The Minister of State, Ministry of Justice (Lord Faulks) (Con)
My Lords, I begin by congratulating the noble Baroness, Lady Deech, on skilfully steering this Bill to Committee stage. I thank her very much, too, for communicating with the Government about the amendments and the thinking behind them; we are extremely grateful for that clarification.
The Government’s position was made clear at Second Reading and it would not be helpful to repeat that position at this stage. Since then, the noble Baroness has met my ministerial colleague, Simon Hughes, who has responsibility for this policy and is aware of the Government’s thinking. I will restrict my comments in Committee to one or two brief points about the amendments and leave it very much at that.
The first amendment relates to Clause 1 and the protection of children on divorce, and it is of course convenient to take Clause 6 stand part together with the amendment. Amendment 1 limits what was the repeal of all of Section 25 of the Matrimonial Causes Act 1973 to subsection (2) of that section, which contains the list of matters to which the court must have regard in deciding how to exercise its ancillary relief powers. This amendment leaves the other provisions of Section 25 in place and, accordingly, restores the court’s duty to give first consideration to children of the family in deciding how to exercise ancillary relief powers, retaining the list of matters to which the court must have regard in making specific financial relief awards in relation to children of the family. The amendment adds considerably to protection for children given in the Bill. As a result of this, the noble Baroness has indicated that she does not wish Clause 6, which contained the previous provision for children in the Bill, to stand part of the Bill. The Government welcome this improvement in protection for children.
Lord Kennedy of Southwark
My Lords, this is an important technical group of amendments, which follow on from the previous group in clarifying that the provisions of Section 25(1) of the Matrimonial Causes Act remains in force and that we are referring only to subsection (2), for all the reasons that noble Lords gave in the previous debate, along with Amendment 3, which again makes it clear that we are referring to the Act in the amended form. The addition and clarification of the 2004 and 2013 Acts, as the noble Baroness advised the House, will clarify that the new law will apply to civil partnerships and same-sex couples, but not to cohabiting couples, who are the subject of a different Bill, to be introduced by the noble Lord, Lord Marks, which will have a Second Reading shortly.
The second part of the group removes subsections 5(1) and (2), which deal with the issue of periodical payments, discussed during the Second Reading debate in your Lordships’ House. They seek to address an issue that everyone recognises needs to be looked at; on these Benches we were concerned that there appeared to be a one-size-fits-all approach. In a later group, we will look at amendments that seek to take on board concerns expressed in the Second Reading debate and elsewhere.
Amendments 21, 22 and 26 make clear the divide between lump sum payments and ongoing periodical payments.
Lord Faulks
My Lords, I shall speak briefly to this group of amendments. As the noble Baroness said, a number of these are technical or drafting improvements on which I need not detain the House; I have only these brief comments of substance to make.
I acknowledge the noble Baroness’s intention to limit the potential for litigation under this Bill through her amendments. Amendment 20 is consequential to the removal of paragraphs (b) and (d) of Clause 4(7). It removes the provisions on the making of periodical payments and the duration of such periodical payments and the requirement for the court to consider whether a lump sum payment would be sufficient to meet the needs of the person concerned; it also removes the restrictions and duration limits on the court when making orders for periodical payments, for which the existing subsection (1) of Clause 4 provides.
Amendments 21 and 22 remove from Clause 5 references to lump sum payments as an alternative to periodical payments in Clause 5, and Amendment 26 removes a reference to a lump sum order as an alternative to an order for periodical payments. The Government welcome the greater flexibility for payment of periodical sums provided by these amendments.
Baroness Deech
My Lords, I wish to say simply that of course the noble and learned Lord, Lord Walker, is right—that is why he is learned and I am just a noble Baroness and not learned. However, my point is that this House has not revisited the principles of financial provision on divorce in more than 40 years, despite all the changes in society and all the things that have happened—the changes in the position of women, women going out to work and the rise in divorce. It is really crucial to do so now because of the removal of legal aid and the need to help those who mediate and arbitrate and give them a starting point. The Government favour mediation yet there has been a decrease in the use of mediation. How can people mediate if they do not know what the starting point is? To mediate means to find a middle way, and therefore we need a parameter. That is why we are trying to clarify this law.
