Pensions are a subject that make most people want to switch off and since the change allowing people to access their funds from age 55, they have become a lot more complicated in the context of a marriage breakdown.
A number of lawyers, accountants and independent financial advisors came together in London in March this year to discover what they knew and did not know about how to value and deal with pensions on divorce, and what are the factors that clients need to be aware of, both when considering the divorce settlement and afterwards.
The message that came out loud and clear, and which is a consistent message from lawyers to their clients, is that financial advice must be taken. Lawyers cannot give financial advice and have to be careful of straying into it, even by, say, suggesting that a client draw down on pension funds to make a lump sum payment to the other spouse.
A major point of discussion was the unintended effect on pension attachment orders. Although rarely made these days, there was a time when pension sharing was not an available option, and pension attachment was the only way of a spouse securing an interest in the future pension itself. It was often provided that the person drawing the pension would commute the maximum lump sum possible, and the attachment order “bit” onto that lump sum so that a fixed percentage went to the non pension owing party. However the maximum lump sum possible was then limited to 25% of the fund value – it is a very different figure today.
It is likely that the number of pension attachment orders affected will be small but if you have not yet retired, divorced before 1 December 2000 and pensions were a feature of your settlement, you might want to dig out your paperwork and have a look at your order.
So are there some do’s and don’ts for those going through divorce today, with pension provision?
• Despite the contrary statements by senior Judges in a case of WS v WS  handed down in January this year, most Judges at County Court level will expect the assistance of an actuary where pensions are to be split on an income based approach in a needs case. This is an extra expense for the parties but a good report will be easy to follow and crucially easy to implement too.
• the new flat rate single tier state pension cannot be shared unless the person with the Additional state pension to be shared
a) started the divorce before 6.04.16
b) is already claiming the state pension
c) is are eligible to claim the state pension but has deferred
• be wary of offsetting ( how much cash/assets now should be paid against future pension not shared) as the calculations done by actuaries vary widely here. In the example used at the conference, 14 experts gave a band of offsetting values of between £290,000 and £798,000 when the fund in question was valued at £500,000
• assumptions about the ease of rebuilding a pension after sharing may be flawed. It was pointed out that in the case of both Uncrystallised Funds Pension Lump Sums and Flexi-Access Drawdowns, the annual allowance is thereafter reduced to £10,000 from £40,000
So have some sympathy for your lawyer making noncommittal sounds as to what is the best approach to your pension or your pension claims. The best answer is to gather all the relevant information as early as possible and to use every effort to formulate agreed question to a jointly instructed pensions expert, particularly if pensions are the largest asset or one or both parties are near to retirement – which today can mean simply approaching 55.
The role of arbitration in family law is relatively new compared to its remit in the commercial sphere.
But the initial take up was slow and in very small numbers. However, the process is strongly supported by the higher ranking judiciary, leading to the judgement of the President of the Family Division in S v S (Financial Remedies :Arbitral Award )  EWHC 7 (Fam). It was not clear at the time of that case whether the clear passage of arbitration awards through the court would be achieved by rule changes (coming from Government) or by Practice Directions, (from the Judges themselves).
However 2 years on from that, the President has again seized the initiative by publishing Practice Guidance at the commencement of Dispute Resolution week in November 2015. His aim is to encourage the use of arbitration and to ensure that those who use it, can rely on the award being made seamlessly into a court judgement.
But what is arbitration? The easiest way of explain it may be to pick up a media phrase that it is “privately funded court”, which in many ways it is.
It applies the law of England and Wales to disputed family financial cases, including disputes between those who are married and those who are not. Many arbitrators are, or have been Judges or are senior barristers and solicitors.
There are two clear advantages in using arbitration as opposed to the court process; firstly speed and secondly confidentiality. As the courts become slower clogged up with delays caused by too few staff and increasing number of litigants in person, taking a case to arbitration allows the parties to select a time and venue for their hearing almost to suit themselves. It will be a more consumer friendly environment that the average county court!
