Disputes about finances (spouses and civil partners)

bicycle handle barsUntangling shared finances is a key feature of most divorces and civil partnership dissolutions. In practice, the process is separate from, but often runs in tandem with, the divorce or dissolution process itself.

Financial disclosure

Financial disclosure (designed to lay all the information on the table to create a clear picture) is an essential part of the process and usually dealt with by each party completing and then exchanging a Form E.  This is a court form which sets out detailed information about:

  • Assets - including interests in properties, savings and investments, pensions, business and trusts
  • Liabilities - including mortgages, loans, overdrafts and credit cards
  • Income
  • Outgoings

Form Es must be prepared after any court application for financial orders is made, but in practice they are often exchanged before court proceedings start, to help the negotiation of a settlement. In less complex cases or where there are limited assets it may not be proportionate to exchange Form Es, but there is still a process for financial disclosure.

Agreed financial settlements

Any agreement about financial issues will have to be approved by a judge to be legally binding, so it is sensible to seek advice before it is formalised in a consent order or separation agreement. A consent order can be applied for after the decree nisi/conditional order in the divorce/dissolution process, and it makes the financial settlement legally binding. Once the order is approved, this prevents any future claims by either spouse, unless allowed for in the order. A separation agreement is another option, used when a couple wants to settle financial issues but is not yet able to obtain a formal consent order.  It is not legally binding like a consent order, but does carry weight with the court if there is a later dispute about finances, particularly if the parties had legal advice and went through financial disclosure before it was signed.

Disputes over finances

If it is not possible to agree a financial settlement, mediation should be considered as the first option for resolving the dispute. Find out more about mediation and the requirement for a Mediation Information and Assessment Meeting (MIAM).  If the dispute cannot be resolved through mediation, either party can make an application to the family court. The Matrimonial Causes Act 1973 empowers the court to make a variety of orders when dealing with financial claims from spouses or civil partners, including orders as to:

  • What should happen to the family home (the court can make an order for transfer between partners or an order for sale and division of proceeds)
  • Sharing or transfer of pension assets
  • Sale or transfer of shares in a business
  • Spousal maintenance
  • Responsibility for debts
  • Financial provision for children.

The court has a wide discretion and will look at the list of criteria set out in Section 25 of the Matrimonial Causes Act (which is also applied to civil partnerships by the Civil Partnership Act 2004). In Lawrence v Gallagher (2012), the Court of Appeal made clear that these principles should apply in the same way to same-sex civil partners as they do to heterosexual spouses (although in practice of course there is considerable flexibility and cases involving same-sex couples often have a different flavour).

The court must consider and weigh up the following factors:

  • The welfare of any children (this is usually the most important consideration)
  • The financial needs, obligations and responsibilities of each partner (both now and in the foreseeable future)
  • The income, earning capacity, property and other financial resources of each partner (both now and in the foreseeable future)
  • The standard of living enjoyed by the family before the breakdown of the relationship
  • The age of each partner
  • The duration of the marriage or civil partnership
  • Any physical or mental disability of either partner
  • The contribution which each partner has made (or is likely to make in the foreseeable future) to the welfare of the family including looking after the home or caring for the family
  • The value of any anticipated benefit which either party will lose if the relationship is dissolved
  • The conduct of either party (although only if the judge considers it inequitable to disregard this).

The court is not bound by any pre-nuptial (or pre-registration, in civil partnership cases) agreement which the parties entered into before getting married or forming a civil partnership, but can take it into account. The weight it will be given is an evolving question, but it is clear that agreements are more likely to be considered if they are signed sufficiently in advance of the marriage/civil partnership, and following full financial disclosure and independent legal advice for both parties.  The case of Radmacher v Granatino (2010) which was decided by the Supreme Court established that pre-nuptial agreements could be upheld by the court if they wished. In 2014, the Law Commission recommended that pre-nuptial agreements should become legally enforceable. It therefore seems likely that the court will take more, rather than less, account of pre-nuptial agreements in the future.

The court has the power to make an order for spousal maintenance i.e. ongoing regular income payments made from one spouse or civil partner to another, over and above child maintenance and any capital or property orders. This may be appropriate where one spouse has been heavily dependent on the other's income and the court can be flexible in the way in which the orders are made. For example an order can be made for a certain number of years to allow the receiving party an opportunity to get back into work or to adjust to the new lifestyle. If circumstances change later, it is possible for either party to try and bring the matter back to court to vary the terms of the order.

The court process

The court process is designed to allow parties to continue negotiating matters and to reach their own settlement, but with the court ultimately imposing an order if settlement is not reached.  One of the benefits of making a court application is that the court process will impose a timetable for the process of resolving things, during which most cases settle.  Either party can send a completed Form A to the family court at any stage after a divorce or dissolution petition has been issued, and must then go through financial disclosure if they have not already.  The court will then set dates for three hearings to determine the financial application. These are:

First Directions Appointment (FDA) - This is the first hearing in court and is normally mainly procedural. The judge will assess the information already provided and will determine what is required to progress the case to settlement. The judge might order:

  • further information, for example if the financial disclosure was incomplete or if there are questions which need clarifying
  • formal valuations of assets like properties or pensions (including deciding who should conduct those valuations)
  • a timetable for any additional information to be provided in advance of the next hearing.

Financial Dispute Resolution hearing (FDR) - The court will not make an order at an FDR, but a judge will hear the position of each party, their proposals for settlement, and their reasoning, and will then give an indication of what he or she might order if this were a final hearing.  This hearing is conducted on a ‘without prejudice' basis which means that the judge will not be involved in the case any further if it does not settle. This is designed to encourage open discussions in which the parties feel able to lay their cards on the table without worrying that they might affect the ultimate decision if there is no agreement.  Many cases settle at or shortly after this hearing.

Final Hearing - At a final hearing, a different judge from the one who heard the FDR will usually hear oral evidence from each party and any relevant experts, and will consider the written evidence and legal argument which has been filed in advance of the hearing. The judge will then reach a decision and will make an order dealing with the finances which is imposed on the parties.