Financial Settlements

In the course of divorce, Judges have a wide discretion to redistribute income and assets to produce a fair result. There is no magic formula involved although certain factors must be taken into account. Each case is different and will be judged on its own individual facts. We cannot predict exactly what would be awarded but we can advise you what type of settlement to expect within certain limits.

We always attempt to agree a settlement, rather than proceeding to a contested Court hearing where a decision is imposed upon the parties by a Judge. An agreed settlement is often quicker and will usually resolve a dispute more amicably. Furthermore, the legal costs involved in a negotiated settlement rather than a contested Court hearing will probably be less. If a satisfactory settlement is not possible though, we would advise issuing an application which ultimately could go before a Judge to be decided.

Set out below are types of orders a Court has the power to make and what a Judge must consider when making such orders. This page is meant as a guide only, so please feel free to as us any questions.

 

1. Orders The Court Can Make

The legal orders available are as follows.

  • Maintenance pending suit: Maintenance for a spouse/civil partner to tide him/her over during the proceedings. It stops once the divorce/dissolution is concluded.
  • Periodical Payments: This is maintenance for an ex-spouse/civil partner which will commence after divorce/dissolution. It can be open-ended or limited in time.
  • Secured Periodical Payments: These are maintenance payments which are secured against property or assets to ensure payment. This is a rare type of order, but will be considered in exceptional circumstances.
  • Lump Sum Order: This is a payment of a lump sum of money from one spouse/civil partner to the other. There is no limit on the amount that can be awarded and it can be ordered to be paid by instalments.
  • Property Orders: Various orders redistributing interests in property (usually the home) can be made. These include a transfer of property from on spouse/civil partner to the other and a sale of the property which, if ordered, would include a direction on how the proceeds are to be divided. This aspect is dealt with in more detail in Section 3.
  • Pension Orders: The Court can order pension sharing or earmark part of the spouse/civil partner’s Pension Scheme for the benefit of the other spouse/civil partner.
  • Variation of Settlement Order: This gives the Courts power to vary settlements or trusts that have been set up in favour of one spouse/civil partner. This is a rare type of order.

 

2. Factors The Court Must Consider

It is the duty of the court in deciding what financial orders to make to consider all the circumstances of the case, but first consideration must be given to the welfare of any minor child of the family. The Court will want to ensure that any minors have adequate accommodation. The specific factors that the Court must by law consider are as follows.

  • The income, earning capacity, property and other financial resources of each party including what each party is likely to have in the foreseeable future e.g. by way of inheritance.
  • The financial needs, obligations and responsibilities of each party.
  • The standard of living enjoyed by the family before the marriage broke down.
  • The age of each party and the length of the marriage/civil partnership.
  • Any disability of either party.
  • Contributions made by each party to the welfare of the family including contributions to be made in the foreseeable future.
  • The conduct of each party but only if that conduct is extreme.
  • The value to each party of any benefit that they will lose as a result of the divorce e.g. pension rights.

In medium to long marriages the starting point is equality, but it is important to note it is only a starting point. Different factors can push the marker either way e.g. inheritances, exceptional contributions, gross bad behaviour etc. Each case must be assessed on its own facts.

The Court will also specifically consider making each party financially independent of the other, thus achieving a “clean break”. It sounds an attractive idea but carefully consult us because it is often not as good as it sounds.

 

3. Division Of The Home

The matrimonial/civil partnership property is often a couple’s most valuable asset. However, it usually also provides a home for the family and therefore must be given special consideration. A starting point would be to consider whether it is reasonable and financially possible for one of the parties to remain in the home (particularly the party with whom any children are to reside). If this is possible then the property can be transferred to that party, perhaps with an adjustment in the other party’s favour by way of payment of a lump sum. If that is not financially possible, then the property could be transferred on the basis that it will be sold at a later date (usually when the remaining spouse/civil partner remarries or forms a further civil partnership or the children complete full-time education), when the vacating spouse/civil partner can receive a share of the proceeds. (This is known as a “Martin Order”).