Confidentiality, until recent years, was not an issue for separating or divorcing couples but the drive towards greater transparency has made this no longer a guarantee. One Judge has stated it is his intention to allow the media to report all cases in their court unless the parties persuade him otherwise. The new Practice Guidance has provided that the details of an award made shall remain confidential even when passing through the court approval process, as the award is to remain in a sealed envelope marked for the attention of the District Judge only.
A further advantage of arbitration is that it can limit the hearing to the area of dispute, so if the parties are agreed on 80% of the matter but have a dispute over, say the amount of ongoing support or a share of inherited property, this issue alone could be put before the arbitrator, whereas the court process cannot take a narrow focus until much further down the line.
It is also possible to agree that the arbitrator give an award on the basis of paper evidence only, although this is likely to be of benefit only to incidental matters rather than a full unresolved dispute.
Where the arbitrator conducts a hearing, it will seem very similar to a court hearing , save that the uncertain start time will be avoided. The arbitrator’s decision is called an award and is not at that stage a court order. When choosing arbitration the parties have entered into an agreement that they will accept the award as binding. Once the award is made, the parties’ solicitors then submit the award to the court and it is this process that the President has sough to streamline by his Practice Direction.
If one party declines to co-operate with this procedure and will not accept the award as a final conclusion, the President (and other Judges) have made it clear that matter can be dealt with quickly by the court using the “show cause” procedure, which sidetracks the normal disclosure requirements and lengthy timetable of standard financial applications. The President has also said these cases should always be listed in front of High Court Judge.
Of course this comes at a cost. The services of a Family Court judge are free whereas an arbitrator makes a charge for his/her time, both in preparatory reading, conducting the hearing and in drawing up an award. These costs will be shared between the parties, on top of their own legal costs, including the costs of making the award a final court order. This may seem to put it beyond the reach of many people.
However, if the choice to use arbitration is made early enough and the solicitors co-operate together to produce the required information more quickly than to the standard court timetable, there can be a saving of the costs that would be spent simply in running a case over many months.
Some arbitrators have also offered very reasonable rates in order to gain experience in conducting arbitrations and to promote this procedure generally. It is hoped that with some pragmatic bargaining, cases can be identified that would be right for arbitration, where the parties have the ability to put aside some funds to obtain a quick and civilised decision where there is an issue of principle between them that negotiations cannot resolve.
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I recently dealt with an application for a declaration of marital status under Section 55 of the Family Law Act 1986, securing the declaration my client sought. As is often the case at the outcome of his Judgment, the Judge asked me to type up the order for it to be sealed by the Court.
Dutiful as I am, I set about drafting the order the next day when it suddenly struck me: was the hearing that took place the previous day in open court, or was it a private hearing?
I am ashamed to say that not only did I not know the answer, nor could I find the answer anywhere. My gut instinct was that proceedings were in an open court given that declarations bind the world; their purpose is to declare the status of the parties (just as it might be in doubt whether a falling tree in a deserted forest makes a sound, likewise one could ask the philosophical question, whether one can declare something that no one hears).
In the end I took the coward’s way out, drafted it on the basis that it was in open court, but brought it to the Judge’s attention (he was a QC after all) and asked him to correct me if he wanted. He didn’t.
However the question has been gnawing at me ever since.
A little bit of subsequent research shows that the court does not appear to have adopted an universal approach. The case of Solovyev v Solovyeva (which also dealt with a declaration of marital status) Link is clearly recorded as being in open court.
The later case of N v D Link on the other hand on the Bailii website is emblazoned in red with the following warning:
“This judgment was delivered in private. The judge has given leave for this version of the judgment to be published on condition that (irrespective of what is contained in the judgment) in any published version of the judgment the anonymity of the persons concerned must be strictly preserved. All persons, including representatives of the media, must ensure that this condition is strictly complied with. Failure to do so will be a contempt of court.”
So much for the court being any help. It also has to be said that we would not necessarily be privy to any earlier hearing which made a private hearing open, or open court private.
