Personal: Financial settlements

It is good advice to try to reach a financial settlement on an amicable basis. You owe it to yourself to reach a fair and reasonable settlement which is in your interests. However, how do you reach a financial settlement and it is binding?

The first step is for the parties to make a full and frank disclosure of their circumstances. Financial disclosure is very important. It is the bedrock upon which any financial settlement should be based. Without proper disclosure it may be possible for the settlement to be re-opened. Therefore it is important to ensure that your disclosure is complete. Further we need to scrutinise your spouse's disclosure to ensure that nothing is missing, whether deliberately or otherwise.

We can then move towards reaching a settlement.

In order to successfully enter into negotiations you should be advised as to the likely outcome and the best and worst case scenarios. The advice given varies on each case, and at Davies and Partners we pride ourselves on the clarity of our advice. Unfortunately the law is not always black and white and the Courts have discretion and therefore in order to advise you properly we need to carefully consider the powers of the Court and the likely outcome.

Powers of the Court

Maintenance

The Court can award maintenance i.e. a regular payment from one party to the other. The couple need not have dependent children and the maintenance order can last until one of the parties dies or the recipient (often the wife) remarries. The Court can order that the maintenance will last for a specified period of time and further it can direct that this period cannot be extended. Secured periodical payments are rare and can last beyond the death of the payer.

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Maintenance is always capable of variation and typically a wife on a variation application can be awarded a lump sum instead maintenance and this would bring the husband's maintenance liability to an end. However the Court may simply change the amount of the maintenance payment. There are different types of maintenance payments, namely maintenance pending suit, periodical payments and secured periodical payments.

If you need financial support for children you can apply to the Child Support Agency for an assessment or you can try to agree on a level of maintenance on a voluntary basis with your ex partner.

Lump sum

A lump sum order requires one party to pay a specific amount to the other although it may be payable by instalments. It is usually a one off payment as opposed to maintenance which is a recurring payment.

Property orders

The Court can order that a property shall be sold or transferred from one person to the other. The Court can attach conditions to a property so that for instance a home is preserved for the children until the youngest is independent and thereafter the property is sold or one party may "buy out" the other person's share of the property. There can be further conditions attached to such orders. The Court's powers relate to property and money anywhere in the world although there can be difficulties in enforcing an order against property and money in certain foreign jurisdictions.

Pension orders

There are different types of orders which can be made against pensions and the most common is a Pension Sharing Order. This is sometimes called a Pension Splitting Order and it involves one person's pension being divided by a stated percentage which can vary in each case. The pension can even be reduced to 0% and so that the whole of the pension is transferred. The recipient of a pension sharing order will then have a pension in their own right. When they retire they can draw on the pension when they choose to do so as long as it complies with the rules of the pension. They may be able to opt to take out a completely new pension. However they may choose or be required to stay within the original scheme. Pension orders are very important as quite often couples find that the values of their pensions are significant. Where there are pensions of significant value, it is advisable to obtain independent financial advice which we can arrange.

How do lawyers and the Court approach these cases?

The factors which must be taken into account are set out in section 25 of the Matrimonial Causes Act 1973 which is well worth reading and appears below. This Act has been in place for over 30 years and there are many cases which have been heard by the higher Courts which have been reported. The Courts emphasise that each case should be considered on its individual merits. There has been a development led by the Courts which has arguably followed social trends and the main change occurred following the decision in the House of Lords in a case involving a Mr and Mrs White. In that case the Law Lords referred to the 'yardstick of equality' in a long marriage which was a move away from previous decisions in which 'needs' were the priority.

The amount of weight which the Court gives to the factors set out in Section 25 of the Matrimonial Causes Act 1973 varies according to the facts of the case. Moreover the Court has discretion. There is no standard formula that assets must be divided in a certain proportion. Each case is decided on its merits and it is essential to take good legal advice.

Davies and Partners have considerable experience acting for clients in complex cases. We act for husbands and wives. The facts need to be carefully analysed. Further we take account of personal preferences. Some clients prefer there to be a clean break which means there are no ongoing financial ties between the parties. We deal in cases involving businesses whether they are incorporated, partnerships or sole traders.

