Anyone who read my post here last Tuesday might be surprised about what I am about to say. In that post I effectively said that I could not envisage any formula or formulae for financial settlements on divorce that would work, because no formula or formulae could reasonably be devised that would result in a fair outcome in all cases. Now, I am about to suggest that perhaps we could have a formula-based system after all…
What I have in mind is not, in fact, something that has just occurred to me, although it has recently re-occurred to me. Years ago, when I first considered whether it was possible to have a formula-based system, it became obvious that a formula could deal with a large number of cases, even if it certainly could not deal with all cases. The simplest example of such a formula is: take all assets of the marriage and divide by two. That actually works in many cases – where the parties have similar means and needs (which usually means they have no dependent children) then a straightforward equal division is often entirely appropriate.
Now, in many cases such a simple formula is obviously not useful. However, if we had a more complex formula, or several such formulae, then they could cover a larger proportion of cases. All cases would still not be covered, but we could then have a system whereby the formulae apply, unless a party can successfully demonstrate to the court that they should not. In other words, we have a half and half system, whereby many, or even most, cases are covered by formulae, and the rest are dealt with under a discretionary system similar to what we have at present.
To demonstrate what I have in mind I have come up with a few formulae. Please note that these are FOR ILLUSTRATION PURPOSES ONLY. I realise that these formulae are flawed, sometimes seriously, and they are most certainly not my ideas of formulae that should actually be used. So, please suspend disbelief and imagine for the sake of considering my idea that they are actually workable formulae.
Following the proposition contained in my previous post I am going to suggest that there should be three separate formulae: one for capital division, one for spousal maintenance and one for pension sharing. Before I begin, here are the variables I will use:
P = Assets owned by that party prior to marriage
D = Assets that came into existence during the marriage
CN = Capital need of that party
T = Total value of all assets, including those owned prior to marriage
IN = Income needs of that party
EC = Earning capacity of that party
OPI = Other party’s income
OPIN = Other party’s income needs
M = Maintenance
TP = Total value of pension contributed during marriage
PEN = Pension held by party prior to marriage
OK, on to the formulae:
Here I am suggesting that there be two formulae, one for couples with no dependent children or with dependent children who reside with both parents, and one for couples with dependent children who reside with one of the parents:
If no children/shared residence: Each party receives their prior assets + (D ÷ 2). Thus:
Each party receives P + (D ÷ 2)
If children looked after by one party: That party gets whatever is the highest of the above, or their needs, up to the total value of all assets. Thus:
If CN > (P + (D ÷ 2)) that party gets whichever is the lesser of CN and T,
Else that party gets P + (D ÷ 2)
If the recipient spouse’s income needs are greater than their earning capacity and the other party’s income is greater than their income needs then the maintenance will be, say, half of the difference between the other party’s income and their needs, up to a maximum of the first party’s needs less their earning capacity. Thus:
If (IN > EC) and (OPI > OPIN)
Then M = whichever is lesser of ((OPI – OPIN) ÷ 2) and (IN – EC)
Shares adjusted so that each party receives half of total value of pension contributed during marriage, plus whatever pension they had before. Thus:
Each party receives PEN + (TP ÷ 2)
These are the formulae that will apply, unless either party makes a successful application to have them disapplied on the basis that, in the circumstances of the case, they will produce an unfair result. Thus, for example, a party where there are no children may have greater financial needs, or a party may need more than half of the other party’s ‘spare’ income by way of maintenance, or perhaps a party has a particular reason to seek more capital, off-set by having a smaller or no pension share. In order to prevent meritless ‘disapplication’ claims it may be necessary for the law to include some guidance as to the circumstances in which the court might disapply the formulae.
Now, just as Marilyn Stowe did in her recent post about divorce formulae, I’m going to have to disappoint those who hope that such a system will do away with the need for lawyers. It will not. There will still be plenty of room for argument, especially regarding what constitutes income, capital and needs. There will also of course be a need for advice as to whether you have good cause to apply to have the formulae disapplied.
What, then, is the point of all of this? Simply that it will provide greater clarity and consistency. Formulae along the lines set out above could be created to cover most common scenarios, and thus litigants, many of whom will of course not have lawyers, will have a far better idea of the likely outcome of their cases. At the same time, regional variations in orders will be reduced, with judges having to follow the formulae in the majority of cases.
Could such a system work? I don’t see any obvious reason why it couldn’t. Clearly, a great deal of thought will be required, in particular in putting together the various formulae. However, without the unreasonable expectation of coming up with a formula that produces a fair result in every single case, I think that it should be possible to create workable formulae.
Anyway, that’s my idea, and I commend it to the House.