Family Proceedings Rule

Introduction

In divorce proceedings the courts have a range of financial orders open to them to grant to spouses under the MCA 1973. The courts powers to make financial orders are found in s22 – 24 MCA 1973. New process to resolve ancillary relief was introduced in June 2000. These new proceedings were to help the court achieve a clean break between the parties Family Proceedings (amendment 2) Rules 1999 and in particular Statutory Instruments 1999 no. 3491.

The Family Proceedings rule 2.51B states the overriding objective of the ancillary relief rules is to enable the court to deal with cases justly including:-

• Ensuring that the parties are on an equal footing
• Saving Expenses
• Dealing with cases in ways that are proportionate to the money involved, importance of the case, complexity of the issues and the financial position of the parties
• Ensuring the case is dealt with expeditiously and fairly
• Allotting the court’s resources appropriately to the resource needs of the case

In addition, the parties are required to help the court further the overriding objective. The courts must encourage the parties to cooperate and settle dispute through mediation. And help the parties to settle the whole or part of the case and to give directions to ensure that the trial of a case proceeds quickly and efficiently.

Ancillary relief is the term given to the financial settlement of a divorce. It covers the range of financial orders available to spouses under the MCA 1973 and more recently to civil partners under the CPA 2004. Also the principles the court applies when making those orders.

Clients Information

Our client is Mrs Amanda Matthews (Petitioner) and has instructed us to start divorce proceedings against her husband Mr Adrian Matthews (Respondent). Mrs Matthews has informed us that her husband is the owner and director of a large toy firm and their total assists are worth in the region of £10 Million approx. Mrs Matthews has stated to us that she always fully supported her husband while he worked long hours to establish the business and was fully responsible for raising their two children Katie and Alistair Matthews who are aged 6 and 8.

Financial Orders Available

The powers of the court to make financial orders are found in ss 22-24b MCA 1973. The orders fall into two main categories: – income orders and capital orders.

Income orders:-

• • Maintenance pending suit
  • Periodical payments
  • Secured periodical payments

Maintenance pending suit

Under s22 MCA 1973 the court can order either party to make periodical payments to the other up to decree absolute. The application for maintenance pending suit may be made, heard and take effect at any time after the petition for divorce has been filed. Any order for maintenance pending suit will terminate on the grant or dismissal of the divorce. Maintenance pending suit payments are intended to keep one party going financially until decree absolute, for instance if one party wasn’t working or had a disproportionately lower income then a maintenance pending suit payment could be applied for, subject to the circumstances in the case. Maintenance pending suits are not available for a child and it is not necessary as periodical payments may be obtained for a child of the family as soon as a petition is filed or alternatively an application to the child support agency for maintenance assement. In reality maintenance pending suits are not frequently pursued for a number of reasons including:-

• • In practise the sums ordered for payment in a maintence pending suit are modest because the purpose of the payment is to provide adequate temporary provision during the proceedings.
  • If the maintence is so small that it has to be supplemented through benefits such as income support or jobseekers allowance then there is no advantage as the benefit will be reduced by the maintenance pound for pound.

However maintenance pending suit might be worthwhile pursuing if one party who has ample means to support themselves leaves the other party with little or no income and responsibilities with no way to meet them.

Periodical payments

Periodical payments can be made by the court under s23 (1) (a) MCA 1973 to a spouse, or in exceptional circumstances to a child of the family s8 (3) CSA 1991 or to the spouse caring for that child on that child’s behalf s23 (1) (d) MCA 1973. The amount to be paid and the length of time the payments should be made are up to the court. The order can be made to reflect a party’s circumstances for example if a court recognises one party should pay maintenance but their income is insufficient, they can make a nominal order (for as little as a £1) to recognise in principle they should be paying maintenance. That amount can be increased should the party’s income increase. The terms of the agreement can be varied by application to the court for instance if one party loses their job, salary increases or even begins co habiting. The court may limit the term of periodical payments to years or months if it considers that a party should be able to become independent after a period of adjustment, an example being a housewife re training to obtain employment. The court has a duty under s25A (2) MCA 1973 to consider whether such a limitation on maintenance is feasible. All periodical payments terminate on the death or remarriage of the recipient s25 (1) (a) MCA1973. A periodical payments order is unaffected by the remarriage of the payer but a remarriage by the paying party could result in an application by that party to discharge or reduce the order if the paying party would be supporting the new spouse. Periodical payments made to children terminate on the child’s 17th birthday unless it would be in the child’s interest for it to continue until their 18th birthday (s29 MCA 1973) usual reason is continuing in full time education. Maintenance may continue past a child’s 18th birthday only if circumstances set out in s29 (3) MCA 1973 apply:-

• • The child intends to be (or is) in full time education, academic or vocational
  • There are special circumstances, the child has a mental disability requiring care

