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Europe > England Wales > Family Law > Domestic Partnership > Financial remedies following dissolution

Overview: Family Law, Domestic Partnership

PRINCIPLES OF FINANCIAL PROVISION ON DISSOLUTION OF A CIVIL PARTNERSHIP

Parliament has laid down the rules that a court must apply when it comes to sorting out the finances (see panel). However, no-one has yet converted this into a useable structure that enables anyone to predict precisely the orders that the court will make. The best we can do is to explain the guiding principles that the courts have tended to adopt.

Of course these principles are derived from cases on divorce as opposed to dissolution of civil partnerships (simply because civil partnership is relatively new and there are few authorities) but as the statutes are identical and it is unlawful to discriminate on the basis of sexual orientation outcomes should be equivalent.

Schedule 5 Part 5 Civil Partnerships Act 2004: Matters to which court is to have regard in deciding how to exercise its [financial provision] powers

20 (a) The court in deciding to exercise its powers under the Act, or (b) if so in what way, must have regard to all the circumstances of the case, giving first consideration to the welfare, while under 18, of any child of the family who has not reached 18.

21 (2) The court must have particular regard to -

a) the income, earning capacity, property and other financial resources which either civil partner has or is likely to have in the foreseeable future, including in the case of earning capacity any increase in that capacity which it would in the opinion of the court be reasonable to expect a civil partner to take steps to acquire;

b) the financial needs, obligations and responsibilities which each civil partner has or is likely to have in the foreseeable future;

c) the standard of living enjoyed by the family before the breakdown of the civil partnership;

d) the age of each civil partner and the duration of the civil partnership;

e) any physical or mental disability of either of the civil partners;

f) the contributions which each civil partner has made or is likely in the foreseeable future to make to the welfare of the family, including any contribution by looking after the home or caring for the family;

g) the conduct of each civil partner , if that conduct is such that it would in the opinion of the court be inequitable to disregard it;

in the case of proceedings for dissolution or nullity order, the value to each civil partner of any benefit which, because of the dissolution or annulment of the civil partnership, that civil partner will lose the chance of acquiring.

Particular matters to be taken into account when exercising powers in relation to children

22 (2) The court must in particular have regard to-

h) the financial needs of the child;

i) the income, earning capacity (if any), property and other financial resources of the child;

j) any physical or mental disability of the child;

k) the way in which the child was being and in which the civil partners expected the child to be educated or trained;

 

1) Fairness

“Fairness” is the overall objective. However it has come to mean something particular in the family courts. For example:

  • conduct will almost never enter into the reckoning – so courts will not adjust the shares even if one party seems to be entirely to blame for the end of the civil partnership;
  • the wealth that each side has brought in to the civil partnership will little matter after a long civil partnership;
  • differential in effort and contribution during the civil partnership is usually ignored entirely.

In one case, the senior court indicated that fairness is about giving each former partner an equal start on the road to independent living. That reminds us that fairness is rather a broad concept – little wonder that it is hard at the outset to predict with precision how an unknown judge is going to react to yet-to-be-designed presentations, over unclear assets many months into the future.

2) Needs

The judge will want to be satisfied that the financial arrangement will enable each of the civil partners to meet respective needs. Children’s needs are prioritised. What the court will want to see is an arrangement where:

  • there is appropriate housing for each, providing secure homes for any children;
  • there is sufficient money for the outgoings of each of those two households to be met;
  • there is at least some recognition that the parties need to be able to provide for their longer-term needs, including in retirement.

So this component will bring into sharp focus

  • annual budgets (how much each side says that they need to live); and
  • re-housing budgets: what each side says that they, and the other, should be spending for housing / re-housing; and
  • shares in the pension assets.

