Divorce settlements ‘get real’, at last

Posted on March 8, 2012 by

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In January 2011 the Law Commission shocked what had been until then a pretty unshockable sector of society – divorced men.

The Law Commission in publishing Report No.198 (“Marital Property Agreements”),  made proposals that could revoltionise marriage and matrimony. Their suggestion was that pre-nuptial and even post-nuptial contracts should be legalised in Britain. [1]  So radical were the proposals that I wrote an article at the time, “A Fairer Deal for the Common Man”   ( http://robertwhiston.wordpress.com/2011/04/19/24/).

The only other time that government had fleetingly contemplated pre-nuptial contracts was in 1997 at the time of the billion pound Sure Start programme.

Adults as free agents

Should, the Law Commission asked, a couple be empowered to make a firm agreement, i.e. a binding contract, before they get married  or enter a civil partnership ?  Should this empowerment be extended so that they are free to make an equally firm agreement during their marriage ?

The purpose of pre-nuptial contracts is to limit exposure while attempting to be fair at separation. Pre-nuptial are most useful when one, or even both, parties have significant, say, family wealth or assets overseas or business interest, they wish to retain or that would be put in jeopardy by a separation/divorce.

Previously this form of making prior arrangements had been ‘off limits’ –  a no-go area – as the moral imperative to provided for any children of the marriage. such contracts, even where there were no children, were viewed as undermining the purpose of marriage, i.e. a lifelong commitment (however, on reflection that reason became obsolete the day no-fault divorce was introduced).

Notwithstanding the above there remained the question of matrimonial property. What should happen to the property if the relationship ends ? And this incites another question, namely that of what constitutes matrimonial property when other jurisdiction have a “community property” system. In the US community property is that acquired only during the marriage and it is only this property that is divided up upon divorce. This contrasts with the UK where property previously owned and brought into the marriage, plus any property acquired during the marriage is divided up on divorce.

Prior to the Law Commission’s consultation paper two high-profile and very expensive divorce cases had effectively re-written matrimonial law when the highest court validated pre-nuptial contracts. The judgement in Radmacher v Granatino and McCloed went further than ever before in recognising the significance of pre-nuptials.

Millionaire’s law

They say money buys influence and one can’t help thinking this is all too true in the above two cases for they both involved millionaires.

The first of the two pivotal cases was McCleod v McCleod in 2008. Roderick MacLeod, aged 64, had made an estimated £14m fortune from cable television, and his wife Marcia, 22 years his junior sought a divorce (the case was decided,unusually,by the Privy Council). [1]

The second case, Radmacher v Granatino, was heard in Juy 2009. Katrin Radmacher, 39, was a German heiress worth an estimated £100m. She was divorcing her husband, Nicolas Granatino, 37. This case was decided in the Court of Appeal.
Both millionaire couples were able to protect their money and assets to an extent only dreamt of by Mr & Mrs Average.
So should the law remain as it now stands, or face a revamp for all ?
Public reaction 

In a consultation launched by the Law Commission the question asked was how amenable to change and what problems might arise if this new format were to be widely adopted ?

Submissions from a variety of sources were received by the Law Commission and given the radical approach of the DWP ‘Green Paper’ to Child Support payments published at the same time, the ambiance seemed most appropriate to test the waters among those groups which one could reasonable call family and father centred.

With the possibility of a momentous change about to be engineered it became imperative that a consolidated or coalition  of like-minded people be assembled.

In the autumn of 2011 a survey (devised by George Piskor) was sent to over two dozen ‘interested groups’ which shared an appreciation of family law and custody matters.

The results, over a wide-ranging series of questions, showed an overall disappointment with the current law across a large number of aspects.

The finished survey results were very detailed, however the consensus relating to the Law Commission’s suggestions are shown below in correspondence (in précis form) to the Law Commission .[2]

The collated results were ready by April 2012 and formed the basis of a second or Supplementary Response submission to the Law Commission in anticipation of ‘Sept 2012 developments’ alluded to in correspondence.

Survey highlights

A danger always exists that when reforms are planned and then implemented then the Law of Unintended Consequences will apply sooner or later. Reforms that are evolutionary in nature will suffer from this malady far less than radical reform on the scale of the 1969 Divorce Reform Act (that Act was so unworkably abrupt that a decade of supplementary legislation was needed to make it operate).

Some years ago John Haskey, the much respected contributor to ONS’s Population Trends, and who for many years produced social statistics wrote in a Foreword published by Civitas: 
  • “For the best part of thirty years we have been conducting a vast experiment with the family, and now the results are in: the decline of the two-parent, married-couple family has resulted in poverty, ill-health, educational failure, unhappiness, anti-social behaviour, isolation and social exclusion for thousands of women, men and children.”

