This article highlights some significant developments that impact financial settlements upon divorce. Whether you are a solicitor, barrister, or an individual navigating the complexities of separation, staying informed is crucial. This article provides an updated and legally accurate breakdown of the latest changes, particularly in light of the Law Commission’s Financial Remedies Scoping Report, published on 18 December 2024.
The Law Commission’s Review of Financial Remedies
One of the most significant developments has been the Law Commission’s scoping report on financial remedies, critically assessing the Matrimonial Causes Act 1973 (MCA 1973), the cornerstone of financial settlements in divorce cases. The report outlines four potential models for reform:
- Codification – Bringing existing case law into statutory form without making radical changes.
- Codification-Plus – Incorporating targeted reforms, particularly around prenuptial agreements, spousal maintenance, and property division.
- Guided Discretion – Providing judges with statutory guidelines to achieve more predictable outcomes while maintaining flexibility.
- Default Regime – Implementing fixed rules for asset division, mirroring systems in other jurisdictions to provide greater certainty.
The report also examines whether serious misconduct, such as domestic abuse, should explicitly affect financial settlements. The report also explores reforms to spousal maintenance, financial provisions for adult children and the treatment of pensions.
For family law professionals, these potential reforms could reshape financial dispute resolution which should make settlements clearer and less adversarial. The government has not yet confirmed whether it will implement legislative reforms based on these proposals; however, the report may signal the onset of a significant shift in the legal framework governing financial remedies.
Key Case Law Developments
Recent case law continues to shape how courts handle financial disputes. The following cases stand out:
- Standish v Standish [2024] EWCA Civ 567 – The Court of Appeal reaffirmed the principle of matrimonialisation, holding that the source of the asset, not legal title, is the key factor in applying the sharing principle. The case involved a £132m estate, with £112m of non-matrimonial assets and £20m of matrimonial assets. A £77m transfer to the wife in 2017 was deemed matrimonialised, a finding she unsuccessfully appealed. The court rejected her argument that matrimonialisation is not a valid concept and upheld its continued application. The husband’s cross-appeal led to a £20m reduction in the wife’s award, reinforcing that legal or beneficial title alone cannot determine asset division. The Standish v Standish case is set for a Supreme Court hearing on 30 April 2025, following the Court of Appeal’s ruling in May 2024, the Supreme Court will examine the principles of matrimonialisation and whether the wife has a legitimate claim to these assets, with judgment expected in late 2025.
- HO v TL [2023] EWHC 215 – This judgment provides essential guidance on business valuations and illiquidity discounts. Peel J emphasised that the court, not the expert, determines valuation, acknowledging the inherent fragility and uncertainty of valuing private companies. He identified key factors affecting reliability, including marketability, niche industry characteristics, and ownership structure. The ruling also reaffirmed the principle of Wells sharing, stressing the need to balance liquid and illiquid assets fairly. This case is critical for business owners involved in financial settlements.
- AH v BH [2024] EWFC 125 – Peel J examined the weight given to a pre-matrimonial agreement (PMA) in a case involving a five-and-a-half-year marriage with assets of £5.3m and a further £50m held by the husband. The PMA proposed the wife receive 40% of the £5m family home proceeds, a lump sum of £841,000, and child maintenance stepping down over time. The court, however, awarded £20,000 per child annually and £4.05m for housing provision, holding that a pure Schedule 1 reversionary award was unfair. While the PMA was considered by the court, the s. 25 discretion allowed the court to adjust provisions based on fairness and need, reducing the certainty of nuptial agreements in contested financial remedy cases.
- Mainwaring v Bailey [2024] EWHC 2614 Fam – This case reaffirmed that litigants in person (LIPs) must adhere to procedural rules just as represented parties do. Henke J dismissed the husband’s appeal, labelling it as “hopeless” and rejected his argument that he should be treated more leniently due to being unrepresented. The court made a costs order against him, reinforcing that lack of legal representation does not exempt a party from compliance with the Family Procedure Rules. The ruling relied on Piglowska v Piglowski [1999] WLR 1360 and McGraddie v McGraddie [2013] UKSC 38, emphasising appellate deference to trial judges’ factual assessments.
The Growing Role of Alternative Dispute Resolution (ADR) and Cost Consequences
With court backlogs delaying proceedings, there is a renewed emphasis on ADR methods such as mediation and arbitration in financial disputes. In HO v TL (Costs) [2023] EWFC 216, Peel J reaffirmed that failure to engage in non-court dispute resolution (NCDR) without good reason can justify a costs order against the party at fault. The court has discretion under rule 28.3(6) and (7) to depart from the usual no-costs rule based on factors such as non-compliance with court orders, failure to negotiate reasonably, or rejecting fair settlement offers. Legal advisers must explain the risks, as refusing to settle can significantly impact the final award. This decision highlights the increasing financial consequences of failing to engage in ADR, making proactive settlement efforts more crucial than ever.
Greater Transparency in Family Courts
New pilot schemes have introduced anonymised reporting of family law judgments to enhance public understanding and promote consistency in financial remedy cases. While privacy remains protected, this initiative is expected to improve judicial accountability.
For legal professionals, this means that case law will be more accessible, leading to better legal strategies and more informed client advice. It also heightens the importance of well-prepared arguments in financial disputes, as judicial decisions will face greater scrutiny.
What This Means for Clients
As financial remedy laws continue to evolve, certain aspects of divorce settlements are becoming increasingly significant. Prenuptial and postnuptial agreements are expected to play a greater role in financial planning, particularly if proposed reforms strengthen their enforceability. Additionally, spousal maintenance payments may soon be subject to stricter time limits, making it essential for divorcing individuals to carefully consider their long-term financial strategy. The treatment of business assets and inherited wealth remains complex, necessitating expert guidance to navigate potential claims and ensure fair distribution. Finally, mediation and arbitration are becoming central to financial remedy proceedings, offering swifter and often more cost-effective alternatives to litigation. These developments demonstrate the importance of seeking specialist legal advice to achieve fair and sustainable financial outcomes.
Final Thoughts
The landscape of matrimonial finance in the UK is evolving, with potential reforms that could significantly reshape financial settlements in divorce cases. If you need expert guidance on a financial settlement, whether as a client or a fellow legal professional, consult our Clerks to get in touch with a specialist to understand how these developments may impact your case.
Financial Remedies is a complex area of law. If you have any questions relating to this topic do not hesitate to get in touch with our clerks
****Disclaimer: The information contained herein is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. It is provided without any representations or warranties, express or implied.
For more information about our financial remedies team please contact clerks@becket-chambers.co.uk
