Financial Dispute Resolution Solicitors
Bexleyheath, Petts Wood & Blackheath
Quite often couples can reach an agreement between themselves as to how their finances are to be divided on divorce. If they are unable to do so they can make an application to court so that the court can decide what should happen.
In deciding how finances should be distributed the court will follow the rules set out in the laws created by Parliament. The law is not always clear and therefore Judges are guided by looking at decisions made by very senior judges in appeal cases which are recorded and made public. This is known as case law. These cases are used as precedents as they establish principles that should be followed in cases with similar facts or should influence the outcome of similar cases so that decisions are more predictable.
The court wide powers to make orders concerning a couple’s financial arrangements on divorce to includes the power to order:-
- periodical payments – spousal maintenance payable for a specified period or until death
- secured periodical payments – spousal maintenance which is secured against a particular asset such as a property, so that if the paying party does not pay the maintenance ordered the asset can be sold
- payment of a lump sum to the other party
- property adjustment order – for example, a sale and distribution of the proceeds of the sale, an outright transfer from one party to another, or a transfer from joint names to one of the parties, giving the other a charge secured against the property for a specific amount or a percentage of the value. The charge is a legal document recorded at the Land Registry which gives them the right to force a sale of the property if the specified amount is not paid when it falls due.
- share of a pension fund – pension sharing, where the benefit of one person’s pension is transferred to a pension plan in the name of the other spouse or earmarking, where a spouse’s pension continues to be held by them until retirement when a portion of that benefit will be paid to the other spouse.
When deciding what orders to make, the court must take into account the following issues:
- the financial resources which the parties have or are likely to have now and in the foreseeable future
- the financial needs of each party now and in the foreseeable future
- the standard of living enjoyed by the family before the breakdown of the marriage
- the age of the parties and the duration of the marriage
- any physical or mental disability of either party
- the contributions made by each party to the welfare of the family, including any contribution by looking after the home or caring for the family, and any contributions which either is likely to make in the foreseeable future
- the conduct of each of the parties, if that conduct is such that it would be unjust to disregard it – usually the court will only take into account conduct that has affected the financial position of the parties.
The legislation does not give any guidance as to how much importance should be given to each respective factor, although, the court must give first consideration to the welfare of any children under the age of 18.
The court will look to the important decided cases to help them exercise their discretion, particularly in cases where there are assets that are of considerable value. In cases where the value of the assets is small, the outcome of the case will largely be determined by the needs of the parties and their children.
If there are children, the court will usually start by considering their housing needs and this will often lead to an unequal division of the assets or the transfer of the family home to the person who is the main carer for the children.
Assets that form part of the marital pot include inherited property and property acquired before the marriage or after the relationship came to an end, however, such assets may be treated differently to those acquired during the marriage, particularly in cases involving substantial assets, or where the marriage is short.
Pensions are quite often of significant financial value and the court can order that the pension funds be shared between the parties, or that the value of the pension is offset against other capital assets. So, for example, one party may keep all or most of the pension fund and the other may keep all of the equity in the house. How this works in practice will depend on all the circumstances of each particular case and you will need advice tailored to your specific circumstances.
Where there is a short marriage the courts are less likely to order a transfer of property acquired before the marriage unless there has been a long period of cohabitation before the marriage. In cases where the marriage has been long, the parties have clear financial responsibilities to each other and the courts are more likely to order a transfer of assets, such as the family home or pensions.
Where the parties agree on a settlement between themselves it is important for them to record the terms of the agreement in a consent order. This is a document that sets out what has been agreed and where possible, prevents the other party from making any further application about the financial issues on divorce in the future.
The order is sent to the court for the Judge to approve. He or she will want to ensure that the order is fair and not biased towards one party. There is no need for the parties to attend court unless the Judge is concerned about any aspect of the order, or considers that the order is unfair to one party or the other. If this is the case the Judge will list the matter for a short hearing to deal with those concerns. If approved the order will be stamped with the court seal and sent to each party. The order then becomes binding on all parties.
If court proceedings become necessary, the court process usually involves a series of three court hearings. First appointment, Financial Dispute Resolution hearing (FDR) and a final hearing. The party bringing the proceedings is known as the applicant and the other party the respondent. When the application is lodged the court will set a strict timetable for the parties to provide disclosure and will set a court date for the first hearing, known as the first appointment between 12 and 16 weeks from the date of issue.
The purpose of the first appointment is to deal with issues relating to disclosure of income, assets and outgoings. Each party will be required to complete a Form E, which is a statement in a set format detailing the value of the assets and debts, the level of income and the outgoings that each party has. Documents proving what is declared in the statement, such as pay slips, bank statements for the last 12 months, mortgage redemption figures, valuation of properties, pensions, life policies etc. are attached to the Form E. The Form E should be filed at court and exchanged with the other party 35 days before the date of the first appointment.
Each party is permitted to ask questions about the disclosure, where information provided by the other party is incomplete, unclear. Any questionnaire, a chronology of dates and a brief statement setting out the issues that need to be decided must be filed in advance of the court hearing, together with a notice informing the court either that the disclosure is complete or that further disclosure is required.
If further information is required, then the first appointment will proceed and at the hearing, the court will consider the questionnaires to make sure that there are no onerous or irrelevant questions and then will order directions, setting a timescale for answering the questionnaires, valuation of assets and where appropriate narrative statements to clarify issues in dispute etc. The case will then be listed for the financial dispute resolution hearing, usually in four to six months, during which time the parties must comply with the orders made.
If the disclosure is complete at the date set for the first appointment, then the hearing date will be used as an FDR hearing, as set out below and the case can move on much more quickly and cost-effectively.
Financial Dispute Resolution hearing
Assuming all directions have been complied with by both parties, just before the hearing, each party must send to the other an offer letter setting out their proposals for settlement. On the day of the hearing, the parties and their representatives should arrive one hour before the allotted time for negotiation. If agreement can be reached on the day then terms of the agreement can be set out in a consent order and approved there and then by the Judge.
If an agreement cannot be reached then all parties go before the judge, who will consider the offers made and will give an indication of what he or she believes the outcome would be if the matter were to go to the final hearing. The judge may also make further orders, for example, updating bank statements and valuations of the assets, further disclosure, statements etc. The judge will have no further involvement with the case and the final hearing must be heard by a different Judge.
The indication given by the Judge usually helps the parties settle, if not on the day, soon after, through correspondence, as the costs involved in attending a final hearing are likely to be considerable.
Before the final hearing, each party should comply with any directions made at the previous hearing. The solicitor for the applicant must prepare a bundle containing all documents relevant to the case.
At the hearing, each party will be asked questions about the information they have provided about their finances by the other party’s representative. The Judge will make a decision based on all the evidence, including the oral evidence given at court by applying the relevant law and cases to the facts of the particular case, as to how financial issues should be resolved. A decision may be made on the day or the Judge may need some time to think about the order to be made in the more complicated cases.
Each party is normally expected to bear their own costs of the proceedings. The court will only consider awarding costs to one party if the other fails to co-operate fully with the proceedings by, for example failing to provide proper disclosure or failing to attend a hearing.