Lord Faulks
I am sure that all noble Lords realise that what the noble Baroness meant by saying that the 1973 Act had not been revisited was that the approach that was set out in that Act has not been changed since that date. Although there have in fact been a considerable number of amendments to the Act, as the noble and learned Lord, Lord Walker, pointed out, the overall thrust of the noble Baroness’s point remains the same. Amendment 5 moves, in amended form, the list of financial orders in Clause 2 so that they now form the definition of “relevant financial orders” in Clause 1, which deals with interpretation. This amendment goes with the proposal that Clause 2 does not stand part of the Bill, as the provisions for financial orders would as a result be dealt with elsewhere in the Bill.
The Bill as amended will limit the court to making relevant financial orders only to the extent that a binding prenuptial or post-nuptial agreement did not “deal with the matter”, and only in relation to matrimonial property, as defined by the Bill.
Lord Kennedy of Southwark
My Lords, this amendment in the names of the noble Baronesses, Lady Deech and Lady Wilcox, my noble friend Lord Grantchester, and the noble and learned Lord, Lord Walker of Gestingthorpe, and the other amendments in the group—namely, Amendments 14, 15, 15A, 16, 18 and 19—deal with matrimonial property, an issue central to the Bill.
The new clause proposed by Amendment 6 is detailed and, as we have heard from the noble Baroness, Lady Deech, and the noble and learned Lord, makes it clear that the split of assets on divorce should be limited to property acquired after marriage by the couple. The family home will be treated as matrimonial but property, gifts and inheritances acquired before the marriage will not be matrimonial or available for sharing.
I very much see the point that without the certainty that the proposed new clause aims to give, couples run the risk of spending vast sums of money fighting over the division of assets and thereby reducing the assets that they are left with. As the noble Baroness, Lady Deech, said, to reduce costs we need to make things simpler and clearer for divorcing couples. These are welcome amendments that seek to do just that. I also associate myself with the comments of the noble Baroness, Lady Shackleton of Belgravia, in thanking the noble Baroness, Lady Deech, for bringing forward the Bill.
Lord Faulks
My Lords, the amendments in this group would provide greater clarity about how the court is to approach the making of orders dividing matrimonial property on divorce. Clarity and a degree of certainty are clearly desirable. Against that, one has to weigh the need for flexibility, with the possibility that flexibility can sometimes bring fairness that certainty precludes. I am very grateful for the way in which the group was introduced by the noble Baroness, and indeed for the elaboration by the noble and learned Lord, Lord Walker of Gestingthorpe. He explained with great lucidity the attempt to improve upon the Scottish definition to deal with the problems of portfolios and the like, which may change and therefore change their character in legislative terms.
The proposed new clause seeks to define matrimonial property as property acquired “during the marriage”, rather than property owned before the marriage by either party, or property received as a gift during the marriage. Its intention is to clarify the definition of matrimonial property, which, under the terms of the Bill, will be the only property in respect of which financial orders can be made on divorce, except where there is a significant additional contribution by one party, or if the property has increased in value. The noble and learned Lord described what is meant by a significant additional contribution.
Matrimonial property would normally be divided equally between the parties. The Government have concerns over the definition of “matrimonial property” and the rigid equal division of matrimonial property, as the definition may be unfair in many cases: an equal division of property is rarely found in most ancillary relief cases, due to the lack of assets of the family, and the needs of the children and of the family. If the provisions of the Bill were to be taken forward we would need to define matrimonial property extremely carefully to ensure that any division was fair.
Existing provisions for division of property on divorce give the court a wider discretion to divide property and determine who should have which assets, in the context of the needs of the family. That enables the court to seek to achieve fairness in all the circumstances. The Government are not convinced that the certainty that the Bill and these amendments intend to provide would not come at too great a cost in rigidity. Therefore, the Government believe that the definition of matrimonial property in the Bill is problematic and, I fear, continue to have significant reservations about it.
