Achieving fairness is always a Judge’s top priority when asked to approve a divorce financial settlement that is incorporated into a Consent Order following divorce or dissolution of civil partnership.
The Judge’s role when considering a proposed Consent Order is not to simply act as a ‘rubber stamp’, but to scrutinise the divorce settlement and achieve an outcome which is “as fair as possible in all the circumstances”. Accordingly, each divorce financial settlement is dealt with on an individual basis according to its facts. The Judge may make an Order in the terms agreed in the proposed Consent Order, but also has discretion to reject it if he/she thinks the divorce financial settlement may be unfair to one or both parties.
At the same time as submitting a proposed Consent Order for approval by the Judge, the parties must also submit a Statement of Information form (D81) which sets out a detailed summary of their assets and income. When the Judge considers the draft Consent Order and proposed divorce financial settlement, he/she will also consider the Statement of Information form to see how the proposed divorce settlement will look following the implementation of the proposed Consent Order. In the majority of cases where expert advice and assistance has been obtained in the negotiations and drafting of the Consent Order, the proposed Consent Order is approved by the Judge without any issue.
If a proposed Consent Order is rejected by a Judge, the Judge will usually return the Consent Order with some questions that need to be answered, and clear reasons for the rejection. In many cases there will be an opportunity for the proposed divorce financial settlement and Consent Order to be adjusted and re-submitted to the Judge for approval. The most common queries received from Judges are for the parties to explain how one or both parties will rehouse themselves on the proposed asset split, or how the parties’ needs will be met from the proposed divorce financial settlement.
What do Courts consider in deciding a divorce financial settlement?
As a matter of practice, the Judge will usually embark on a two-stage exercise in considering the proposed divorce financial settlement contained in the Consent Order. These 2 stages are:
- calculation of the assets and
- distribution of the assets
Whilst there is no set formula that a Judge uses when it comes to determining a division of assets on divorce, there are a set of principles that a Judge will use to reach a fair outcome. These three key principles are: needs, sharing, and compensation.
Needs
Primarily, the Judge will aim to divide the family assets equally between the couple, however, if an equal division of assets does not meet the needs of the parties, the Judge will search for alternative solutions to meet the needs of both parties, even if it leads to an unequal division of assets.
In the vast majority of cases the practical exercise will begin and end with the parties’ needs. It is only in cases where the assets are in excess of the parties needs, that the sharing principle is used.
Sharing
Another element of fairness is sharing. The sharing principle sets out that the starting point in all cases should be the equal division of assets unless it is appropriate to award a greater share to either party.
In the majority of financial cases arising from divorce or dissolution, the sharing principle is directly related to the needs of the parties.
Compensation
This principle is only applied in exceptional circumstances if the Judge considers that either party should be compensated for the relationship-generated disadvantage such as giving up a lucrative career or if either party has suffered a loss in terms of earning capacity. In the majority of cases, compensation is rarely a relevant factor due to the extremely high threshold for this element to be awarded.
The statutory factors
In addition to above three key principles, a Judge must also take into account common sense factors when deciding a fair outcome. These are contained in Section 25 of the Matrimonial Causes Act 1973 and include:
- The welfare of any minor children of the family.
- The income, earning capacity, property, and other financial resources which each spouse has – or is likely to have – in the foreseeable future. This includes, in the case of earning capacity, any increase in that capacity which it would be, in the opinion of the court, reasonable to expect a person to take steps to acquire.
- The financial needs, obligations, and responsibilities, which each spouse has or is likely to have in the foreseeable future.
- The standard of living enjoyed by the family before the breakdown of the marriage.
- The ages of each spouse and the duration of the marriage.
- Any physical or mental disability of each spouse.
- The contributions which each spouse has made or is likely to make in the foreseeable future to the welfare of the family, including any contribution by looking after the home or caring for the family.
- The conduct of each spouse, if that conduct is such that it would in the opinion of the court be inequitable to disregard.
- The value to each spouse of any benefit which one spouse because of the divorce will lose the chance of acquiring (most usually pension provisions).
How is a Consent Order approved?