Consideration would also have to be given to whether the remaining spouse/civil partner can sustain the mortgage and whether the mortgage company will agree to the mortgage being transferred into that party’s sole name. If a transfer from one party to the other is not appropriate, the Court may decide that the property must remain in the joint names with a sale taking place at a later date. (This is known as a “Mesher Order”). Consideration would also be given to a sale of the property and division of the proceeds especially where the house was excessive to each party’s needs.

 

4. When Orders Can Be Made And Their Duration

An application can be made for a financial order any time after the filing of the Divorce/Dissolution or (Judicial) Separation Petition. The Court can make an order for maintenance pending suit any time after the issue of the petition but cannot make the order for financial orders until the Decree Nisi/Conditional Order, the first Decree of divorce/first order of the dissolution. Property orders are not effective until Decree Absolute/Final Order, the final divorce Decree or final dissolution order.

Any order for periodical payments should state how long such payments are to last or alternatively will leave the duration open-ended. Either party can re-apply to the Court at any time before the order ends to vary the maintenance payments (upwards or downwards). This would normally be appropriate if there had been a change in circumstances. Because these depend on joint lives, you might need to consider life insurance in case the payer dies during the term of the order.

Capital orders (i.e. lump sums and property orders) are normally phrased as being final. This means that neither party can re-apply to the Court at any stage in the future to vary the capital division.

It is important to note that remarriage or forming a subsequent civil partnership bars you from making a claim against your former spouse/civil partner if you have not initiated such a claim before remarriage. Further, your remarriage or subsequent civil partnership ends any entitlement to maintenance that was previously ordered to be paid by your former spouse/civil partner.

 

5. The Procedure

If agreement can be reached, then the solicitors on behalf of the parties can draw up an agreement known as a Consent Application. This is signed by the solicitors and lodged with the Court, where it is made into a formal Court order, known as a Consent Order. If agreement cannot be reached, then one or other party will want to make an application to the Court. We list below the steps taken before such an application is heard finally by a Judge.

a. Application

Your solicitor will prepare an application which will initiate the process. On submission to the Court, a hearing date will be fixed, known as the First Directions Appointment (FDA) some 12 to 16 weeks ahead. A strict timetable is then applied. At least 35 days before the FDA the parties must each prepare a financial statement known as Form E. This is the format set by the Court for financial disclosure and the parties will also be required to fill one out and exchange it. The purpose of the form is to enable both sides to provide the Court with full details of their finances. If the form is complete and there are no further material questions left unanswered, then the chance of using the First Appointment as a Financial Dispute Resolution Appointment is considerably improved 14 days before FDA the parties must each prepare a concise statement of issues, a chronology and a questionnaire setting out any further questions they want to ask or any further documentation required of the other party.

A notice must also be lodged stating whether the party is able to proceed with the next stage (Financial Dispute Resolution Appointment or FDR) at the FDA thereby short circuiting matters. This is usually only possible when the disclosure given is relatively complete at an early stage and the issues are not too complex. For each hearing in the process the parties must also prepare an estimate of their legal costs to that point.

b. The First Directions Appointment (FDA)

The Court will give directions as to what questions are to be answered, whether any valuations are to be obtained etc. We usually recommend instructing a barrister for this appointment and probably we will have a preliminary meeting beforehand. A further timetable will be fixed and a Judge may adjourn the FDA or more usually direct that the Financial Dispute Resolution Appointment (FDR) must take place. This will usually be fixed a few months ahead. In the interim both parties must comply with all the directions made at the FDA. We can leapfrog this FDA by agreement but experience tells us that except in the simplest cases that is not desirable.

c. The Financial Dispute Resolution Appointment (FDR)

  1.  This hearing is designed to define the issues and encourage the parties to reach
  2. agreement.
  3. Prior to the appointment each party must have submitted their proposals to the Court.
  4. No order can be made unless the matter is agreed.
  5. If agreement is reached then the Court can make an order thus finalising matters.
  6. If no agreement is reached then further directions can be given and the matter fixed for a Final Hearing.
  7. The Judge who conducts the appointment is disbarred from adjudicating at the final hearing.
  8. If the FDR does not settle the matter the Court will list it for a final hearing usually some months ahead.