Amendment 14 is in a different category. It would clarify the date on which the net value of the matrimonial property is to be valued. Instead of the “relevant date” described in Clause 4(4), the valuation is to be made on the date of the relevant financial order made by the court. This provides a clear and unequivocal date for the valuation: the date on which the property is divided. Consequentially, Amendment 15 removes the definition of the date at which the matrimonial property is valued in Clause 4(4). That is clearly desirable.
Amendment 17 would insert a new subsection into Clause 4, describing how a lump sum order is to be taken into account on the division of property on divorce. A lump sum payment is to be taken into account as part of the equal sharing of the matrimonial property, irrespective of the assets used to pay the lump sum. The amendment clarifies the position as to how lump sum payments are to be taken into account.
The Government welcome the greater clarity that would be introduced into the Bill, but as I have indicated remain concerned about the lack of flexibility for the court to determine how to divide property on divorce, and about the fact that the provisions in the Bill apply only to matrimonial property, allowing no flexibility for the court to consider what might be fair to the parties of a marriage in particular circumstances. I acknowledge the noble Baroness’s intention, through her amendments, to limit the potential for litigation under the Bill. The Government and all noble Lords are particularly aware of the unsatisfactory nature of the law, in the sense that it can so often lead to protracted disputes.
Amendments 18 and 19 concern Clause 4. They would remove paragraphs (b) and (d) from Clause 4(7), so that, under the Bill, the court would no longer have to take into account the source of funds not derived from the efforts of the parties during the marriage when making an unequal sharing of the matrimonial property—nor would the court have to take into account the nature and use of the matrimonial property in such circumstances.
Lord Kennedy of Southwark
My Lords, this group of amendments starting with Amendment 7 in the names of the noble Baronesses, Lady Deech and Lady Wilcox, and my noble friend Lord Grantchester are all to Clause 3, which concerns prenuptial and post-nuptial agreements.
I see the arguments made that these agreements, which were not very common a few years ago, are on the increase and can provide certainty to both parties as to the division of assets in the result of a breakdown of the relationship. I recall the comments of the noble Lord, Lord St John of Bletso, when he told us at Second Reading that these agreements had in no way encouraged the breakdown of marriage. Also, the noble Baroness, Lady Wilcox, spoke about people who had been widowed or divorced and were afraid to marry again where there were assets they wished to protect and who were reluctant to commit again, fearing a potentially financially disadvantaged position at a time of life when starting again would be almost impossible. The noble Lord and other noble Lords spoke about this again today.
The amendments themselves seek to provide further clarity as to what this Bill seeks to do in respect of pre and post-nuptial agreements and build on the comments and points raised both inside and outside your Lordships’ House.
Lord Faulks
My Lords, this has been a useful and instructive debate on this interesting and significant area. There are those who retain great faith in the institution of marriage. The noble Baroness herself said that, and I for one see no tension between thinking that and nevertheless being of the view that it is important there should be some sensible provision about prenuptial agreements. Her student may have been anticipating a trend by suggesting going to a lawyer almost immediately, in the heady days of announcing her engagement. A number of popular songs that suggest going to see the preacher at that juncture may have to be amended to reflect this different approach.
These amendments all relate to this clause. Amendment 9 changes the threshold of the duty of disclosure placed on both parties for the prenuptial or post-nuptial agreement to be binding on both parties. The Bill currently requires that the parties fully disclose their assets before the agreement will be binding on them and this amendment would require only “proper disclosure”.
Amendment 7 corrects the omission of the requirement in the Bill for a prenuptial or post-nuptial agreement to be made in writing. I recall that that point was specifically drawn to the House’s attention by the noble and learned Lord, Lord Scott of Foscote, at Second Reading. As the noble Baroness said, this is an essential prerequisite and a key feature of the recommendations made by the Law Commission.
The intention is clearly to protect people entering into prenuptial agreements by imposing the formality of a written and signed agreement. However, the Government have already indicated that we have reservations about the lack of flexibility in the Bill for the court to override an agreement that is unfair or does not adequately provide for “needs”. This is especially so given that people often enter into a prenuptial agreement at a point when they are not as realistic about events, sadly, as they should be.