What do the rules say? These appear quite clear. An application for declaration of matrimonial status is an application made using part 19 of the Family Procedural Rules 2010. Rule 27.10 seems to give a definitive answer: proceedings to which these rules apply will be held in private except (……) where these rules or any other enactment provide otherwise (….) Link
This would suggest that proceedings for declarations are private. However procedural rules do not and cannot change the substantive law (see for example this well argued article Link)
As a brief aside for anyone wondering since this is my second article in a row where I cast doubt on the provisions of the FPR 2010; I am actually a fan. I like having all our rules in one place; its just that they are not perfect – yet!
So after all the thought that has gone into the matter I am no further forward. If push came to shove, I will cast my lot in with declarations of martial status being held in open court, as that is what my instincts tell me and the case of Solovyev v Solovyeva was heard in front of the President of the Family Division. I would like to think he at least knew what he was doing, and if I am wrong at least I can try and pass some of the blame on to him (and my QC Judge who didn’t correct me when I drafted my order).
However, all comments and counter arguments are warmly welcomed.
I write this article fully aware it may only be of interest to legal nerds who, like me, enjoy a point of law.
For that audience, the recent case of BR v VT  EWHC 2727 (Fam) will make interesting reading. Click here for a link to the judgment
In Paragraph 2, Mostyn J identifies three procedural routes by which a court can make an interim order for the sale of a property within family proceedings:
- Taking his last route first, Family Proceedings Rules 2010 Rule 20.2 (1) (c ) (v): This rule provides that the court may grant as an interim remedy an order “for the sale of relevant property which is of a perishable nature or which for any other good reason it is desirable to sell quickly”. Interestingly I picked up on this power when the FPR was first published and had the temerity to send an email to the publishers of the Red Book about it. Their response was that they had been in touch with the Family Procedure Rules Committee, who had very clearly considered matters when drawing up the Rules, and it was never their intention that that particular rule should be used on an interim basis to order the sale of the family home and that no such power exists. The rules (secondary legislation) cannot grant extra powers not conferred by statute. As much as I would like to agree with Mostyn J, I don’t.
- The second jurisdictional base was Section 17 of the Married Woman’s Property Act 1882 (as clarified by Section 7 (7) of the Matrimonial Causes (Property & Maintenance) Act 1958) which gives the court power to make such order as it thinks fit “in any question between husband and wife as to the title to or possession of property”. I must admit that has never come up in any application I have dealt with. I suspect most matrimonial lawyers would feel a little bit uncertain basing an application on such an arcane piece of legislation, especially given subsequent legislative enactments (when Parliament could have given the Court the power to order sale the family home on an interim basis but did not) and case law. Mostyn J might be right, but I am not convinced.
- Section 13 and 14 of the Trust of Land & Appointment of Trustees Act 1996 (TOLATA) which says the Court can make any order relating to the exercise by the trustees (legal owners) of any of their functions (including their ability to sell the property) as it thinks fit. I think Mostyn J is on stronger grounds when invoking this basis. He also cites as support the case of Miller-Smith v Miller-Smith  EWCA Civ 1297 (Link ) and I agree that is probably good law. The problem is that Miller-Smith dealt with what was expressly described as “unusual circumstances” where the Wife had engaged in a whole course of conduct specifically designed to frustrate the smooth running of court proceedings. “It is much more desirable that an issue, as here, about the sale of the home should be resolved within an application for ancillary relief” said Lord Justice Wilson. I think on the facts of this case Mostyn J could have shoehorned his judgement into the “unusual circumstances” category, but (by definition) not in all cases will this be possible. However this heading alone might well dissuade the Wife in BR v VT from appealing (it would put me off).
The decision in BR v VT seems to be a wholesale attack on legal orthodoxy stated in Wicks v Wicks  EWCA Civ 3050 (Link ) where Ward LJ (although he was very unhappy about it and did not consider TOLATA) found that the court had no powers to do what Mostyn J now seems to be doing.
Mostyn J concludes in BR v VT “the effect of my order is to impose financial sanity on this family. That is needed for the health, safety and well-being of the parties and their children as the alternative is insolvency with all the psychological damage that that entails.”
