Law Commission Scoping Report: Reforms on the Horizon for Financial Remedies on Divorce 

On 18 December 2024 the Law Commission of England and Wales provided their long-awaited scoping report concerning whether the law governing financial remedies requires reform. As this is just a scoping paper, they have not yet made any firm recommendations. This article will discuss the report and financial remedies for this divorce reform.

The current law for divorce and financial proceedings is set out in the Matrimonial Causes Act 1973 (“the statute”). Since 1973 there has been case law setting out how the statute should be interpreted. However, the actual statute has not been updated in over fifty years. 

Why the law might need to be reformed 

Numerous concepts have developed through case law since 1973, for example the concept of needs and matrimonial/ non-matrimonial property. However, the statute does not define what these are. Therefore, arguably the statute needs to be updated  in line with the current case law, mainly so that anyone getting divorced can understand how their case will be dealt with by looking at the statute. 

There has been a lot of criticism about the current law as it gives the court such a wide discretion. This  makes it difficult for divorcing couples to know what a court will do, as what one Judge orders may be completely different to another Judge, but these will all still fall within the bounds of discretion. This can make it difficult to negotiate as one party may be at the upper end of a court’s discretion, and the other party at the lower end. In the meantime, costs can spiral. 

There have been calls for reform for a long time, to bring statute up to date with case law and also to narrow the discretion so divorcing couples have greater clarity about the outcome of their case. Furthermore, society has changed significantly in the last 50 years and so many would say that reforms are long overdue. It can also be argued that case law has helped to keep pace with changes in society and there is no need to change the law. 

What the scoping report says 

The scoping report concludes the current law requires reform, although they place the burden on the Government to decide what shape the reform should take. They set out four models for possible future reform: 

• Codification: this involves minimal change to the existing law and is the simplest model of reform. Concepts which have developed through case are codified in statute. This should make the law more accessible, as the law would be set out in one statute, rather than contained in different case law. The court would retain a wide discretion and therefore this model does little to increase certainty. 

• Codification-plus:  this is a step-up from the codification model. The current law is codified and there could be additional reforms to deal with specific areas of law which are not yet settled (see below). The court still retains discretion but limitations on discretion may be introduced in relation to areas of reform.

• Guided discretion: Introduction of a set of underpinning principles and objectives which guide the exercise of the court’s discretion. This reform would go beyond the changes to the existing law contained in the statute. 

• Default Regime: this would create a matrimonial property regime. This means when couples get married they will know how property will be divided on divorce. This provides a high level of certainty and reduces the courts discretion. Default regimes are common in some European countries. 

Areas of law which are not yet settled 

There have been calls for reform in a number of areas of law including the following: 

Nuptial agreements

The current law means nuptial agreements are not yet legally binding in England Wales. The Law Commission’s 2014 Report on Matrimonial Property, Needs and Agreements, recommended couples should be able to enter into binding nuptial agreements, albeit parties should not be able to contract out of providing for financial needs. The government has yet to take these recommendations forward.

Spousal maintenance

The current law states that a court should consider whether it would be appropriate for spousal maintenance payments to be made in order to enable the other spouse to adjust to financial independence without undue hardship. Some commentators suggest spousal maintenance  should be limited to 5 years, save in cases of serious financial hardship. However, there are concerns this could leave spouses vulnerable. 

Conduct

There is no statutory definition of conduct. The current case law suggests personal misconduct will only be relevant where it is “gross and obvious”. Concerns have been raised that conduct does not recognise domestic abuse as conduct sufficiently. Reform could therefore define what forms of behaviour will be considered conduct, the impact this will have on the case and procedure. 

Making financial remedies orders for children aged 18 and over

Currently child maintenance paid through the Child Maintenance Service ends upon the child reaching the end of secondary education or training. The statute provides financial support for children will generally cease when they reach 18 years, although there are limited powers to make provision for a child beyond this age. Society has changed and many parents still provide support to their children beyond the age of 18. There are therefore calls to reform the law, to bring it in line with the societal norms, possibly to the age of 21. 

Pensions

The Fair Shares report found 24% of divorcing individuals didn’t know their spouse had a pension. Pensions can be extremely valuable and it is important they are factored into the overall financial settlement. It is common for divorcing couples to offset against a pension, i.e. one party receives a greater share in a pension and the other party a greater share of other assets. Concerns have been raised that this results in unfairness and issues for long-term financial wellbeing. 

If the government is updating the law, they may consider taking the opportunity to reform the area of laws considered above. 

Conclusion 

Although the scoping report recommends reform, it does not propose a method for reform and instead places the burden on the government to decide what should happen.  The current system based on statute and case law gives Judges a wide discretion to reach a fair outcome. Any reforms will need to carefully ensure fairness can still be achieved, whilst also providing divorcing couples greater certainty. The government have six months to provide an interim response and a year to provide a full response. Time will tell what the government’s proposals will be!