Divorce is fraught enough and in the past that stress has been mischievously assigned by reformers to “the process” whereas the process of divorce creates only low levels of stress. Measures to ease the impact of process on the individual parties has not eased their pain or strain whatsoever underlining that the central problem is not there but oppressive nature of settlements (both of property and children).

  • “The Commission will examine the extent to which one party should be required to meet the other’s needs after the relationship has ended. It will also consider how what is known as “non-matrimonial property” (acquired by either party prior to the marriage or civil partnership, or received by gift or inheritance) should be treated on divorce or dissolution.”

Unless substantial changes are made to the present proposals the anticipated benefits of the reforms will remain the preserve of the wealthy in society.

While we accept we cannot speak for solicitors, it is our opinion that there is an expectation among a number of provincial solicitors that the proposals will not bring about a substantial change for the majority (if any) of their clients.

If this assessment proves to be the most likely then we ask for the mechanism to be re-examined to make the benefits more widely available.

Based on the article by Prof. Elizabeth Cooke (of the Law Commission), “Pre-Nups and Beyond: What is the Law Commission Up To Now ?[3]  we agree with her comments about:

  •  patterns of property ownership
  • The overall level of wealth or poverty

Note:Later on we drew attention to and contrasted levels of poverty with Lord Gorrel’s Royal Commission of 1912 which examined separation and the situation of lowly paid, unemployed, or missing men, and serial relationships by abandoned women with children. Society has, of course, moved on greatly since that era with women’s earnings today comparable to men’s.

We share Prof. Cooke’s sentiment that no matter how splendidly the high-profile test cases she cites display ‘individually tailored justice’ it does make predictability more difficult, induces stress, and increases litigation costs.

Prof. Cooke then states that ‘the other new ingredient’ in the project is the law relating to non-matrimonial property in the light of the House of Lords ruling in White v White (2001).

The fact that in this case some of the country’s best “lawyers struggled to determine whether any property is exempt from the new sharing principles” would indicate the sharing principles to be inherently inequitable and profoundly misplaced.

We believe extending the sharing rights of property upon divorce was a mistake. ‘Ancillary Relief’ has already been adeptly described by a former Law Commissioner as vengeful and pernicious. Excluding inherited or pre-acquired property it provides only for a modicum of relief. [4]

In this narrow regard the principles of community property, adopted by some states in American, appear relatively attractive as they limit exposure.

Limiting exposure to the damaging effects of section 22 – 25 of the Matrimonial Causes Act 1973 is essential to restore confidence in 1/. the law, 2/.  the judiciary and 3/. marriage (with all the implications for the present government’s policy).

Marilyn Stowe, in an article, identifies ‘need’ as the fulcrum of the discussion – as indeed does Prof. Cooke. We would agree. We see the present interpretation of ‘need’ as the stumbling block to progress. Devised in a period of history when married women were not expected to work, have equal wages or to be equal to men in society, it made sense that their needs should be put ahead of all other claimants.

Dependent maintenance

Former spouse maintenance payments (all payable over a protracted time scale), plus a dip into the asset resources of the matrimonial partnership plus future likely income enhancements all represents more than just double dipping for one party to the divorce. [3]

The period of a 1950s saw the ‘wholly dependent’ wife – especially among middle-class families. This has  now long gone yet the judicial culture remains of awarding generous compensation to helpless wives.

Overlooked today is the fact that working class women went out to work in great numbers. Possibly the same proportion, or more, of working class women went to work than all the women today.

By the late 1990s, 45% of the labour market (and this was increasing) was female and the law needs to be modernised to reflect our current society’s social and ethical values.

Needs or just ‘wants’ ?

Professor Cooke asks, ” what does “needs” mean and how should a party’s “needs” actually be defined ?”

“Needs” in this instance are as indeterminable as the ‘best interests of the child’ mantra recited in custody cases. Both are incapable of sensible quantifiable measurement and should be abandoned.

They are used to justify actions and decisions where no other ‘excuse’ would be tolerated.

The court should no longer consider:

  • “ . . . the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future.”

Courts have totally negated the meaning of financial obligations and responsibilities owed by each of the parties to one another. They and Society have encouraged on the one hand a ‘grass is greener on the other side’ approach while on the other, a ‘black widow’ mentality. [5]

Divorce means dissolution – a complete termination – a ‘de novo’ situation as one would find in Company Law. ‘De novo’ provisions allow for struggling companies/partnerships to reform and return to profit.  In the matrimonial dimension divorce is so catastrophic that reforming and returning to profit for a marriage is a dim and distant target.