The Government has yet to consider the detailed proposals for binding matrimonial property agreements put forward by Law Commission in its report on Matrimonial Property, Needs and Agreements. We have informed the commission that a final decision on the proposals should be made by the new Government after the election. However, the Government would not seek to oppose this amendment to the Bill.
The requirement under the existing divorce process is for both parties to make,
“full, frank, clear and accurate”,
disclosure of their assets using form E. We have concerns that undefined “proper” disclosure would be open to interpretation and offer scope for possible hiding of assets in a way that the current requirement is designed to avoid.
Amendment 8 amends the formulation of subsection (1) of Clause 3 and, if I have understood it correctly, is intended only to tidy up the drafting and not to change its substantive effect. The amendment seeks to replace the words,
“binding on the parties and is to be given effect unless”,
with “binding on them unless”. However, I believe that normal legislative drafting convention means that the effect would be to omit the crucial word “unless”, which is necessary to apply the conditions set out in paragraphs (a) to (e) of subsection (1).
Amendment 11 inserts a new substantive provision into the clause which sets out the requirements for a prenuptial or post-nuptial agreement to be binding. It does not set a new condition for the agreement to be binding; rather, it provides that only the person who has been disadvantaged can rely upon failure to obtain legal advice or failure to disclose assets as a means to make the agreement non-binding. The Government remain generally concerned about the lack of protection for people entering into binding prenuptial or post-nuptial agreements under the terms proposed in the Bill. These amendments do not appear to improve significantly on the protection offered and are substantially different from the approach recommended by the Law Commission, which would preserve the ability of the court in appropriate cases to override an agreement made between the parties where in the view of the court its terms are manifestly unfair or where they fail to provide adequately for needs. The Government have yet to consider the Law Commission’s detailed proposals. In relation to the Bill we are concerned that leaving prenuptial agreements to be subject to the rules of contractual law around validity and enforceability, and post-nuptial agreements subject to review by the court under the provisions set out in Section 35 of the Matrimonial Causes Act 1973, does not amount to a coherent set of protections.
Amendment 12 would remove the possibility of the Lord Chancellor making rules to specify what constitutes the full disclosure of assets, which is one of the requirements in the Bill for the prenuptial or post-nuptial agreement to be binding. The noble Baroness said that she has been advised that the law in relation to disclosure is sufficiently clear not to need further elaboration. As already noted, the second amendment would alter “full disclosure”, which as she rightly says is well understood, to “proper disclosure”. The Government agree that there are already established principles around disclosure. I understand that the noble Baroness is really concerned with what might be regarded as de minimis omissions from the list, but I do not think that that would in fact cause a difficulty on the existing rules. We are concerned that the use of the term “proper disclosure” could open up some areas of concern.
Baroness Shackleton of Belgravia
Would the Minister clarify that he is talking about form E? Form E is an incredibly detailed analysis of someone’s wealth; it could not be fuller than full disclosure. Is the Minister talking about disclosure of that nature, because I think that the amendment is meant to catch disproportionate non-disclosure? Form E is the most comprehensive document known to man. It goes down to the last £500 or number of pairs of cufflinks that a man may own.
Lord Faulks
I am not seeking to suggest that form E is not an extremely thorough document and I am sure that my noble friend is absolutely right on the point. But the amendment seeks to alter the rules from “full disclosure” to “proper disclosure”. If form E is going to be what proper disclosure is, my noble friend may well be right. My point is simply that proper disclosure appears to be a different description. If I have understood her correctly, the noble Baroness, Lady Deech, said that this was in order to ensure that the whole thing could not be set aside on the basis of a failure to include in the list something that someone had forgotten about or which was so trivial that it did not enter the heads of those entering into it. I understand that that is the aim, but the Government remain concerned that “proper disclosure” could open the door to someone saying, “Well, it was not proper for me to disclose that”. That is my answer to my noble friend.
