What is the starting off point in divorce financial settlements?
When the court in exercising its very broad discretion considers what final order to make, the starting point for the Court is to look to the statutory criteria, which can be found under Section 25 of the Matrimonial Causes Act 1973. This piece of legislation provides as follows:
- It shall be the duty of the court in deciding whether to exercise its powers under section 23, 24, 24A, 24B, or 24E above and, if so, in what manner, 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 eighteen.
- As regards the exercise of the powers of the court under section 23(1)( a ), ( b ) or ( c ), 24, 24A, 24B or 24E above in relation to a party to the marriage, 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, 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;
(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 the marriage;
(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 home or caring for the family;
(g)the conduct of each of the parties, if that conduct is such that it would in the opinion of the court be inequitable to disregard it;
(h)in the case of proceedings for divorce or nullity of marriage, the value to each of the parties to the marriage of any benefit . . which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring.
In plain English!
So in addition to the needs of any child of the family, the court will consider, broadly speaking, eight statutory criteria that includes, amongst others, the length of the marriage and the standard of living, the needs of the parties and recourses available to meet those needs.
What is not included within the above criteria, at least not expressly, is the references to the behaviour of the other party, whether forming a relationship with another person during the marriage, his or her behaviour (other than in extreme case where the behaviour is categorised as “gross and obvious” or even a planned marriage or immigration status.
Does bad behaviour affect the split in assets?
The only manner in which such matters could be taken into account would be under the umbrella of “all the circumstances” or more specifically concerning the parties’ “conduct”. This is a very difficult argument to win. The authorities on this matter place a considerably high bar for such an argument to succeed, to the extent we are talking about conduct such as the attempted murder of a spouse or acts of paedophilia to children of the marriage. There is even a case where a husband frittered away hundreds of thousands on gambling and prostitutes and his conduct still did not bite due to the standard of living and size of the overall assets.
To expand further, when determining how to exercise its statutory criteria, leading authorities from the highest court in this country laid down three broad principles to be taking into account, those include “needs, compensation and sharing”. The authorities are known as White v White, Miller v Miller and McFarlane v McFarlane.
The wife gave up her career
Compensation is rarely an applicable principle as it relates to the wife (or husband) over many years giving up a career opportunity and earning capacity to the benefit of the other spouse, most notably to raise children. The starting off point remains an equal split of assets including pensions.
Splitting assets based on needs
As for a sharing claim, such can apply to a short marriage, but ultimately this will only be the case where the assets available exceed those required to meet the parties’ needs, which is not the case here based on the equity in the family home.
As a result many cases can be determined by “needs”, namely what are the parties reasonable income and capital needs and how are those to be met.
When considering capital needs, this effectively falls into housing. The court is going to need to look at the resources available such as equity from property and will also consider the parties’ potential borrowing capacity.
Maintenance and Income
Insofar as a spouse’s income claims are concerned, they have to be “reasonable” income needs. It is common practice for spouses in financial remedy claims to inflate their budget with a view to trying to strengthen their claim for spousal maintenance or their need for a greater capital payment if both are low earners. Any claim for spousal maintenance would have to take into account the ability to earn or earn more by maximising earning capacity and would be dependent upon any surplus income available to plug the gap if reasonable needs were not covered by full time income.
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