A major plank in the pre-1969 argument in favour of divorce reform was that it would legitimise illegitimate marital liaisons, i.e. supposedly encourage second marriages and re-marriages which, it was claimed, were held up in limbo by the existing law. These ambitions of the Divorce Reform Act 1969 were still-born. The plight of Second Wives has been one of society’s running sores for 40 years (and women who are in the vanguard of divorce reform give them not a moment’s thought).

Sect 25 of Matrimonial Causes Act 1973, with which society has had to live for 40 years allows only for complete asset confiscation. The provision is wholly negative and destructive. The basis for any new proposals must not include this vestige from an increasingly irrelevant past.

British law has always been based on property. Even the criminal law is steeped in the use and abuse of property. If you want to smash any branch of the law then strike at its ‘vitals’ – its junction with property. This is what has happened over and over again with divorce and custody reforms. Property gives the holder rights, status but also obligations; invert it and only obligations and loss of its quiet enjoyment remains.

So, in answer to the question, should a party’s “needs” actually be defined’ the response has to be ‘no.’  Not only do the meaning of “needs” vary from one family  to another but we would suggest that in 90% of divorce cases asset and property ‘reallocation’ cannot be divided sensibly, i.e. economically or justifiably. All that happens in an institutionalised debasement of living standards (enforced poverty) and an under use of those assets that are available.

Euphemistically text books state that “whatever capital assets [are left over] after needs are met” from out of the family pot can then “to be shared’ out equally.

If we review the differences between the pre-69 divorce laws and the post-69 laws the most striking aspect would be the ability to pay. Generally, divorces were granted 1/. where there was a guilty party and 2/. if the husband could provide for his former wife and ensure his wife would not be ‘a burden on the state.’

After 1969 that pretence (some would say safeguard) was dropped. Incomes levels became irrelevant and thus all former wives became ‘a burden on the state.’

Divorce was, in effect, ‘nationalised.’

  • “The Commission will not, however, be conducting a full-scale review of the law of financial orders. Rather, the aim is to bring clarity and predictability to two areas of that law that cause particular difficulties.”

If the Law Commission is to limit the scope of the review of Marital Property Agreements (MPA) to only a few topics revolving around consideration of “needs” and ‘property’ we would press for a radical rethink of ‘needs’ (for the reasons given above).

Any reassessment of property rights or entitlements should be equally radical and reflect the present day social values.

Is the Law Commission asking how desirable are Marital Property Agreements (MPA) for a). spousal marital property and b). for non-marital relationships ?

The single largest legal question posed by pre-nuptials, we believe,  is to what extent do they allow parties to truly define their own financial affairs and contract out (or re-define) of statutory provisions (relating to property division, spousal maintenance and child maintenance).

The test will be if the proposals make a real impact for the majority – and not just for women, as has always been the case since 1971.

There are contradictions which will not go away. For instance, if marriage can be defined as a personal religious covenant or even a contractual relationship, then the state has little to say in the case of contractually valid agreements.

But if marriage is viewed as an inherent status regulated by the state, then legalising pre-nuptials is tantamount to the state vacating its role as the regulator of relationships (as a matter of implicit or explicit public policy).

The way couples are taxed, e.g. personal allowances, altered many years ago so is it now time for the way we assess Marital Property and Non-Marital Property ?

The more modern of countries have long recognised four general approaches to inclusion/exclusion of marital property:

  1. Separate property regimes in which assets and wealth accumulation are held distinctly by each party.
  2. Community Property regimes in which all assets, and resulting wealth from those assets, accumulated during the relationship are jointly and equally held by both parties. Wealth accumulated from assets brought into the relationship, are therefore deemed separate.
  3. Universal Property regimes in which all assets brought into the relationship and any subsequent wealth accumulation from any form of asset is jointly and equally held.
  4. Equitable Distribution regimes in which property distribution is based on relative contributions and sacrifices made by both parties adjudicated under Laws of Equity.

We believe that individuals should be free to arrange for their own property / asset regime from the above four options within a Marital Property Agreement (MPA.)

Jurisdictions often blend economic considerations such as relative contributions and sacrifices made by parties with social welfare issues of “needs and means” in assessing property rights.

Some have argued that welfare issues (the “needs and means” in assessing property rights) are more properly a state responsibility separate from private law property issues. Arguably, when the state off-loads its welfare responsibilities onto the individual parties in a relationship Equity is undermined.