Increasingly couples have invested in properties whether jointly or in one of their sole names. We commonly deal with shares or share options. The nature of the assets within a marriage can affect the likely result. For instance, if one party is to receive the liquid assets such as bank and building society accounts, properties and other investments and the other party receives a business as part of the settlement we need to evaluate the balance between one party receiving relatively risk free assets whereas the other party receives more risk laden assets. We are conscious that we are not always comparing like with like. The same is true with pension valuations and other assets. Where the figures are significant we usually advise that a second opinion should be taken from an accountant or pension expert.

It is important for there to be a strategy. The approach which individual clients prefer can vary enormously. We will discuss the strategy and tactics with you.

Further we will discuss whether it is in your interest to obtain assistance from others such as a Barrister, or tax expert.

Negotiations often take place in correspondence between solicitors although sometimes it is best to arrange a meeting to try to reach a settlement.

If a settlement is reached it is usually in the interest of both parties to have a consent order made by the Court. There is usually no need to attend Court for the order to be approved. It is necessary for there to be a Decree Nisi in divorce proceedings before the order can be made.

In Judicial Separation proceedings the Court have powers to make most of the orders except it cannot make Pension Sharing Orders and the settlement can be subject to a later review in divorce proceedings.

In Nullity proceedings the Court has powers to make financial provision depending on the circumstances of the case.

Maintenance payments for children are usually dealt with by the Child Support Agency if an agreement cannot be reached. There are certain exceptions for instance where the child is not the child of both parties or where a parent seeks a contribution towards the children's school fees and other limited exceptions. Quite often parents wish to negotiate their own agreement which they are fully entitled to do.

There is a formula which the Child Support Agency uses to calculate child maintenance which can be found on the CSA's website www.csa.gov.uk . The government has proposed an overhaul of the CSA with the establishment of the Child Maintenance and Enforcement Commission (CMEC) which will change the formula, change the arrangement for collecting maintenance and extend powers of enforcement. CMEC is expected to be in place by about 2010/2011.

In some financial settlements urgent action is needed to preserve assets.

We set out below the matters which a Court must pay regard to when considering financial issues. The relevance and the amount of weight which the Court will attach to the various factors depend on the circumstances of the case.

The Matrimonial Causes Act 1973 Section 25
Matters to which court is to have regard in deciding how to exercise its powers under sections 23 and 24.

(1) It shall be the duty of the court in deciding whether to exercise its powers under section 23(1)(a), (b) or (c) or 24 above in relation to a party to the marriage and, if so, in what manner, to have regard to all the circumstances of the case including the following matters, that is to say-
(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;
(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 parries to the marriage;
(f) the contributions made by each of the parties to the welfare of the family, including any contribution made by looking after the home or caring for the family;
(g) in the case of proceedings for divorce or nullity of marriage, the value to either of the parties to the marriage of any benefit (for example, a pension) which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring;

and so to exercise those powers as to place the parties, so far as it is practicable and, having regard to their conduct, just to do so, in the financial position in which they would have been if the marriage had not broken down and each had properly discharged his or her financial obligations and responsibilities towards the other.
(2) Without prejudice to subsection (3) below, it shall be the duty of the court in deciding whether to exercise its powers under section 23(1)(d), (e) or (f), (2) or (4) or 24 above in relation to a child of the family and, if so, in what manner, to have regard to all the circumstances of the case including the following matters, that is to say-
(a) the financial needs of the child;
(b) the income, earning capacity (if any), property and other financial resources of the child;
(c) any physical or mental disability of the child;
(d) the standard of living enjoyed by the family before the breakdown of the marriage;
(e) the manner in which he was being and in which the parties to the marriage expected him to be educated or trained;

and so to exercise those powers as to place the child, so far as it is practicable and, having regard to the considerations mentioned in relation to the parties to the marriage in paragraph (a) and (b) of subsection (1) above, just to do so, in the financial position in which the child would have been if the marriage had not broken down and each of those parties had properly discharged his or her financial obligations and responsibilities towards him

The amount of weight which a Court attaches to the above factors will vary from one case to the next. Davies and Partners have considerable experience in guiding you through the whole process and will look after your interests.

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