The Law Commission opens its consultation on needs and non-matrimonial property

Family Law|September 11th 2012

Today the Law Commission is opening its supplementary consultation on needs and non-matrimonial property, with the publication of a 131-page consultation paper. It is part of the Law Commission’s ongoing consultation on marital property agreements (better known as prenups).
As a member of the Law Commission’s advisory group, I have already contributed my thoughts and ideas. What has become clear to me, after reading through the provisional proposals and consultation questions, is that the Law Commission has been tasked with hammering a square peg into a round hole.
The Law Commission’s supplementary consultation examines two aspects of the current law in England and Wales, as it relates to financial provision on divorce:

  • To what extent should one spouse be required to meet the other’s financial needs? What are needs, anyway? Section 25 of the Matrimonial Causes Act 1973 says that each party’s needs must be met, but needs have never been properly defined.
  • What should happen to property owned by one partner before the relationship, or acquired during the course of the relationship? This is an example of a non-matrimonial asset, and gives rise to another question: what does non-matrimonial mean, with regard to property and other assets? For example, if a house is brought into a marriage but is then renovated, is it a matrimonial or non-matrimonial asset? Should it be excluded or included as a shared asset if the marriage breaks down? Likewise, what of a business that is inherited by one party, but then turned by both parties into a thriving enterprise?

These questions have arisen as a result of the Law Commission’s examination of prenuptial and post nuptial agreements, and its proposals to make ‘qualifying’ marital agreements automatically binding in law. So, marital agreements that are made voluntarily, with full information and in good time, will be legally binding, provided that financial needs are met. Draft legislation will be presented to carry this into effect in the final report due in Autumn 2013.
What has prompted this extended consultation? Well, the principle of fairness is at the centre of family law in England and Wales. The Law Commission has recommended that prenups become binding, providing that needs are met. Nobody should be required to leave a marriage destitute. But how are “financial needs” to be defined? Laymen dont know and there is no guidance to explain what it means.
No case is the same and at present, a judge’s discretion helps to ensure a fair outcome.
A more formulaic approach would reduce the need for lawyers and judges. Instead, divorcing couples could be pushed to relatively cheap mediation, or to online “hubs”. With the abolition of legal aid, and with litigants-in-person cramming up the courts, it isn’t difficult to see why the Government is keen to promote such solutions.
These issues aside, current law isn’t perfect. As Professor Elizabeth Cooke, the Law Commissioner leading the project, notes:

“When two people bring their marriage or civil partnership to an end it is vital that the law is able to help them resolve their financial arrangements as quickly and fairly as possible.
“The current law creates too much potential for uncertainty and inconsistency.”  

The Law Commission has concluded, however, that drastic reform of the law would take time. Instead, tweaks to the current law have been proposed.

Non-Matrimonial Property
The provisional proposals made by the Law Commission with regard to non-matrimonial property are as follows:

– We provisionally propose that non-matrimonial property, defined as property held in the sole name of one party to the marriage or civil partnership, and:
(1)    Received as a gift or inheritance; or
(2)    Acquired before the marriage or civil partnership took place
Should no longer be subject to the sharing principle on divorce or dissolution, save where it is required to meet the other party’s needs.
– We provisionally propose that non-matrimonial property should not lose its status as such merely by virtue of having been used by the family.
– We provisionally propose that where non-matrimonial property has been sold and substitute property bought, that property should be matrimonial property if it has been bought for use by the family, save where the substitute property is of the same kind as the property sold.
– We provisionally propose that where non-matrimonial property has been sold and the proceeds invested in matrimonial property, the property (following that investment) should be matrimonial property.  

Improving the Current Law Relating to Needs
Consultees are invited to give their views about five possibilities for statutory and non-statutory reform, which are as follows:

  1.  Statutory provision to the effect that courts, in making provision for spousal need, must aim to ensure that a payee spouse is enable to become independent within a reasonable period, while bearing in mind also that independence is unlikely to be practicable until the children of the marriage or civil partnership finish their education.
  2. An authoritative source of guidance for the courts and the members of the public about: (a) the considerations involved in an assessment of need; (b) the priority to be afforded to difference elements of need.
  3. Provision about the following either by way of statutory amendment or in the form of authoritative guidance: (a) the time within which independence is to be expected; (b) the normal form of orders for periodical payments (term orders or joint lives); and (c) the financial arrangements to be made after short childless marriages.
  4.  Who should provide that guidance? Would it be appropriate for it to be produced by the Family Justice Council in the form of Practice Guidance?
  5. Publication of that guidance on the information hub to be provided in response to the Family Justice Review.

Principled Reform
I have left this section of the proposals and questions until last, because I believe that it is the most interesting. The Law Commission has turned its attention to spousal maintenance. It makes the argument that reform is required, to ensure that maintenance payments are founded on a principled basis that explains what has to be paid by way of spousal support, and for how long.
Principled reform of the payment of spousal maintenance would be far-reaching. It would likely affect many of the 100,000-plus couples who divorce every year in England and Wales. However the Law Commission also makes it clear that such reform can be neither swift, nor straightforward. There are many difficult questions to be answered before it can proceed – and a number of them have been set out in the paper, for consultees to tackle.
For example, should a principled reform of spousal support take the form of a reformed discretionary approach, or a formulaic calculation? How should spousal support be structured?
I shall be setting out some of my thoughts in later posts, but in the meantime, interested parties may wish to note that this latest round of consultation is open until 11 December 2012.
The Law Commission is set to publish its report in 2013, when it will make formal recommendations on marital property agreements, needs and non-matrimonial property.

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  1. John says:

    Hi Marilyn,
    Great blog, BTW. I’m particularly interested in the definition of matrimonial property vs non-matrimonial property proposed as part of the draft report, specifically that it should be not subject to the sharing principal, save where it is required to meet the other party’s need. Does this definition have any bearing on a divorce that’s in commencing now?

    • Marilyn Stowe says:

      Dear John
      Thanks. The court is entitled to apply the sharing principle to all the assets of the marriage. However in practice reasonable needs will first be met and any surplus will be open to arguments as to why it should not be divided equally including the argument that property is non matrimonial.
      Best wishes

  2. JACKIE says:

    Hi Marilyn,
    My partner needs to divise a form for his wife to sign stating that (as agreed)after the sale of the home all assets will be divided equally. What is the best way in order to do this?
    Thank you

  3. Rachel Meredith says:

    Fairness dictates that all spousal maintenance agreements ought to be time limited. The current system of uncertainty and total lack of responsibility on behalf of the recipient is plain cruel. The payer is totally powerless in the current system and is at the mercy of recipients who refuse to train or work. In 2013 it is wrong of the courts to support women with children not to plan, train and work for their own future.
    The current system asks 2nd wives to declare their income to support first wives who do not train or work. This is unfair and wrong.
    Change is urgently needed to save families from a lifetime of acrimony as there is neither carrot nor stick to bring about independence of maintenance recipients.

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