The present situation has some parallels with the Royal Commission of 1912. Divorce laws then had also become notorious and Lord Gorrel felt he had to explain the iniquities it had reached to parliament.

As President of the Probate Divorce and Admiralty division it was Lord Gorrel who pointed out in the House of Lords (14th July, 1909), that separations were being obtained instead of divorces and that this was having a bad effect on the moral standards of the working classes. These women were not technically divorced but were re-establishing their married status by ‘living-in-sin’ and thus committing adultery or bigamy.

Politicians of the time were shocked at the possible collapse of morals among the lower orders and so a Royal Commission was set up in 1912.

Sharon Redmayne’s book “The Matrimonial Causes Act 1937: A Lesson in the Art of Compromise”, states how Gorrel noted the number of injustices and anomalies which were being exposed in the Matrimonial Causes Act of 1857.

As a social document the 1912 Royal Commission provides a bridge to earlier Commissions, namely the Royal Commission of 1832 and the one of 1852. All 3 investigated adjacent social issues. The Royal Commission of 1832 was set up to reform the Poor Laws that were deemed no longer relevant to 19th century society. The Commissioners found that employers could keep wages artificially low, knowing that they would be subsidised by the Poor Law (as a result family living standards, a precursor to marriage rates, were adversely affected).

It is these last points, laws deemed no longer relevant and employers keeping wages low, which bears comparison with the present day. Our present divorce laws have already achieved notoriety. Compared with 1912 standards we have achieved a total moral collapse.

Since the state provides a safety net there is no incentive to act and behave in a mature manner. There is no deterrent effect since the state will compensate for divorce by low-income couples.

An associated argument is that relationships must of necessity contain an element of good-faith risk that must be assumed by every mature adult. Further, that the modern state by providing so comprehensive a safety net, which was not available in earlier times, works to undermine the need for every adult to act and consider matters maturely.

If MPA’s are to constitute a valid contract under private law, is it reasonable that the state should have no right to impose public welfare obligations on one former spouse to provide maintenance to another ? This is particularly acute where the severing party (petitioner) is the one most likely to gain the most financially and to have conveyed or put least into the matrimonial pot ?

Assuming couples are free to structure their own financial settlement within a contractually valid MPA agreement under private law, should couples have an over-riding obligation to provide needs-based maintenance in the event insufficient wealth has been accumulated during the relationship ? This brings us back to the questions posed in divorce courts during the pre 1969 era (should money and the ability to provide spousal maintenance dictate the issuing of a decree absolute ?)

Almost be implication, should couples be free to have a “clean-break” option in a MPA by contracting out of post-dissolution “needs” of a former spouse ?

Child maintenance provisions (which have not been addressed so far in this supplementary response), have been the subject of a thorough examination by the DWP over recent years (see Green paper 2011).

There is a possibility (ref DWP), that in future child maintenance payments can be mutually agreed between the separating couples having regard to their joint income (and not just the fathers).

Assuming child maintenance provisions can be made in a MPA the question is will it clash with the DWP’s proposals ?  

For a MPA, what is the intended default minimum (if any) that should be respected – e.g. 1/. equivalent welfare payments, 2/. pre-dissolution average standard of living of parent, 3/. post-dissolution average standard of living of parents or 4/. the DWP approach of income practicality ?

We trust the above is of assistance to your team. We would be pleased to provide any clarification as required.

END

 

NB. This supplementary letter represents the general views and opinions of the Men’s Aid which co-sponsored a survey of other opinions within the Family Rights Movement (FRM) in the autumn of 2011.


 

[2] See also “The myth of the kept woman” , 19 Sept 2009 http://www.guardian.co.uk/lifeandstyle/2009/sep/19/divorce-settlements-law-deech

[5] ‘Marriage Contracts’ by Antony W. Dnes, University of Hertfordshire, http://encyclo.findlaw.com/5810book.pdf and ‘Property Rights and the Economics of Divorce’ by  Simon Clark

[1] See http://www.telegraph.co.uk/news/uknews/3815022/Post-nups-are-the-new-pre-nups-after-landmark-millionaire-divorce-case.html ]

[3] The 2004 settlement won by Ray Parlour’s former wife included  1/. more than a third of his future income  2/. A £250,000 lump sum 3/. maintenance of £444,000 a year  4/. Two mortgage-free houses worth more than £1m  5/. an annual payment of £12,500 to each of his 3 children. Source: BBC on line http://news.bbc.co.uk/1/hi/uk/3872905.stm

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