Secured periodical payments

The court can order that periodical payments be secured under s23 (1) (b) (e) MCA 1973. Periodical payments can be secured by charging an asset with a sum fixed by the court from which periodical payments can be met. Securing periodical payments are rarely made in practise but if the court is in doubt that a party may not comply with the order to pay periodical payments. This will typically be income producing, shares or rented property. The income produced by the charged asset will be paid to the party in receipt of the periodical payment in the amount specified by the court. Another form of securing periodical payments is placing a charge on a non-profit producing item such as, house or property, antique or painting of substantial value so if the periodical payments were not being paid to the recipient then the court could sell the asset with the charge secured on and the periodical payments paid from the sale of that item. Secured periodical payments terminate in the same way non secured periodical payments do with one exception, the death of the party whom pays the periodical payment does not terminate the secured periodical payment as it does in non-secured periodical payments. However, the death would be taken into account on any application by their estate to vary or discharge the order. An order for periodical payments and secured periodical payments can be made before decree nisi but cannot take effect until the decree absolute has been granted.

Capital Orders

The purpose of capital orders is to settle any disputes once and for all. For most married couples the matrimonial home is their largest asset but they may also have savings, pensions etc. Capital orders include lump sum orders, pension sharing order, and in regards to property, property adjustment order or an order for sale.

Lump Sum Orders

Under s23 (1) (c) (e) MCA 1973 a court can order that one party pay the other party or a child of the family, a cash lump sum. The court has wide power to specify an amount to be paid and can order that lump sum to be paid in instalments on which the timing of the payments can be agreed on. There are two main reasons for making a lump sum order:-

1. To adjust the final division of the matrimonial assets. The lump sum order is frequently used in conjunction with an order on the matrimonial home.

2. Or to recompense a party for expenses incurred prior to the order being made as a result of inadequate financial support from the other party.

Courts ultimately want divorcing couples to achieve a “clean break” from one another financially. Maintenance payments such as periodical payments find one party financially dependent on the other party. A lump sum makes a clean break achievable. Funds for a lump sum order may not be immediately available but if there is anticipation that funds will become available in the near future, the court may decide to adjourn an application for a lump sum order until the funds become available. The court will only decide to adjourn a lump sum order if there is a very real evidence that funds will become available within a relatively short time period. In Roberts’s v Roberts 1986 the court said an application to adjourn a lump sum order should not be adjourned for longer than five years. In Michael v Michael 1986 the court also refused to adjournment based upon a party hoping to inherit money as it was too uncertain whether and when the inheritance would occur. Lump sum orders are also available for children although not very common. It would be more appropriate in high income families or if the child has a disability or illness that requires high levels of care. Spouses can only apply for one lump sum order but in the case of children more than one lump sum order can be made. Lump sums can be paid in instalments set out in the order. A lump sum order cannot be varied but there is jurisdiction to deal with an application to vary, suspend and discharge instalments of a lump sum. If a lump sum has been ordered to be paid in instalments or deferred to allow the party to raise the money the court can order interest at a specified rate to be paid. Lump sums can also be secured in the same way periodical payments, if the court was in doubt if the party would honour the order and pay the lump sum. Lump sums can be made on or after decree nisi but are not effective till after decree absolute. This is very important as in the case of McMinn v McMinn the husband had been ordered to pay his wife a large sum of money in a lump sum order. The husband went on to murder the wife before the decree absolute was granted, the estate of the deceased wife tried to claim the lump sum as part of her estate but as the decree absolute had not been granted in made the lump sum order void.

Property orders

The matrimonial home is usually the only property owned by the family and usually the largest capital asset. The courts have wide reaching powers in deciding what the best way to deal with property is. The courts must decide if it is in the best interests not only of the parties involved but for any children of the family who live in the property whether to sell the property and realise its capital or to retain the property so it can continue to provide a home for those that live there. In deciding what to do with property the court is required to regard the factors set out in s25 Matrimonial Causes Act 1973. These factors provide guidance to the court in deciding what orders are available to make and what size share

Property adjustment orders

Under s24 (1) (a) MCA 1973 courts have wide powers to redistribute family property between the parties and any children of the family. The courts could order one party to transfer a property over to the other party, or to be held in trust for a child of the family. It does not have to be the matrimonial home in can be any property classed as a matrimonial asset. No application can be made not even for children for further property adjustment, it is neither possible to vary these orders. A property adjustment order can be made after decree nisi.