That might be right but sounds very close to “what is necessary is lawful” which goes beyond even the wide discretion and powers the Family Court wields. In fairness Mostyn J adds a security net that the court should never order the sale of the family home unless on the facts of the case the Court would, if asked, have been persuaded to make an occupation order (injunction). For my part I would like the court to have the powers exercised here, but I suspect Mr Mostyn might be open to appeal especially when he says “I make a positive order for the sale of the home under FPR rule 20.2(1)(c)(v).”
All I need now is the right case and a client with unlimited funds to test the point…
Even if Mostyn J is right and I am wrong, the secondary problem is that even if the Court can and does order the sale of the family home, it has no powers to order one party to pay off a specific creditor or make an interim capital award. My last thought on the matter is therefore: if you are defending an application for the interim sale of property, consider urging the Court not to exercise its discretion unless the applicant provides very clear undertakings as to what will happen to the proceeds of sale.
6th October 2015
The first point to say is that the majority of couples who go through a divorce do so without the need to attend court at any point. Where matters are agreed, it is (as far as the Court is concerned) a paperwork exercise and although the Judge has to give his own considered approval to all financial agreements reached between divorcing couples, he does so in the privacy of his chambers with no prying eyes.
Even for those who have to bring a court application, there are sufficient opportunities and encouragement within the court system to ensure that a large number of these cases also settle before a final contested hearing.
The press can attend at any contested family hearing. What they can report is a different matter. This has recently exercised the nation’s most vocal Judge Mr Justice Mostyn who In the recent case of Appleton & Gallagher v News Group Newspapers and PA has granted permission to NGN Ltd to appeal to the Court of Appeal to resolve the “unhappy divergence of judicial approach” to privacy and reporting restrictions in family financial cases.
He said that it was a “serious understatement” .. “to say that the law about the ability of the press to report ancillary relief proceedings which they are allowed to observe is a mess”. This is because his views are in complete contrast to Mr Justice Holman who has now decided that every financial remedy case appearing before him should be heard in open court with reporters able to report on anything said, unless an application is made to limit that reporting.
Mr Justice Mostyn disagrees and makes the following points
- R27.10 of the Family Procedure Rules 2010 states these type of case are held in private
- The process of a financial remedies hearing involves people giving “highly personal and private information under compulsion” which should not then be used by anyone else save for the purposes of the proceedings
- Article 14 of the 1966 International Covenant on Civil and Political rights ( ratified by the UK in 1976) stipulates that the press can be excluded from all or part of the trial when the interest of the private lives of the parties so requires and provides that judgement need not be in public in cases involving matrimonial disputes.
He also said “ the reform which resulted in FPR 27.11 being made was the result of a campaign to enable the world to see how public law care proceedings were conducted. It was not designed to enable the essential privacy of ancillary relief proceedings to be cast aside. Reporting how a case is conducted and what legal points are raised in an abstract way is one thing; laying bare the intimate details of the parties’ private lives is altogether another.”
The arguments in favour of reporting everything said are firstly the probity of the judge and secondly the truthfulness of witnesses. It was said (back in 1834) that witnesses would more likely tell the truth if they understood that “a thousand eyes would have seen them lie”. Taking this into the family financial sphere, if a party understands that his or her finances ( dubious or otherwise) are about to be laid bare, it is thought more likely that that party would seek to settle on favourable terms.
In my view people’s engagement with the truth has moved on since 1834 and someone who has gone to significant lengths to hide their wealth is not going to suddenly “come clean” simply because their evidence will be in the local or national press. And indeed Mr Justice Mostyn accepts that allowing that the right to privacy will be lost where there is “proof of iniquity”, or where there is so much information in the public domain that privacy has already been lost.
The most persuasive argument in my mind for privacy is that for most people, it encourages honesty where individuals are reassured that what they disclose to their lawyers and their spouses will go no further. It does not go to the Inland Revenue, it does not go to HM Customs and Excise. In the case of those involved with both public or well standing local companies, it is not available for discussion over the breakfast table by employees or rivals.
Again the point to emphasise is that this is not going to be an issue for the vast majority of couples who divorce. But do have confidence that the information provided as part of the process of negotiation or mediation, is and will remain private. If you embark on court proceedings, there is a very slim chance of matters being reported but only at a final contested hearing. There are many other reasons than privacy to work hard to settle your claims before reaching a final hearing.
