07 December 2018 - Article
On divorce, the court's powers in respect of asset division are as far reaching as they are discretionary. The judge will look at all the relevant facts in the particular case in order to find a solution that is fair. This must be the right approach. That said, I understand that this discretionary system can be daunting for those who do not have experience of it. I have some sympathy with Gary Lineker's desire for a mathematical formula — something straight forward, predictable and inflexible. However, such a system could not take account of the myriad of different facts that are relevant to each particular family. Each family is different and our system reflects that reality. It is difficult to see how any other approach could result in a fair outcome. The Family Justice Council recognises how intimidating it can be for those representing themselves during financial proceedings on divorce, and has produced a comprehensive guide: 'Sorting out Finances on Divorce' (you can download a copy on the Courts and Tribunals Judiciary Website). This guidance will help those without experience to navigate their way through the system, and increase their understanding of the court's approach. By increasing an understanding of our system, hopefully it can allay the concerns of those who find it frustrating. The guidance focuses on how the court approaches financial needs on divorce. In family law decisions, context is everything, and the definition of needs is a prime example. In many cases there are not sufficient assets to meet those needs, let alone any surplus to divide and so the case begin and ends with the definition of need. In other cases there are extensive surplus assets ('big money' cases). If each party is entitled to a share of the assets (for example where all the assets were a product of the parties' joint contribution during the marriage), and that share will exceed the parties' needs, then the court is not required to calculate their respective financial needs. However, in 'big money' cases where there is no entitlement to share, the definition of 'need' is of crucial importance. As you would expect needs are defined within the context of the particular marriage and the standard of living enjoyed during that marriage. An example of the broad definition of need is the case of Mills v McCartney (2008) where Heather Mills received £24.3m to meet her needs. But what are the limits on the definition of need? In the recent case of BD v FD  EWFC, there were available assets of £58m and the husband also had trusts interests of over £100m. The wife was not entitled to a share in those assets as they were non matrimonial (the husband had inherited them); her claim was limited to an amount to meet her needs. Both parties agreed that the wife needed enough money to buy a property for her to live with their 4 children, and a capital sum to be invested so that the income could be used to meet her expenditure for the rest of her life. However, the wife quantified this need at £25m, and the husband argued it was £8m. The wife claimed that her needs should not be defined by the standard of living during the marriage, but rather the standard of living that the husband could afford. There are various factors for the court to consider when assessing needs: i) The first consideration must always be the welfare of minor children. ii) The length of the marriage and the additional period during which a party makes a contribution to the welfare of the family by looking after the children. In this case the youngest child was 5 and so although the marriage was 11 years, there was a significant additional period where the wife would still be making a contribution by being the children's primary carer. iii) Standard of living during the marriage. iv) The age of the applicant v) The available resources In this case it was weight that the court should attach to standard of living that caused contention. The husband argued that the court's focus should be the standard of living during the marriage, rather than what he could afford to pay. However, the wife said that standard of living was a benchmark, and not a ceiling, and the court must look at what was available, and not be constrained by the history of spending during the marriage. Whilst unusual it is not unheard of for a former spouse to have a higher standard of living on divorce than they enjoyed during the marriage. In Hvorostovsky v Hvorostovsky (2009) the wife applied for a variation in maintenance as the husband's income had increased, and her claim was not limited by the marital standard of living. However, in BD v FD it was not that the assets had increased after the parties separated, but rather that the wife felt that the spending during the marriage should not impact on what she should be able to spend in the future. When reading the case, I was reminded of the Court of Appeal decision of K v L where the family had enormous wealth, but had made a conscious decision that their children should not be aware of their financial position, and they should live relatively frugally. The husband was awarded £5m of the £57m available to meet his needs. The Court provided an outcome that it is fair for that particular family. In BD v FD the wife's needs were not so narrowly defined, and the judge awarded her £9.1m (which he then reduced by £300,000 to reflect the amount that she had spent excessively since separation). Having read the 26 page judgment, it is clear the extent to which the judge has taken into account all the various arguments in relation to the particular circumstances of this case. It is this level of analysis that is required to do justice to the parties. Whilst a mathematical solution sounds appealing, it would not be an appropriate solution. Those who want to try to ensure a level of certainty, should consider negotiating a pre or post nuptial agreement. In Radmacher v Granatino (2010) (the landmark case on pre nuptial agreements) the husband's needs were reduced to a level that would have been inconceivable had there been no pre-nuptial agreement. Similarly in WW v HW (2015) the judge said that because of the pre nuptial agreement, there was no obvious basis for any generosity in the interpretation of the husband's needs. Of course pre and post nuptial agreements can cover a great many other issues, not just the definition of need, and allow parties to have some degree of control as to how their assets should be divided on divorce. Such agreements are not binding on the court, but they are a relevant factor for the court to consider and assuming that the court considers the agreement to be fair, they can prove to be very persuasive. It seems to me that the most sensible way to have predictability and fairness is to consider a pre or post nuptial agreement.