Financial remedy orders following divorce: The Matrimonial Causes Act 1973 turns 50, but is it still fit for purpose?

This year, the Matrimonial Causes Act 1973 (the ‘Act’) reaches its fiftieth anniversary. Unfortunately, not everyone in the family law community will see this as a cause for celebration. There are increasing concerns that the law the Act contains is now out of step with those depending on it, and    calls for reform continue to gather pace.  In this article, we consider the current law, the rationale for reform and crucially, what the new law might look like.

What is the current law?

At present, the Act is the bedrock of the law surrounding the division of financial assets on divorce.  As well as setting out the orders which the court can make, section 25 of the Act also sets out guidance on the factors which will be considered by judges when determining the appropriate settlement (the ‘section 25 factors’).  First consideration is always given to the welfare of any child of the family who is under the age of 18.  However, the court will consider all the circumstances of the case, including:-

1. the income, earning capacity, property and other financial resources which each spouse has or is likely to have in the foreseeable future. This includes any increase in earning capacity which a spouse can reasonably acquire (for example, by completing further training).
2. The financial needs, obligations and responsibilities which each spouse has or is likely to have in the foreseeable future.
3. The standard of living enjoyed during the marriage.
4. The age of each spouse and the length of the marriage.
5. Any physical or mental disability which either spouse has.
6. The contributions which each spouse has made or is likely to make to the welfare of the family in the foreseeable future. Crucially, this includes contributions made by looking after the family home or looking after children.
7. The conduct of each spouse, although in practice little if any weight is given to this factor, unless there is misconduct that is so serious that it would be inequitable to disregard it.
8. Any value which either spouse will lose the chance of acquiring as a result of the divorce (for example, interests under a pension).

Beyond this, the law surrounding financial remedies has been derived from case law. Over the years, judges have made significant developments in the approach taken when determining the division of assets. The case of White v White [2000] UKHL 54 determined that contributions to the household and looking after children should be given equal weight to contributions made by the financial breadwinner, with awards being checked against “the yardstick of equality”. Subsequently, the 2006 cases of Miller v Miller [2006] UKHL 24 introduced three key principles: namely, meeting the parties’ needs, sharing the marital assets and compensating spouses for losses suffered as a result of the marriage (for example, giving up a lucrative career to raise children). Later still, the landmark case of Radmacher (formerly Granatino) v Granatino (Rev 4) [2010] UKSC 42 accepted that the court should uphold pre- and post-nuptial agreements if they met certain conditions, despite there being no legislative basis to support this.

Since the introduction of the Act, the only substantive revision made to it was implemented in 1984, and required the court to consider in every case whether a clean break could be achieved without causing undue hardship. Nonetheless, for many years in cases where spousal maintenance was ordered, it was commonplace for judges to make “joint lives orders”, which required maintenance to continue for as long as both spouses were alive. Whilst judicial sentiment has now moved away from this approach, it is a clear demonstration of the breadth of judges’ discretion.

Is reform needed?

Understandably, the courts have been loath to introduce strict financial guidelines on the likely outcome of cases, for fear that this risks overlooking the personal elements which are often so crucial in family law. With that in mind, the principles set out in the Act are to be lauded for their focus on holistic factors. There can be little doubt that family courts are not the right venue for a hard-nosed commercial approach. The level of flexibility provided by section 25 means that each case can turn on its own facts, rather than families finding themselves lumped into a one-size-fits-all category.

However, the nature of the section 25 factors means that they offer little certainty for spouses faced with the daunting prospect of litigation, instead preferring to leave family court judges with the final say. This means the outcome of cases turns on the precise way in which each judge interprets and applies the Section 25 factors. It is entirely possible for two skilled judges to reach substantially different conclusions on the same case. This can make it difficult to advise clients on what they should expect to receive in a settlement. It can also hinder negotiations outside of the court room, where each spouse’s solicitor may take an equally individualistic view on the appropriate outcome.

There are also concerns about regional differences in the way in which the section 25 factors are applied. London courts – widely regarded as a mecca for high net worth divorces – are perceived as likely to award more generous settlements, whilst regional courts may take a more conservative approach, particularly when considering spousal maintenance payments.

Societal changes also need to be considered. Inevitably, many families today look very different to those in 1973, when the Act was first introduced. Couples are now more likely to live in dual income households, with women enjoying significantly more financial success and independence than previous generations. Supporters of the Act argue that the elasticity of the section 25 factors means these changes can be easily weathered. Conversely, critics conclude that the factors are underpinned by outdated assumptions, making them inherently unsuitable for modern families, and requiring judges to reinterpret the Act in order to fill the gaps.

What might the future look like?

Calls for reform of the law increased following the introduction of no-fault divorce in April 2022. The Ministry of Justice was put under increasing pressure to expand the scope of change by reviewing the law on financial remedies as well. A review was initially promised within weeks, but it is only this month that a consultation by the Law Commission has been formally announced. The first step is for the Law Commission to publish a scoping paper, but this is not expected to be completed until September 2024. Therefore, spouses who are currently in the midst of litigation are unlikely to find that their case is impacted by sweeping reforms.

Little can be guessed at this stage about the substance of potential reforms, but the Law Commission’s statement on the review offers some clues. As well as considering “whether there is a need for a clear set of principles…to give more certainty to divorcing couples”, the Law Commission will review the section 25 factors and will also consider how the law on financial remedies operates in other countries. Therefore, the Law Commission may look towards the law in other jurisdictions to resolve perceived problems in our own.

Sitting in the House of Lords, Baroness Fiona Shackleton (a leading family lawyer) has sponsored a controversial private members’ Bill that suggests a very different approach. The Divorce (Financial Provision) Bill  endorses formalising the recognition of pre- and post-nuptial agreements, and suggests that marital assets should be divided equally, with any provision for spousal maintenance limited to a duration of five years, unless this would cause serious financial hardship. The bill has yet to have a second reading in the House of Lords, but has already drawn criticism from Baroness Hale, a former president of the Supreme Court who previously undertook family law reform work at the Law Commission. Commenting on the bill, she described it as “threatening” to the stability of marriage, and stated, “I question how one size fits all can possibly meet the justice of the case”.

It seems unlikely that future cases will be determined by reference to a set range of outcomes based on the level of assets available. However, specific areas may see the introduction of definitive guidelines. In particular, the Law Commission mentions the issue of spousal maintenance. At present, there is no legislation to assist in determining the appropriate level of maintenance, or the period of time for which it should be paid. Consequently, it is an area which is frequently ripe for disagreement and may particularly benefit from substantial reform.

Whilst the consultation is underway, the family justice system will navigate the twists and turns of the Act and the section 25 factors as usual, with judges continuing to exercise discretion in deciding each case. For those who crave greater control over the process in the meantime, alternative dispute resolution options may be the answer, offering couples the chance to explore opportunities for settlement away from the pressures of the court room.

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