Who gets what financially on divorce - how does the Court decide?

The Law Commission's final report about how certain aspects of financial cases are to be dealt with on divorce is due to be released in autumn of this year. The report aims to give much welcomed clarity to the legal profession and the public about certain issues which arise when separating, divorcing, dissolving civil partnerships and indeed when entering into pre-nuptial agreements before marriage.

Financial cases are sometimes referred to as ancillary relief cases All this means is that a divorce commences, and that within or ancillary to the divorce, financial cases can be determined by the Court either by consent or upon an application being filed by one party on a contested basis.

The current legislation relating to financial cases is mainly set out in section 25 Matrimonial Causes Act 1973. These are referred to as the section 25 factors or the section 25 criteria.

Section 25 is in fact a checklist of things that the Court must consider when making a decision about how financial cases, ancillary either to divorce or civil partnership dissolution, are to be resolved. Many people think that there is a mathematical formula that is applied, and whilst there can be to child maintenance, there is not to other aspects of financial cases.

Section 25 includes, for example, that the Court must consider the parties' financial resources, their income and earning capacity, other property that they have an interest in, assets which have been dissipated by a party, financial needs, responsibilities and obligations of each party, standard of living during the marriage, length of marriage, ages of the parties and duration of marriage.

Having identified what facts are and are not relevant, the Court also bears in mind some general principles. First consideration must be given to the welfare of any child of the family below the age of 18. So it is important that any child of the family has somewhere to live. This does not necessarily mean the wife - even if she cares for the children most of the time - has the right to remain living in a large property with spare bedrooms, or a property that has lots of equity locked into it when there are no other assets. The Court must also consider all the circumstances of the case which means anything which does not fit into the section 25 factors, for example cultural issues.

Over and above the legislation, there are various fundamentally important cases that have been decided which the Court also has to bear in mind at all times. Cases such as White v White and Miller v Miller and McFarlane v McFarlane introduced principles such as fairness, an application of a yardstick of equality and a principle of sharing. Fairness, for example, centred around discussion about whether or not it was right to discriminate between a husband and wife in their respective roles and concluded that there should be no bias in favour of usually the husband as the breadwinner and stereotypically the wife as a homemaker and carer of children. In practice, this means that the starting point for dividing up capital and pensions is 50%. The Court then applies the relevant facts of the case to the section 25 criteria, keeping in mind the overall principle of fairness and that first consideration goes to the welfare of any child of the family. The Court then makes a decision as to what extent, if any, there should be deviation from 50%.

None of this is straightforward and therefore the Law Commission has been asked to address certain specific issues which arise repeatedly and are often contested through the Court. One of these issues is whether or not there should be a distinction between matrimonial and non-matrimonial property.

Each case therefore is currently determined on its own facts. The preliminary view of the Law Commission is that there should be a distinction between matrimonial and non-matrimonial property. So this means, for example, money received as a gift or inheritance or an interest in a business built up prior to marriage provided such monies are not required to meet the other party's needs. Again, what this means in practice is that in those cases where there is not enough money to go round to provide basic needs of housing etc. that such monies will still be brought into account.

The final Law Commission report is to be released in autumn 2013. Bearing in mind the complexity of the law, coupled with the actual legal procedures to be followed, it is strongly advisable to obtain expert legal advice about financial matters on separation/divorce and dissolution. Although generally speaking it is unusual for one party to be ordered to pay another person's legal costs in a financial case ancillary to divorce, orders can still be made.

For more information on any of the above issues, please contact our Family Law team on 0113 201 4902 or family.law@emsleys.co.uk.