Fairness in Family Financial Arrangements - Essay Example

Fairness in Family Financial Arrangements The terms, equality and fairness were not defined by the Matrimonial Causes Act 1973, in instances of agreements pertaining to financial matters, after the separation of couples. The courts considered the cases subjectively and resolved the matters based on the circumstances of each case. This work deals with examining the issue of fairness in financial matters relating to post separation agreements. In this regard various cases have been scrutinised. The liabilities imposed on the spouses in the matrimonial system were intended to accord support to the members of the family. To accomplish this aim, the courts made judgments that fundamentally relied on fairness and equality, while deciding financial matters. Finally conclusions were arrived at based on the findings of the work. The mutual liability of spouses towards each other tends to have a bearing on public and private support systems. As a result, the state may pursue a husband to make income support payments to the wife, which have been granted to her after her application for welfare. In the event of failure to maintain a spouse, proceedings could be initiated before the family proceedings court for grant of a financial provision order. 1 Whenever a decree of divorce, nullity or judicial separation is made, the High Court and county court can redistribute the capital, assets and income of the spouses. Such apportioning will be according to what the court deems to be reasonable and equitable. These considerations are inapplicable with respect to a partner to whom one is not married. In such cases, there is liability to provide maintenance. In addition there is no redistributive jurisdiction, similar to that provided under Part II of the Matrimonial Causes Act 1973. Such redistributive jurisdiction pertains to cohabitants outside marriage. 2 With regard to enormous amounts of money involved in cases, wherein the marriage had failed, a very important decision was provided by their Lordships in White v White. The House of Lords stated in this case that a fair outcome was achieved only when there was no discrimination between the spouses and the role enacted by them. 3 It was also held that the court, while hearing such cases, should aim at reaching an equitable outcome. Consequently, prior to arriving at a distribution of assets, the presiding judge should compare his views against the norm of equality. Any deviation from equality should be due to the presence of a justifiable reason. 4 Furthermore, the House of Lords stated that in instances where the wife was not employed on a full time basis, and where she was engaged in the task of taking care of the home and the children, her contributions were to be accorded the same value as those of the husband, who was the chief provider of financial contributions in the family. This is equally applicable to instances, where there husband looks after the home and the wife is the chief provider of family finance. 5 In addition, it is the responsibility of both the parents to provide financial support to their children, after their marriage comes to an end. This requirement is independent of where the children are to reside. In addition, financial support can be claimed from one’s partner, irrespective of whether there are children. Financial support can be arranged by agreement, via the Child Support Agency, or through the court.6 When both the parties involved consent to financial support, a voluntary agreement results. This could be either in a verbal or in a written form. For instance, there could be an agreement whereby one of the partners would provide the other partner with weekly payments, in order to support the children. Another example is provided when one of the partners consents to make mortgage or rent payments, household expenses, or pay for holidays and clothing for the children. 7 The court considers the entire property owned by the spouses, while making a financial settlement, at the time of the dissolution of the marriage. This includes property owned by the spouses before or during the marriage. The concealment of ownership of possessions or property by a spouse is penalised by the court. 8 A certain amount of difficulty is associated with establishing ownership with regard to household possessions that have been acquired during the tenure of the marriage. Thus, if one of the spouses had made a present to the other spouse, and such intention had been made very clear, then the gift in question belongs to the spouse to whom it had been given. In the absence of an agreement to the contrary, wedding presents belong to the spouse whose friend or relative had given them. 9 Ownership issues have to be determined with regard to possessions that had been acquired jointly or had been purchased by one of the spouses for joint use. Any disagreement over such issues has to be resolved by a court. In general, domestic goods and equipment are to be retained by the spouse with whom the children live.10 However, the House of Lords have made it very clear that income and capital have to be divided fairly. With regard to matrimonial finance, gender discrimination does not come into play. Orders have to be made, after taking need, compensation and sharing into consideration. This was established with the decision in White,11 Miller12 and McFarlane.13 Furthermore, in Radmacher,14 the Supreme Court’s ruling made it clear that fairness in a particular case need not necessarily be fair under all circumstances. In other words, what constitutes fairness can vary from case to case. This case related to the Ante – Nuptial Contract. Nevertheless, a certain degree of confusion persists with regard to what constitutes fairness, with regard to matrimonial finance.15 As such, the Supreme Court in Radmacher clarified that the erstwhile rule that agreements relating to separation in the future were against public policy was outdated, and that it was not to be limited to post – nuptial agreements. Some of the relevant factors in such cases, were deemed to be age, maturity, relationship history, emotional state, foreseeable circumstances at the time of forming the agreement, and whether the marriage would have proceeded in the absence of the agreement.16 Moreover, in situations, wherein both the parties involved are able to enter into amicable negotiations, recourse to a court of law can be averted. In such settlements some of the important aspects to be considered are; first, the welfare of any children; outstanding liabilities of the parties; assets held by the parties; value of the jointly or individually held property; and the financial obligations and responsibilities of the parties.17 In addition, some of the other factors to be taken into account