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Financial and Property Issues

'With all my worldly goods I thee bestow'

Despite our marriage vows suggesting the contrary, under the Law of England and Wales, a person does not upon marriage automatically acquire an interest in their spouse's assets or vice versa and upon divorce the division of assets remains discretionary.

The Matrimonial Causes Act 1973 sets out certain criteria which must be taken into account when formulating a financial settlement. How those criteria are applied varies according to the circumstances of each case and upon the development of case law. The court must balance the criteria in assessing the claims of each spouse and the needs of the children. This is a complex area of law in which we at this practice are specialists. The following is intended as a basic outline only.
Specifically, upon the granting of a decree of divorce, nullity or judicial separation, the court has the power to make various orders for a spouse which can include the following:-

Periodical payments (maintenance or alimony)
Secured provision (maintenance that is charged against an asset)
Lump sum (a cash payment)
Transfer of property (where legal ownership of an asset is taken away from one spouse and transferred to the other)
Pension attachment/pension sharing (except upon decree of judicial separation) (see Pension Sharing)

In the case of long marriages where there is a surplus of assets, the courts have recently moved towards the proposition of equal division of assets notwithstanding that one spouse has played the major role in the acquisition of those assets.

In short marriages (less than five years) with no children, the aim is to put the parties back into the position in which they are likely to have been had the marriage not taken place.
In marriages where there are insufficient assets to provide for both parties, particularly where there are children, the Court may Order that the spouse with whom the children are living shall retain the right to live in the marital home until the children are grown up, or it may Order a sale of the home with the majority of the proceeds going to purchase a new home for that spouse and the children. There are many ways in which the housing needs of the children and the parent with care can be met and we are happy to offer detailed advice upon this aspect depending upon the particular circumstances of each case.

Nowadays, wherever possible, the Courts aim to achieve financial independence from one another for both parties. This is commonly referred to as a "clean break". This means that in a case where ongoing spousal maintenance would be appropriate, if there are sufficient assets to achieve it, the maintenance will be capitalised and paid by way of a lump sum.
In order to assess what might be a fair settlement, it is necessary first to identify and value each spouse's assets. It is only when the assets have been ascertained and their values agreed, that it is possible to reach a settlement or for the Court to properly consider the case.

Many cases are now settled by negotiation with the help of mediators or by negotiation between the couple and their lawyers. If such a settlement cannot be achieved reasonably quickly then it is usual in divorce cases to issue proceedings for those Orders set out at (a) to (e) above. (Lawyers usually refer to this type of litigation as proceedings for 'Ancillary Relief').

Under the modern procedure, the Court imposes a strict timetable for the exchange of relevant information and valuations. The timetable will allow for two or more meetings at Court. These will be a 'First Appointment' at which the Court will determine the issues and consider whether sufficient information has been provided to permit the case to go forward to the next stage being the 'Financial Dispute Resolution Hearing'('FDR'). This is an important hearing at which the parties and their lawyers will attend before a District Judge who will express his views of the case and how he or she thinks it should be settled. Many cases are resolved at this stage. If not, they can usually proceed reasonably quickly to a Final Hearing before a different Judge who will come to the case afresh and will not be informed of the views expressed by the Judge at the FDR.

Investigation of assets

It is a fundamental principle when negotiating a financial settlement upon the breakdown of marriage, that each person must disclose full details of their financial position to the other and to the Court.

Sometimes, one party deliberately conceals or misrepresents the value of his/her assets. In such cases, the courts have wide powers to assist in investigating the other person's finances in order to ascertain their real worth. Such persons may be ordered to provide extensive documentation. Alternatively, third parties such as bank representatives, new spouses, employers etc., can be ordered to come to court with relevant information and documentation.

The court will also decide what assets need to be valued. Assets such as houses, pension funds and businesses may have to be valued. If the value of any asset cannot be agreed then the Court will appoint a 'joint independent expert' who will be instructed jointly by the parties and be responsible to the Court for providing an impartial opinion.