Needs is subjective concept – what is one person’s need is another person’s luxury. The court will look at the standard of living of the parties during the civil partnership – though many separating families will find it hard to maintain those standards as two homes have to be funded out of the assets that used to meet the demands of one (and possibly only just). This may mean that all sorts of changes have to be considered:

  • Putting income into savings may be the first casualty
  • School fees may no longer be affordable
  • Each civil partner may need to up-grade their earnings, to manage the emerging gap.

It is particularly hard to guess how the courts will address needs where the civil partnership has not lasted a long period and there are no children. Here the needs that exist as a result of the standard of living during the civil partnership have to merge into what is reasonable given the court’s aspiration that the parties achieve financial independence.

3) Sharing and Acquest

On the face of it, parties to a civil partnership are entitled to share – and share equally – what the civil partnership has built up (often referred to as “acquest”)

Beyond this, is a concept called “Wells v Wells sharing” – it reflects the idea that where family wealth is built up from different components then it will usually be appropriate to share the different types of asset between the couple.

The idea of acquest therefore raises questions over what to do as regards:

  • what was brought into the civil partnership, having been built up before it;
  • things that fell into the couple’s lap that were wholly external to the endeavour of the civil partnership (such as an inheritance)
  • assets built up after the parties separated but before the reckoning up; and conversely waste and over-spending by one side e.g. after separation.

Finally there may be different questions for couples who have maintained totally separate financial arrangements during the civil partnership.

Entire chapters have been written about each of these aspects so it is difficult to summarise the situation succinctly – the courts are jealous of their current ability to adopt an individual approach on each case, but for example:

  • pre-acquired resources might be respected by way of a downward adjustment to the equal shares that would otherwise be imposed. In short civil partnerships they could be removed from account altogether; in longer civil partnerships, this additional contribution is likely to be overtaken by other considerations particularly where the assets have been used in the partnership. In a case dominated by ‘needs’, it is quite possible that the pre-acquired resources will be brought into account to the extent they are required to meet the needs of the parties (including housing needs), and this is particularly the case where there is evidence that the pre-acquired assets have been relied upon already.
  • The extent to which after-acquired resources may be retained by the person who has generated them may depend upon the extent to which their roots lie in what was being done during the civil partnership and whether the separation was complete, and the length of the separation before the court is looking at the issues.
  • Things that were wholly external to the civil partnership such as inheritances will not be automatically shared (though may well be brought into account so as to meet needs).

Perhaps the best answer to this area is that “in really clear cases, these aspects may make a difference” – for the rest of us, they may be worth focusing upon more to assist negotiations and to create subliminal influence on the Judge.

4) Compensation

‘Compensation’ is of concern to very few people and is a complex case to pursue. It may be relevant where the resources are significant and where one has sacrificed their career for the benefit of the family, freeing up the other to command a significant ongoing income. Here in the absence of intervention, the career partner has a disproportionate share of the benefits of the matrimonial endeavour and a further adjustment may be made in favour of the home-making civil partner to ensure fairness.

5) Clean break

The courts aspire towards finality. This does not mean that people get less as a result – but it does mean that, where possible, the court will make awards to bring the financial claims to an end (apart from child maintenance arrangements) as soon as possible. This might mean for example that a financially-dependent civil partner is awarded a bit more pension or a larger share of the assets from which to meet their needs, so that the court can terminate maintenance claims.

6) Agreements

An agreement about how these various claims should be addressed (i.e. a pre-nuptial or post-nuptial agreement) will be of influence as one of all the circumstances of the case (see the wording of section 20 of CPA 2005 in the table above). The extent of that influence will depend upon the circumstances. However, since a well-publicised case in October 2010, it is now more likely that a court will uphold such an agreement unless it would be unfair to do so. The Law Commission is currently reviewing this area of family law.

Last Update: 2013-Jan-14 Dave Allison - Family Law in Partnership
The contents of this page do not constitute legal advice or create an attorney- client relationship with the contributor. Do not apply anything you read here without contacting a professional.
Author: Dave Allison
Law Firm: Family Law in Partnership
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