commission’s Scoping Report is just the start of the conversation but at least reform has been recognised as needed. Reform of financial remedies will be far from quick and easy. With all that will be involved, it will likely be years (if not decades) before we see any significant change to the law and how it is applied every day by couples and practitioners.

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