Freezing Orders

If one party can show that there is a real likelihood that assets may be dissipated or removed from the jurisdiction to avoid his or her claim, then an application can be made to the Court for a "freezing" order. Where he or she can show that assets have already been disposed of, an "unscrambling" order can be sought. These orders can extend to assets held overseas and in exceptional circumstances foreign courts can be requested to assist by making a "mirror order" freezing assets within their jurisdiction in support of the English proceedings.

Enforcement of Orders

Most people readily comply with financial orders made by the court, whether the order has been negotiated by agreement or made by a Judge following a contested hearing. In some cases, however, steps have to be taken to make one of the parties ('the defaulting party') obey the order. The courts have a wide range of remedies, which include:-

Registration in the Magistrates Court This is frequently used for the enforcement of Maintenance Orders. The order is registered in a Magistrates Court which then takes over responsibility for enforcement of the order. However, any application for Variation or Commutation (Capitalisation) of Maintenance has to be made in the Court where the original Order was made.

Attachment of earnings. The defaulting party's employer is ordered to deduct payments from his or her salary at source and pay them to the claimant of to the Court. It is often used as a way of enforcing maintenance orders.

Charging order. The Court orders a charge to be attached to one of the defaulting party's assets for the amount due. Assets that can be charged include houses and shares. Once a charging order has been obtained then an application can be made to the court for the asset to be sold so that debt can be paid off out of the proceeds of sale.

Execution of an instrument. The Judge has the power to sign an instrument (i.e. document) if the defaulting party refuses to do so, for example, if the court has ordered that a property be transferred but one party refuses to sign the transfer.

Third party debt order. The court can order people or institutions who owe money to the defaulting party (the third party) to pay it instead to the creditor under a court order. Usually third party debt orders are made against the bank at which the defaulting party has a bank account. The order freezes the account and requires the bank to pay sufficient funds from the account to settle the debt.

Judgment summons. This is a procedure by which a defaulting party is cross examined before a Judge and, if they fail to explain satisfactorily why they have not complied with the court order, they can be sent to prison. However, the impact of the Human Rights Act 1998 means that the same standard of proof and evidential rights as in criminal trials applies

Committal. The court has the power to commit a defaulting party to prison for failing to obey a court order. However, committal proceedings cannot be used to enforce payment of money. They can only be used to enforce performance of an order or undertaking to perform a specific act (such as to transfer a property or a life insurance policy or make a child available for contact).

There are also other forms of enforcement less commonly used. These include Sequestration (under which the assets of the defaulting party are seized and placed under the control of a 'sequestrator' appointed by the court), Bankruptcy (under which the defaulting party is made bankrupt though matrimonial orders are not provable in bankruptcy and Oral Examination (whereby the defaulting party is required to attend court and examined by a court official so as to disclose details of his financial position).

Enforcement Overseas

It is sometimes necessary to enforce orders overseas. A variety of Conventions exist which provide for the registration and enforcement of maintenance orders made in this country abroad and vice-versa. This is known as reciprocal enforcement. Under some treaties maintenance is defined purely as periodical payments. Under others, it also includes capital lump sums. The reciprocal enforcement proceedings available in each case depend on the terms of the convention or other arrangements in place between this country and the other country concerned.

In many cases, the foreign court has a right to vary the order on the application of the defaulting party. However, in the countries of the European Union and other European countries the judgment is fully transportable. This means that it may only be varied, if at all, by the English court and the courts of the other country may not refuse to recognise it on any ground.

In the absence of reciprocal enforcement arrangements, it is necessary to commence a fresh civil action in the court of the country concerned, seeking enforcement of the English judgment. Enforcement by this method is generally limited to enforcement of lump sum or costs orders and not maintenance orders.

Financial Provision for Children

See 'Children Disputes'

Contact Ursula Bagnall for a free confidential discussion about your financial situation either following or in the event that you are considering separation or divorce. Even without all the necessary information, she may be able to give you a basic 'overview' of your position and advice as to how you should proceed.