Divorce (Financial Provision) Bill [HL]

Baroness Buscombe Excerpts

2nd reading (Hansard): House of Lords
Friday 27th January 2017 Lords Chamber

[Baroness Buscombe (Con)]

My Lords, I thank the noble Baroness, Lady Deech, for introducing the Bill and for enabling the House to once again debate the important issue of financial provision on divorce. We take this issue very seriously. I want to reassure all noble Lords who have spoken today that I have had good discussions with my colleague in another place, Sir Oliver Heald QC MP, the Minister responsible, concerning progress and plans for an all-encompassing reform of private family law.

The Bill has a very commendable aim of seeking to assist divorcing couples and civil partners undergoing separation in resolving disputes over the division of property and periodical payments or “maintenance”. The Government agree that there is scope for greater clarity and certainty concerning the law and the court’s practice in this important area, but we wish to identify ways to achieve this that do not cause hardship and undermine fairness, which, I say with great respect, this Bill would be likely to do. Clarity and predictability must be balanced with the need for flexibility, with the possibility that flexibility can sometimes bring fairness that certainty precludes.

We also recognise that the law cannot be based on a one-size-fits-all approach that does not cover the uncertainties that life presents. The law must have the breadth to meet the various circumstances in which divorcing couples find themselves at the end of a marriage. There is also a need to take into account the fact that aggrieved individuals are likely to be the most vocal, and that the evidence base in this area is sometimes anecdotal, including in relation to how, why and at what stage settlements are reached.

The Bill seeks radically to change the law of financial provision on divorce and differs substantially from, and goes much further than, the recommendations made in 2014 by the Law Commission concerning matrimonial property agreements and clarifying the approach to financial needs on divorce. Those recommendations were made after wide public consultation which included a public attitude survey. The coalition Government provided a preliminary response to the Law Commission stating that further careful consideration would be given to its proposals in the next Parliament. That Government took forward one of the proposals in the report by funding guidance for separating couples, Sorting Out Finances on Divorce, to help make the law and the court’s practice on financial needs and arrangements more understandable and accessible.

That guidance was published in September 2015 by the Family Justice Council and is being promoted in a number of ways including online and through advice agencies. It provides information about financial settlements for couples who are getting divorced or ending a civil partnership, including matters such as maintenance, housing and pensions, as well as the type of orders a judge is likely to make. The original Family Justice Council guidance is on the judiciary.gov.uk website and a simplified, plain English version of it is available on the Advicenow website, which is a charity dedicated to ensuring that people are aware of their legal rights. It also contains advice for unrepresented litigants—this I think is particularly important—to make use of in court by giving concise and easy to understand information about the law.

In respect of that I would refer, as did the noble Lord, Lord St John of Bletso, to a note from the noble Baroness, Lady Deech, dated 27 January which does indeed make reference to guidance. However, that guidance is actually for the judiciary. For anyone else it is somewhat complicated in that a lot needs to be considered in the law. What I am talking about is known as a “survival guide” which responds to much of what noble Lords have been talking about in the debate in terms of providing simple and straightforward references to what people can do in different circumstances. It is incredibly easy to understand and helps couples to sort out their financial affairs without asking the court to decide. It explains consent orders, the process for mediation and the fact that people can access legal assistance for that. It also explains what happens if couples cannot agree and have to go to court. I commend the guidance to all noble Lords.

The corresponding guidance for judges, which is strongly endorsed by the President of the Family Division, Sir James Munby, followed in June last year. The president has described the guide as providing a “succinct summary of the law” and a “useful tool” for the judiciary in relation to making orders to meet financial needs following divorce and the dissolution of civil partnerships.

The Government are also looking at other ways to make the law more easily understandable. We want to make the best use of technology to equip individuals with the information they need to resolve the disputes that often arise following divorce. We are investigating current practice in financial disputes with the aim of developing a tool, again referenced by the noble Lord, Lord St John of Bletso, to help separating couples sort out financial disagreements. The development of this tool will assist couples in resolving financial disputes without going through the courts.

The Government recognise that when disputes go to court, that only increases the acrimony and tension which often arise in such circumstances, and we are therefore considering how to provide improved information and signposting so that more people are made aware of how mediation can help in dispute resolution. We strongly believe that agreements are more long-lasting and sustainable when individuals are able to make decisions for themselves without the intervention of the court. I think that all noble Lords who have spoken in the debate would agree with that. Mediation is generally considered to be a more cost-effective way of resolving disputes than going to court and must be considered before a person can apply to the court for a financial order unless there is evidence of domestic violence or another exemption applies. It can help separating couples make their own financial arrangements and reduce tension when individuals are faced with making difficult decisions about their money and property at such a stressful time.

The Government are also considering the Law Commission’s recommendation to introduce qualifying nuptial agreements which would make prenuptial and post-nuptial agreements legally binding, subject to certain protections. These agreements, unlike those proposed in the Bill, could not be used to enable one party to contract out of responsibility to provide for the other party’s financial needs.

The other recommendations in the report are currently under consideration by the Government as part of developing our plans for wider private family law reform, and we will announce our response in due course. Our reforms will be underpinned by the Government’s ambition to enable people to resolve their disputes in a way that is just, affordable and transparent. I want to reiterate that the Law Commission’s proposals are based on extensive consultation, which this Bill’s far more radical proposals are not. The likely effects of the Bill’s proposals are also far less clear.

