When a couple decide to divorce, there are often financial issues that need to be resolved. In mediation, people are free to make whatever agreement they consider fair between them. It is sometimes helpful for the couple to understand the legal framework that governs financial issues arising on divorce. This can provide an incentive to reach agreement away from Court proceedings. It can also be useful to understand how a Judge would approach their situation if it were referred to Court.
This factsheet will provide information on three areas:
1. If a case is referred to Court, what is the process and how long will it take?
2. What financial orders can be made by the Family Court?
3. What principles would a Judge apply if asked to make an order in a particular case?
What is the Court process and how long will it take?
Once a divorce case has been started, one of you can put in a Form A – ‘Notice of intention to proceed with an Application for Ancillary Relief’. This means that you are initiating a request for financial orders which are ancillary to the divorce petition.
When the Court receives a Form A, it will send both spouses the date of the ‘First Appointment’. In the main Family Court in London, the Principal Registry, it can be 3 months or so before the First Appointment. This is a 30 minute appointment, at which solicitors and often barristers attend.
Both spouses must file a comprehensive statement of their financial positions, with supporting documents, not less than 35 days before the first appointment. The form on which they do this is Form E. It is a lengthy and detailed form that can take a while to complete Only when the Form E’s are filed will the Court and the legal advisor feel they can begin to consider options for settlement. The process of completing Form E is called ‘Disclosure’.
At the first appointment, the Judge considers whether further evidence is required, such as independent valuations of property. The First appointment is when the judge decides what information each side should produce and timetables the case. At the end of the First appointment, a date is set for the next appointment, which is the ‘Financial Dispute Resolution’ appointment (FDR). It is usually a further 6- 8 months or so until the FDR.
The FDR is a longer appointment at which both spouses are represented by barristers. The Judge will ask if any offers for settlement have been made which are then discussed and reviewed by the Judge. The Judge may give avowed about the likely outcome and encourage the spouses to settle. This appointment gives the clients a taste of what is to come and encourages them to think realistically about their claims and settlement options. Many cases settle at the FDR.
Those that do not settle are then listed for a final hearing, which will be heard by a different judge. The final hearing will be in another 6-8 months or so.
Shortly before the final hearing, the disclosure of financial information will all need to be updated.
The final hearing then takes place. Both spouses give evidence and are cross-examined. Any other evidence is also considered and any expert witnesses give evidence. The hearing usually takes at least half a day and often longer. At the end, the judge will make a final order.
By the time of the final order, it will be 16-18 months since the financial proceedings began. The process will have cost the couple many thousands of pounds and take up a great deal of time. The real cost, however, is in the stress to the couple – and therefore the family as a whole.
At any stage along the way, from the initial filing of Form A, right up until the moment when judgment is delivered at a final hearing, it is open to a couple to come to a settlement and present that agreement in a ‘consent order’ to the Court. Mediation can be used at any stage along the way.
What financial orders can be made by the family Court?
The Matrimonial Causes Act 1973 sets out the various financial orders that a court can make in divorce proceedings. In summary these are:
a) A lump sum order – ie the payment of a set amount from one spouse to the other, as a one-off payment
b) Property Adjustment order – ie the transfer of property as between spouses
c) Periodical payments orders – more commonly known as maintenance. Maintenance payments can for a spouse. They can also be for a child if the parents have agreed the amount to be paid. In the event of disagreement, maintenance for a child can no longer be fixed by the Courts and requires an application to the Child Support Agency. www.csa.gov.uk
d) Maintenance pending suit – this is an order for maintenance which is made before divorce is granted, simply to meet the needs of a spouse while the divorce proceedings are underway.
e) Pension sharing orders – the Court has the ability to share a pension between spouses by requiring a portion of one spouse’s pension to be paid to the other when the first one starts to draw the pension, or to offset a greater share of the joint assets to one spouse to make up for leaving a greater share of the pension with the other. The important point is that, even though a pension is an asset which has no cash value at the time of the divorce, it is treated as a relevant asset in any financial proceedings.
f) Costs orders. In most cases, there are no costs orders made. The costs are deducted from the family assets before they are apportioned. If a case goes all the way to a Court hearing, the costs can run to tens of thousands of pounds.
Any financial claims remain open until they are dealt with by the Court. If a couple reach an amicable settlement through mediation, they usually have their agreement turned into a Court order. Otherwise their claims against one another remain, dormant, in their divorce petition. Either of them could at a later stage pursue those claims. If there has been a significant change of circumstance since the agreement was made (e.g. one has won the lottery), the other could ask the Court to make a different order from that which was agreed.
In summary, an agreement reached in mediation is not watertight until it is turned into a Court order. When an agreement reached between a couple is presented to the Court to be made into an Order, it is called a ‘Consent Order’. The procedure in obtaining a consent order is very – simple. The solicitors file at court a brief summary of their financial positions with the terms of the agreement, and the Court issues the Consent Order within a few days. No attendance at court is necessary.
What principles would a Judge apply if asked to make an order in a particular case?
When a divorce petition is filed, it automatically brings to life claims that the spouses have against each other for each of these types of order which are included in the divorce petition. These claims will remain open until they are dealt with by the Court. If a couple reach an amicable settlement through mediation, they would be well-advised to have their agreement made into a Court order. Otherwise their claims against one another live on, dormant, in their divorce petition. Either of them could at a later stage pursue those claims. If there has been a significant change of circumstance since the agreement was made (eg one has won the lottery), the other could invite the Court to make a different order from that which was agreed.
Judge is required to take a number of factors into account when considering the financial issues in divorce proceedings. (These factors are called ‘Section 25 factors’.) They are:
a. The income, earning capacity, property and other financial resources currently available or likely to be available in the foreseeable future.
b. The current and future needs, obligations and responsibilities.
c. The standard of living enjoyed before the breakdown of the marriage. (Recent ruling have reduced substantially the weight given to this factor.)
d. The ages of the spouses and the length of the marriage or relationship.
e. Any physical or mental disability.
f. Contributions made or likely to be made to the welfare of the family by the spouses, including any contribution by looking after the home or caring for the family.
g. Conduct, if it is such that it would be inequitable to disregard it. (Conduct must be “very serious” and is hardly ever considered to be a relevant factor.)
h. Any benefit which might be lost on divorce.
By far and away the most important factor in most cases is b – the current and future needs, obligations and responsibilities. First consideration should always be given to the welfare of any child under 18. That means that in families with children, their needs are the priority. In many cases, the settlement is driven by the housing needs of the parent with whom the children will be living most of the time.
The judge has total discretion to order what he/she considers to be fair in all the circumstances. It is therefore impossible to predict with certainty the outcome of any particular case. Both spouses will need to ask their solicitors to advise them of the bracket, upper and lower, within which an order is likely to be made. That gives them helpful information to negotiate a settlement within that bracket.