September 14, 2012

Is the settlement pendulum about to swing too far?

By Fiona Kendall, partner

You may have seen Jones Myers commenting in The Times on the Law Commission’s proposals about how divorce settlements could be worked out in the future in England and Wales. Proposed changes include providing a mathematical formula for couples to calculate how much each partner should receive; and also plans to exclude homes and assets from divorce settlements if they were inherited or acquired before the marriage.

The Law Commission’s consultation says that the present law in England and Wales is unclear with couples often unable to predict what support they might receive – or what they will have to pay out.

Some of the proposed changes mirror what is already happening in Scotland. As a family lawyer dual qualified in English and Scots law, I have advised clients on both sides of the border. So what are the pros and cons of the Law Commission’s proposals?

Divorce settlements by formula

The idea of a formula for working out financial settlements is already the norm in personal injury cases. There is also a parallel with child maintenance costs where settlement for each child is calculated on a percentage of earnings.

Family law judges in England and Wales currently have a great deal of discretion and that can be a double edged sword. Massive discretion can add to the cost of a case because legal advisors can’t predict what judges may say regarding the division of assets. As the Law Commission points out, there is a ‘postcode lottery’ in that judges in different parts of the country are not always consistent with each other about what constitutes a fair settlement.

However, the formula proposed may swing the pendulum too far in the opposite direction as it leaves little room to take into account the individual circumstances that are particular to each and every case. We have to find a balance between the flexibility of the existing system and the prescriptive nature of a formula.

Ring fencing assets

The Law Commission’s proposals follow increased calls for certain assets to be protected from claims when parties separate.

If these changes go ahead then family law in England and Wales will start to look much more like Scots family law. In Scotland inherited assets have been protected for decades, as has wealth brought into the marriage.

Opinion is deeply divided in England and Wales as judges’ focus has traditionally been on ensuring that both partners are adequately provided for regardless of how the assets were acquired. That said, given that the majority of people we see for pre-nups and pre-cips are seeking to ring fence inherited or pre-acquired wealth, there does seem to be support for such a change.

The law is unlikely to be updated for several years – the next step is a Law Commission report to ministers in 2013. We await the outcome with great anticipation as it would signal the biggest shake-up in family law for decades.

If you have any concerns or queries about the issues raised then please contact the team at Jones Myers on 0113 246 0055, drop us an e-mail or tweet us @HelpWithDivorce.