Finally, Amendment 13 alters the court’s powers when dealing with the division of property on divorce when a prenuptial or post-nuptial agreement is to be treated as binding on the parties so that instead the court can make a financial order as described in amended Clause 1(3). The orders the court can make under the revised clause are an order for a lump sum payment, a property adjustment order, a pension sharing order, a pension compensation sharing order and corresponding provisions of the Civil Partnership Act 2014 and the Marriage (Same Sex Couples) Act 2013 in so far as the provisions of the 2013 Act are not already covered by the provisions of the Matrimonial Causes Act 1973 as amended by the Bill. This increases the range of orders which can be made. However it still falls some way short of the flexibility that the courts currently have under the 1973 Act and, for the reasons I have already given, the Government still have some concerns about the approach.
Lord Davies of Stamford (Lab)
The noble Lord said that one of the reasons why the Government would introduce the full setting aside of a prenuptial agreement would be “need”. If that is the case, would that not, first, have the potential to open up an area of great ambiguity and uncertainty because “need” would have to be defined very closely? Secondly, would there not be a real risk that “need” could be interpreted by a court as being the right to retain the same standard of living as had been the case when the party had been married, and that might be possible only by drawing on prenuptial, non-matrimonial property? That would undermine the whole purpose and force of the Bill. Will the noble Lord say a few more words about how the Government envisage defining the word “need” in this context?
Lord Faulks
The noble Lord makes an important point. What I did say was that the Government had not yet concluded how they proposed to respond to the Law Commission’s recommendations. The Law Commission has said that it considers it appropriate to override an agreement in some cases. I take entirely his point that if, as it were, the court is going to have a free rein to override an agreement simply because it thinks it fairer in the circumstances to come to a different conclusion, that would significantly undermine the degree of certainty which can be obtained by a prenuptial agreement. However, at the heart of what the Government will have to decide on this is to respect all the advantages that one can obtain from having a prenuptial agreement for the reasons that have already been outlined in the debate, yet not making it iniquitous in some circumstances—limited circumstances, I would imagine—where it is manifestly unfair for a party to be restricted by the scope of that agreement.
Baroness Deech
My Lords, I am sure that the Minister will agree that the best should not be the enemy of what is workable and good going forward. I am also sure that the Minister and I are united in the deep concern I have about the unfortunate couples who are wasting their money as they go through the process at the moment. I am willing to try almost anything because this has been a concern of mine for the past 40 years. We need a framework for couples that is more in line with what is tried and tested in New Zealand, Australia, Scotland, North America and Europe. While appreciating that this is an issue in flux and the fact that the legislation I am proposing would still have to go through the Commons, I hope very much that the noble Lord will be open to discussion with me and other concerned parties about how to get exactly the right wording in relation to proper disclosure—I absolutely understand his concerns—and the flexibility that is necessary. I am convinced that we must do this and I believe that the Minister shares that concern.
Lord Faulks
My Lords, the amendments deal with Clause 5 and periodical payments. Amendment 23 concerns the power of the court to make orders for periodical payments and extends the duration of those permitted under the Bill from three years to five.
Amendment 24 inserts a new substantive provision into Clause 5(3)(c) and provides a mechanism for the court to extend the duration of a periodical order beyond the five-year maximum under the Bill in circumstances where there is no other means to make provision for a party to the marriage and that party would otherwise be likely to suffer serious financial hardship as a result.
Amendment 25 removes the provision in the Bill which would have provided that any party to the marriage at risk of suffering financial hardship should be awarded only such periodical payments or lump sum as is,
“reasonable to relieve that party of such hardship over a period of three years or such shorter period as the court considers reasonable”.
The noble Baroness has written to me to say that she has listened to the Government’s concerns—as indeed she has said today—that divorcees need sufficient time to adjust to their new circumstances and should not find themselves on benefits because of a lack of maintenance, as it was sometimes referred to.
The proposed amendments would go some way to address concerns held by the Government about the real possibility of hardship, with an economically weaker party to the marriage being forced to live on benefits. That risk needs to be balanced against the understandable desire on the part of many parties to a marriage for a clean break in the event of divorce. We continue to have reservations about the protections under the Bill for ensuring that an economically weaker party to a marriage can successfully complete the transition to financial independence, but we entirely accept the concern that has been well expressed about continuous and over-lengthy reliance on periodical payments, whether it is from footballers or Members of your Lordships’ House.