Proposed changes to family law will take years to make an impact and leave many unanswered quesions. But it is a step in the right dirction, says Speechly Bircham's Michael Wells-Greco.
The Law Commission’s recently published proposals on matrimonial law reform contain little in the way of surprises. A new draft Bill - likely to be introduced in the next Parliament - proposes to provide a statutory basis for binding pre-nuptial agreements (called ‘Qualifying Nuptial Agreements’, or QNAs). In allowing individuals and couples much more autonomy over their own financial affairs, the draft Bill gives recognition to the de facto state of affairs in the English courts since Radmacher v Granatino and brings English law into line with jurisdictions such as New York and other parts of the US.
However, couples (and their lawyers) should remember that the existence of a pre-nup will not override a couple’s first obligation to provide adequately for children or for each other’s financial needs on a divorce. They are not a ‘get out of jail free’ card for a vengeful or unscrupulous spouse. They should, however, become an indispensable legal instrument for affluent or wealthy couples seeking to protect assets owned, earned or inherited before marriage. Despite the valedictory claims made in some quarters, since the majority of individuals do not enter into marriages with substantial assets QNAs may not go mainstream (though more people should consider them than they do now). However, with the number of second marriages rising, and the average age on marriage surging past 30, there will be more people entering (or re-entering) the institution with pre-existing assets to protect.
But how exactly should financial needs after a marriage be defined and calculated? Here, the Law Commission has been less decisive. At present there are few fixed rules deciding who gets what on divorce. The benefit of this is that the Courts can be flexible, and often are; the drawback is that they can be inconsistent and often opaque, with nobody but family lawyers understanding how decisions have been arrived at via a corpus of case law stretching back decades. This makes it much harder for anyone attempting a ‘DIY divorce’ - and with legal aid cuts and litigants-in-person clogging up the courts, this is not a tenable situation.
To remedy this, the Court has proposed, first, that the Family Justice Council produce guidance from time to time on the law regarding how financial needs should be met, and second, suggested that a formula (perhaps modelled on the Canadian system) be established as a guideline to how assets should be split and spousal needs met on divorce. This would allow splitting couples to negotiate financial settlements within ranges, confident at least that any agreement would fall within the right bracket. Emphasis will be placed on spouses transitioning to independence - bearing in mind responsibilities towards children must be met. As with QNAs, the intention behind the formula is to promote negotiation and reduce the number of acrimonious - and often costly and distressing - disputes. This is a good thing, but no two marriages are alike; we will need to be careful that ‘cookie-cutter’ divorces do not spawn injustice or abuse.
While change is on the horizon, it will likely be years before this has a real impact on divorces coming through the system, and we will be left with the present arrangements dealing with financial needs for some time yet. What falls under the definition of financial needs? How do these translate into ongoing shared responsibilities? Will ‘reasonable needs’ still be considered, or will this traditionally more generous approach to splitting marital property become obsolete? When does inherited property become a marital asset? The report has left many unanswered questions; but at least the Law Commission’s proposals are a step in the right direction.
Michael Wells-Greco is a partner at international law firm, Speechly Bircham Geneva. He specialises in advising individuals and couples on family law issues, especially those with an international or cross-border element. Michael is a lecturer in EU Family Law and Private International Law at Maastricht University.