I will very briefly outline the current law of financial provision on divorce. The majority of couples resolve the financial consequences of divorce by agreement, but where this is not possible the court has a wide discretion to decide how their property and income should be distributed, guided by case law and the fundamental principles of financial provision set out in Section 25 of the Matrimonial Causes Act 1973. This includes consideration of the circumstances of the parties and any children in their care, and concepts of fairness and needs. Importantly, the Act requires that the first consideration of the court is the welfare of any child of the family aged under 18.

Other factors in Section 25 include: the income and earning capacity of the parties; contributions made to maintaining the home and the children; the financial needs and obligations of the parties; the age of each party and the duration of the marriage; any physical or mental disability suffered by either party; the conduct of the parties, if it is such that it would be inequitable to disregard it; and any benefits that the parties will lose as a result of the divorce or dissolution.

The first of the main provisions in the noble Baroness’s Bill is that prenuptial and post-nuptial matrimonial property agreements should be binding upon couples on divorce, except in very limited circumstances. The Government are concerned that this does not take adequate account of the needs of parties following divorce, which may have changed since the agreement was made. For example, if the matrimonial property agreement was a valid contract but left one party destitute, we believe it would nevertheless be binding under the Bill. We are currently considering proposals from the Law Commission on binding nuptial agreements with safeguards not present in the Bill. We would wish to consider these more fully within the context of the broader private family law reforms before committing to legislate to make agreements enforceable.

The second provision is that, subject to certain exceptions, matrimonial property—defined essentially as all property obtained during the marriage, except that obtained by a gift, inheritance or succession—should be divided equally between the parties. This would also be potentially unfair and could cause extreme hardship, particularly for lower-income families and for families with children, where the matrimonial home might need to be retained for the children to have a home. A straight division of matrimonial property would not necessarily work in the best interests of the children, who would face the trauma not only of divorcing parents but of their family home having to be sold. All noble Lords have spoken about the needs and priorities of children. This is something we take very seriously and must retain. Indeed, my noble friend Lord Kirkhope of Harrogate urged caution, particularly concerning the priority of children and the possibility of that priority being at risk. I suggest to the noble Baroness, Lady Meacher, who suggested that he was in that way against certainty, that this is more about the priorities of children and the need to be flexible.

I am aware, and welcome the fact, that the Bill has been amended to remove its previous proposal that, although the court should have regard to provision for children, it would not have to make the needs of minor children its first consideration, as the law requires it to do currently. While this softens the Bill somewhat it remains unclear what the effect would be on the provisions overall and the extent to which they could be overridden to ensure that the needs of children were adequately met. As I have said, the lack of flexibility for the court of course remains in cases where children are not the primary consideration.

Support for a “sharing principle” appears to have, in the main, developed out of the “big money” cases, referenced so eloquently by the noble Baroness, Lady Deech. It is seen as unfair that one party would receive a surplus of high-value net property that had been accumulated together over many years. In the vast majority of divorces, financial provision is about meeting needs. Generally, people do not leave a marriage equally—one partner generally has better employment prospects and caring responsibilities are often distributed unevenly. Under the current law, distribution of assets is usually weighted to make up for this. For example, assets may have to be distributed unequally to reflect the fact that one of the parties may not be able to secure a mortgage due to age or ill health. A 50:50 presumptive split of property would generally benefit the person with better ongoing employment prospects or earning capacity and fewer caring responsibilities. This is likely to disproportionately negatively affect women.

The third major provision is that periodical payments for spousal maintenance should be for a maximum period of five years, subject to narrow exceptions. While only one in 10 divorces in England and Wales ends up with periodical payments of spousal maintenance, a five-year limit would not take account of need in the way the current system does and could cause hardship for many couples, and for women in particular. While the Bill gives the court the power to make exceptions to the five-year limit, it nonetheless introduces a presumption against continuing financial support after divorce. The current law recognises the risk that one of the parties in a divorce might not have reached a financial position where they no longer need financial support after five years.

The Law Commission has concluded that, although the courts are given a wide discretion, in practice, financial orders and other financial settlements tend to lead the parties to financial independence in the majority of cases, although the time needed to achieve this will vary according to the circumstances of the parties involved. Having to adjust to a new financial reality may take longer than five years; for example, for a woman who put aside her career because of the competing demands of raising children. We believe, therefore, that it is better for the court to retain the discretion to provide as it thinks best to meet the circumstances of each individual family.

The Bill also provides that the court should not consider the conduct of the parties unless it affects the financial position of either party or it would be unfair not to consider it. The Matrimonial Causes Act 1973 already provides for the court to consider conduct if it would be unfair not to take it into account. The Government believe that this provision is adequate and should be retained. I appreciate the noble Baroness’s desire to ensure that financial division on divorce or dissolution of a civil partnership is made simpler, so that people will more easily be able to estimate what they are likely to receive. In turn, people would be better able to negotiate with each other and couples should be more confident to enter into agreements determining what they would receive on divorce. I say again that this “survival guide”—so well named—contains examples of what couples might receive in different circumstances. It helps to manage expectations, which is an enormous assistance, but we agree that this is not enough.

The Government recognise that more needs to be done to help divorcing couples reach agreement. The Government, as I have said, are considering the Law Commission’s report on matrimonial property agreements and other financial arrangements on divorce and will respond formally in due course in the context of our wider plans for family law and system reform. The Government will not oppose the Bill receiving its Second Reading today but we have concerns about its approach; that it could cause hardship to many families; and that its proposals, which would radically change the law in this area, have not been subject to public consultation. We believe that we are already considering many of the issues raised by the noble Baroness’s Bill and how these might be addressed as part of a wider approach to family private law reform. Finally, I thank all noble Lords who have taken part in this debate, particularly the noble Baroness, Lady Deech.