Where your solicitor attempts to negotiate a settlement on your behalf, the correspondence may be marked “Without Prejudice”. Such an offer is not revealed to the Court if the matter proceeds to a final hearing and so this allows the party who made such an offer to suggest an entirely different order to the Court. The reason to make a without prejudice offer is to enable the parties to negotiate freely without being held to any offers if the matter is not settled. If a without prejudice offer is accepted however it then becomes open and cannot remain private to the parties.

d. The Final Hearing

If it is necessary for there to be a final Court hearing, then both parties must attend Court, to give oral evidence and be cross-examined by the other party’s legal representative. This hearing usually takes place in front of a District Judge and no-one, other than the parties, their legal representatives and any necessary witnesses, such as valuers, may attend.

 

6. Legal Costs

It is common for each party to be responsible for their own costs if agreement is reached, although this is not always the case. For example, if one party has income and/or capital than the other it may be appropriate that they agree to pay their spouse/civil partner’s legal costs. If the matter proceeds to Court, then the Judge has the power at any stage of the proceedings, where he or she considers it appropriate, to make an order that one party pays the other party’s costs due to their conduct in relation to any failure to comply with the Court rules, failure to disclose financial information, the reasonableness of their position etc. However the general presumption is that there will be no order for costs. Further it is rare for a costs order to be made against a legally aided person, unless that party has been unreasonable AND recovers a lump sum in the course of the proceedings which can be utilised to discharge costs. Even then, if a costs order is made against a legally aided party, it is only enforceable in exceptional circumstances.

 

7. Child Support

The Child Support Agency has taken over the assessment and collection of child maintenance from the Courts, save in a few exceptional circumstances. The Child Support Agency applies a formula in assessing the amount of child support payable. We can assist you in dealing with the Agency and run a calculation for you, provided we have the necessary information.

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Financial Settlements

Financial Settlements - Scenario Analysis Example #1

Mrs G left the home last year due to her husband’s alcoholism. The home is in his name and he refuses to co-operate. He works as a Sales Director and has a large pension accumulated from fifteen years with his employer.

Our solution:
Mrs G petitioned for divorce on the basis of her husband’s unreasonable behaviour. At the same time we filed a financial application. When Mr G failed to make financial disclosure we obtained an Order requiring him to do so in 14 days or risk imprisonment for contempt of Court. It was made clear that if he did not co-operate then the Court would make Orders giving Mrs G her share anyway and if necessary Mrs G would be given power to sell the house and to evict him. Mr G then settled the case.

Financial Settlements - Scenario Analysis Example #2

In 1980 Mr G aged 25 was living with his partner.  When she became pregnant he made a Will making her the executor and leaving everything to her.  They separated 2 years later.  The child is now adult.  He re-partnered and had 1 child but the relationship again ended after 2 years.  He continued paying his ex partner’s rent rather than go through the Child Support Agency.  He met his third partner in 1994 and they had 3 children.  He died in 2010.  He had never made another Will or revoked the one made in 1980, but he had quite substantial assets by the time of his death.  What rights did his ex- partners and 4 children have?

Our Solution: 
Briefly, Mr G left a huge mess.  His ex-partners challenged the Will in the Courts.  The dependent children had claims.  Did the adult son, who was independent and 28 years old, have a claim?  What rights did the mothers have where they were left supporting children under 18? Ultimately a judge had to decide on the balance of fairness between the minor children bearing in mind the available resources.  His first partner and adult child did not receive anything.  The cost of sorting this out used almost half the estate.The moral is, make a Will!

What our clients are saying:

‘OB’, North London

Thank you very much Mr Brookman for your highly professional and helpful advice in assistance with my case this year.