Although a proposed financial Consent Order is considered by a Judge “on paper” in private, the process for considering whether the divorce financial settlement is the same as if there was a full formal hearing to decide the finances upon divorce or dissolution. The reason for this is that once a Consent Order is approved it becomes legally binding, and unlike other types of Court order, a Consent Order cannot be changed, appealed, or set aside unless in exceptional circumstances.
When can a Consent Order be reopened once approved?
As Consent Orders are meant to provide certainty and closure, it is normally very difficult to reopen or change a Consent Order once it has been approved by a Judge.
A Consent Order may possibly be reopened in the following limited and exceptional circumstances:
- There was an element of fraud or misrepresentation. An example would be if the valuation of an asset was hugely inaccurate.
- A party did not provide or disclosure full financial disclosure. They may have ‘hidden’ savings or significant assets, or not disclosed a pay rise or new job offer. There needs to be a ‘material’ misrepresentation (i.e., not simply getting a salary slightly wrong)
- Either party lacked the capacity to sign the Consent Order
- The Consent Order was signed under duress.
- An unexpected event occurs shortly after the Consent Order is approved which completely undermines its terms. An example would be in the case of a serious accident and the inability to work.
How do I know if our divorce financial settlement is fair?
As the saying goes “the proof of the pudding is in the eating”. If a Judge considers a proposed Consent Order to be fair taking into account the above key principles, the statutory section 25 factors and their discretion, the Consent Order will be approved and sealed.
If upon considering a proposed Consent Order the Judge does not think it is fair, they have the options to:
- Ask questions, either in writing or at a hearing, to clarify certain issues if they believe the order is unfair.
- Amend the Order or make a new Order to tell you how to divide the assets.
- Refuse outright to approve the divorce Consent Order (this is rare).
These options provide the necessary system of checks and balances to ensure that parties are protected and not left with an unfair or inequitable Order.
Other frequently asked questions
Who decides a financial settlement in divorce?
Any couple may agree between themselves how to divide their assets. However, for that agreement to become legally binding and enforceable it must be embodied into a financial Consent Order approved and sealed by a Judge. Alternatively, a Judge can decide a financial settlement if a financial application is made to the court for a financial remedy.
What can be included in a financial Consent Order?
A financial Consent Order can include the financial agreement reached between the parties and legally binds both parties to the agreed financial terms once approved by the court.
The key elements that can be included in a financial consent order are:
The transfer or sale of property.
Lump sum payments from one party to the other.
How debts and liabilities will be paid.
Spousal and child maintenance payments. It is important to note that any agreement as to child maintenance is only binding for 12 months from the approval of the Order.
The division of savings, investments, and other assets.
The dismissal of future financial claims against each other. This is the clean break part of the Order.
Every financial consent order is different and can be tailored to meet the couple’s individual circumstances and requirements.
Can finances be settled after divorce?
It is very important to realise that the process of divorce or dissolution DOES NOT automatically settle financial matters. You must deal with finances alongside the divorce. Failure to do so, could mean that your ex-spouse may still have live financial claims against you even after many years of being divorced as is shown in the case of HAT v LAT where the ex-wife claimed financial provision 29 years after the couple separated and were divorced.
Does remarriage affect financial claims?
If a person remarries without reaching a Court approved divorce financial settlement, they will not be allowed to make financial claims against their ex. It is therefore a good idea to resolve financial matters anytime after the divorce, but before remarriage.
Can my ex-wife claim my inheritance after our divorce?
If a sealed financial Consent Order is in place approved by a Judge, then no claim may be made on an inheritance following the making of the Consent order.
Does having a new partner affect the divorce settlement?
If either party has remarried or cohabits with a new partner, a Judge may take into account their new partner’s income and resources to the extent to which they can contribute to the budget of the household, for instance by sharing the cost of the mortgage, rent or utility or other bills.
Doesn’t a wife always receive more in a divorce?
In a divorce settlement there is no gender discrimination. Accordingly, neither the husband or wife is automatically entitled to more. The starting point in all cases should be the equal division of assets unless it is appropriate to award a greater share to either party based on their needs.
Is it always a 50 50 split with divorce UK?
The starting point is an equal division of the matrimonial assets. However, fairness does not always necessarily mean an equal division of assets is appropriate in every case. If there is a good reason to depart from equality (for example to meet both parties needs), then a Judge may make a different order and depart from a 50/50 split to achieve a divorce financial settlement.
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