The Employment Tribunal in a ground breaking judgment in the case “Tirkey – v – Chandock and Another” upheld numerous claims brought by an Indian woman of low caste who was kept in servitude by her employers for some 4½ years.
The claims included those for Religious and Race Discrimination (the Claimant is a Christian whilst her married employer couple are Hindu).
The Employment Tribunal found that the Respondents had subjected the Claimant to unacceptable working conditions including :
• Working 18 hours per day for 7 days per week
• Required to be on call 24 hours a day
• Paid 0.11 per hour (the National Minimum Wage is currently £6.50 per hour)
• Forced to sleep on a mattress on the floor
• Refused permission by the Respondents to bring her Bible to the UK
The Claimant’s evidence was accepted in full, with the Employment Tribunal finding that the conditions of domestic servitude in which the Claimant was kept amounted to a clear violation of her dignity.
Another potentially far reaching development arising from the case, related to the implementation of the Deduction From Wages (Limitation) Regulations 2014 (which came into force on 9 January 2015) and which prevents anyone from claiming more than two years wages owed.
With effect from 1 July 2015, the amendment limits how far back an employee can go when claiming a series of deductions from wages to a period of 2 years ending with the date that the claim was presented. Prior to this, the limitation period which applied was a far more generous 6 years. If you have any concerns about deductions taken from your wages, please contact Clare Riches to discuss your options further.
All governments like to say they promote access to justice and it is viewed as a fundamental human right. When lawyers raise the issue of access to justice, it is most often in connection with the withdrawal of legal aid (public funding). There are probably quite a few people who are in agreement with the removal of legal aid from the vast majority of family cases, as it was perceived as a blank cheque for litigation by those who were not eligible to receive it.
However my point in this article is that access to justice is only as good as your ability to enforce the terms of any order made.
If orders, once made, are too expensive or complicated to enforce, they become worthless and the whole system becomes pointless.
The court system is based on the assumption that by and large people respect the rule of law and that no one would ever contemplate disobeying a court order.
So what to do when they don’t stick to the order?
Where an order deals with ongoing payments such as spousal or child support (where the CMS does not have jurisdiction), the choice is fairly stark. If the payor is in employment, you apply for an attachment of earnings order – job done. If the payor is self employed – you could face a number of difficulties and expert advice will be required.
There are also some choices when enforcing a lump sum payment and if you can identify a fund or asset from which the money can be paid, you should eventually get your money. Here you are also helped by the fact that interest runs (at an attractive rate) automatically on lump sums of £5000 or above, so there is both an incentive to pay and a benefit to receive when you finally have enforced.
For some the biggest headache is the reluctant sellor when the court orders the sale of a property. In many family cases, the end result is that the family home has to be sold. However one party may not have wanted the sale and now, after the order for sale has been made, even if by consent, is when the prevaricators come into their own. Many people using the family court system do not realise that the court does nothing to enforce its own orders. It does not monitor compliance with time scales for action or payment. This can leave those acting without solicitors in limbo.
Depending on the action (or inaction) being taken by the reluctant selllor, different avenues are open to the other party but it will undoubtedly mean an application back to court. It may mean one or two or three applications back as the court deals in turn with the appointment of the estate agents, the marketing price, access to potential purchasers, acceptance of an offer and finally signature of the necessary sale documentation. You can obtain costs orders, to be deducted from the reluctant party’s share of the sale proceeds, but the bigger cost can be the delay which will then impact on the chance of tying in a related purchase.
To add insult to injury for anyone caught up in this type of frustration of a court order, the Government are increasing the fees for these type of “general” applications, from £155 to £255 later this year. This may be seen as a licence to those who do not want to co-operate with the sale, to make as many difficulties as possible as few people, after taking proceedings to the point of a final order, have spare money to fund repeated enforcement applications.
Here a solicitor can make all the difference to achieving as much as possible in one or (maybe two) applications to the court. Whilst use of a solicitor is a further cost, in these type of matters it can represent a saving overall not simply in money terms but in getting to the point of final closure.