are; pension arrangements, the earning potential and comparative earnings of the parties; mental and physical disabilities of the parties; and contributions made by the parties to the marriage.18 However, the court has to be convinced about the reasonableness of the agreement. Moreover, the court also examines whether the parties had been fully cognisant regarding the agreement that they had entered into. If the court is not convinced about these features of the agreement, then the couple may have to discuss the agreement in the presence of the judge.19 Prior to the decision in Radmacher, ante – nuptial agreements were held to be of limited importance, with reference to the ancillary relief exercise. This was the ruling in F v F.20 However, the Supreme Court’s decision has altered this situation dramatically. Consequently, such agreements are now accorded the highest priority during a divorce.21 Thus, ante – nuptial agreements, despite being non – binding contracts, are likely to be upheld by the English courts. As a result, such agreements, as long as they are equitable, will safeguard the assets of the richer spouse, if divorce proceedings are undertaken.22 Although, the English courts have not considered pre – nuptial agreements to be binding, all the same they have taken such agreements into account, at the time of distributing assets. The courts enjoy considerable discretion, with regard to the weightage to be attributed to such agreements. In several cases, there has been a significant departure from the terms of these agreements. 23 This has been frequently observed in longstanding marriages, the parties have begat offspring, the terms of the agreement would result in unfairness, there is a presence of duress, financial assets have not been fully disclosed, or the parties have not procured independent legal advice prior to forming the agreement.24 As such, the decision in Radmacher has reiterated the importance of fairness, which is the predominant principle of ancillary relief. Apparently, the court differentiated between the circumstances obtaining at the time of formation of the agreement and at the time of its invocation. The former circumstances provide little if any scope for dispute.25 However, the circumstances prevailing at the time of invocation will be vigorously contested, as these tend to vary from case to case. Realising this great truth, the court provided certain guidelines. For instance, there should be no compromise regarding the reasonable requirements of the children of the family. All the same, the court was of the opinion that the autonomy of the parties was to be preserved.26 The provisions of the Matrimonial Causes Act 1973, stipulates the issues that the court should take into consideration.27 However, it fails to specify any procedure for determining the proportion of the assets of the parties that is to be received by each of them. The practice in other jurisdictions is to apportion the assets of the parties on the basis of the length of the marriage.28 On many occasions, scholars and legal practitioners have recommended that English law should incorporate similar features. This has not been realised and judges continue to stress that the provisions of the statute do not admit of such prescription. It is their considered opinion that each case has to be determined on the basis of its specific circumstances.29 The Matrimonial Causes Act 1973 does not incorporate the terms equality or fairness. Nevertheless, in White v White,30 Lord Nicholls established the significant legal principle that a court had to proceed in a fair manner, and that such fairness implied equality. Subsequently, a fair amount of discussion regarding the connotation of these terms, under different circumstances, has taken place.31 In general, the higher courts decide upon issues that involve very large amounts of money. On the other hand, a sizeable number of practitioners are more interested in the applicability of these principles to the general cases. All the same, the principles of fairness, non – discrimination and equality are universal in their application. These principles apply to every case, irrespective of its size and the duration for which the marriage had been in existence.32 With regard to enormous amounts of money involved in cases, wherein the marriage had failed, a very important decision was provided by their Lordships in White v White. The House of Lords stated in this case that a fair outcome was achieved only when there was no discrimination between the spouses and the role enacted by them. 33 It was also held that the court, while hearing such cases, should aim at reaching an equitable outcome. Consequently, prior to arriving at a distribution of assets, the presiding judge should compare his views against the norm of equality. Any deviation from equality should be due to the presence of a justifiable reason. 34 Furthermore, the House of Lords stated that in instances where the wife was not employed on a full time basis, and where she was engaged in the task of taking care of the home and the children, her contributions were to be accorded the same value as those of the husband, who was the chief provider of financial contributions in the family. This is equally applicable to instances, where there husband looks after the home and the wife is the chief provider of family finance. 35 As such, with regard to spouses who are owner occupiers, one of these spouses may not be the actual owner of the property. In such instances, the spouse who does not own the property will have to safeguard the right to reside in that property. It will also be necessary for such spouses to ensure that the spouse who owns the property does not sell the same without their knowledge. 36 The above discussion makes it evident that there are enormous consequences of a financial nature, associated with marriage. Moreover, the principal legal consequence of marriage is that it is the only legal relationship that can be terminated by divorce. The judiciary is provided with draconian powers to reallocate assets of the parties, in instances where divorce is available. It is very important to realise that after marriage, English law permits redistribution of the financial resources of the parties. However these resources could have been acquired prior to, during or after the marriage. As such, it can be surmised that the courts regard reasonableness and equality as the most important issues, while deciding financial aspects in post separation agreements. 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Thompson S, ‘Radmacher (formerly Granatino) v Granatino [2010] UKSC 42’ (2011) 33(1) Journal of Social Welfare & Family Law 61. Turnbull C, ‘Is the agreement Binding?’ accessed 1 January 2013. White v White [2001] 1 AC 596. Read More