Mesher order

A Mesher order is a court order that postpones the sale of the marital home and gives a chargeback to a husband exercisable on the occurrence of specified events. It originated in the case of Mesher v Mesher 1980, when the Court of Appeal permitted the wife to remain in the marital home with the youngest child until the child was 17 or further order of the court. The order can also be triggered if the occupying spouse dies or leaves the property Mesher orders have been criticised for “delaying the inevitable” and leaving both parties financially worse off in future. In the case ofBokor-Ingram v Bokor-Ingram the ex wife had applied to vary the terms of the order as her husband had failed to disclose that he was negotiating a better paid job when they divorced. Mrs bokor-ingram argued that if she had known she would have never agreed to the Mesher order they had agreed on. A settlement was reached out of court and the full ownership of the property was signed over to Mrs Bokor-Ingram. The case was first heard in the high court by Mr Justice Charles. Mr Justice Charles said the order had not been prejudiced by Mr Bokor-Ingram’s failure to disclose the negotiations of a lucrative job offer as no formal contract had been signed at the time of the order Mr Justice Charles concluded it should have not been introduced. The Court of Appeal took the unusual step of explaining why the appeal had been allowed as they felt the judgement issued by Mr Justice Charles was “causing or was likely to cause difficulty for specialist practitioners and judges in this field of ancillary relief.”. Furthermore, Mr Justice Thorpe added: “the duty of disclosure is not only that it should be full and frank but also clear.” He quoted the words of Lord Justice Sachs in the case of J-v-J in 1955, commenting that the standard he set has never varied. Mr Justice Thorpe went on: “We are concerned that the judge’s erudition may have blinded him to the simplicity of the case and its proper outcome. Had there been full and frank disclosure…it is inconceivable the wife would not have raised her sights.”

Martin order

Martin Orders granted by the court, are similer to Mesher orders but there does not have to be children of the marriage. The wife or husband remains in the property for the remainder of their life or until a “trigger” event occurs such as remarriage or a voluntary decision to leave the property.

Amongst the many factors to consider will be “the primary concern that on the breakdown of the marriage, the parties should, if possible, each have a roof over his or her head. That is perhaps the most important circumstance to be taken into account in applying s25 MCA 1973 when the only available asset is the matrimonial home. It is important that each party should have a roof over his or her head whether or not there are children of the marriage”: Stamp L.J. in Martin v Martin (1977)

Order for sale

Under s24(1)(b)(c) and (d) MCA 1973 the court can order a sale of any property in which either of the parties are beneficially entitled. This order can only be made once the court has also ordered one of the following orders:

• • Secured periodical payments order
  • A lump sum order
  • A property adjustment order

An order for sale can be made at the same time as the above orders or later but, an order for sale cannot come into effect until decree absolute. The court also has the power to order that the sale of the property should not take place until a specified time or until essential works needed at the property has taken place. Further, a court may choose to defer the sale of a property to enable a party who wishes to avoid selling the property to raise a sum to “buy out” the other party’s interest in the property. The order for sale may contain consequential and supplementary provisions directing how the sale price is to be fixed or who should have the conduct of the sale. Orders for sale can also be used as a method of enforcement if a party has defaulted on a lump sum order.

Pension orders

Along with the marital home a person’s pension is often a person’s most valuable asset or will become it when it is paid. Dividing a pension is a major consideration in ancillary finance. There are currently three different ways of dealing with pensions in ancillary relief.

Offsetting

This was the traditional way of dealing with pensions in ancillary relief. One party would be compensated for their loss of interest in their spouse’s pension by giving that person a greater share of other available assets. This will depend upon the value of the pension concerned and the value of the other assets.

Pension attachments

The limitations in offsetting led the government to introduce reforms to the pensions system. The first changes were introduced by s166 Pensions Act 1995 which introduced three new sections into the MCA 1973, ss25B, 25C and 25D. These new sections allowed courts to make pension attachment orders. A court can attach a portion or the entire pension of either party, once the party retires and claims the pension the party who was awarded an attachment will start to receive their attached portion of the other party’s pension. Under s25B the court has power to direct the mangers/trustees of a pension scheme to pay a portion or even the entire pension to the spouse with no pension rights. If the spouse has not yet retired then the court may make a deferred order. Some pensions pay a lump sum on retirement or on the death of the beneficiary before retirement s25C gives the court power to attach an order to the lump sum which will direct the pension scheme to pay whole or part to the other spouse when it becomes payable. Pension attachments will usually be deferred until the member spouse retires or dies. This gives the other spouse very little control over the money until the member spouse retires or dies. This is contery to the ‘clean break’ principle the courts are advised to achieve in ancillary relief.

Pension sharing

The Welfare Reform and Pensions Act 2000 inserted s24b,d into the MCA1973. This created a new ancillary relief order a pension-sharing order. This gave the court power to split pension rights. A transfer payment is made which is equal to the member spouses portion of pension rights is transferred to the other spouses existing pension (external transfer) or a pension can be created for the other spouse in the same pension scheme as the member spouses (internal transfer).