Issues relating to shared assets (e.g. the matrimonial home) and ongoing financial arrangements e.g. maintenance for children are possibly the most complex aspect of any divorce settlement. If the parties are unable to reach agreement on the division of assets and financial provision, the Court has wide powers under Section 25 of the Matrimonial Causes Act 1973 to deal with the parties’ financial matters. This used to be called ‘ancillary relief’. The parties now have to apply for a ‘financial order’.
How to Apply
The divorce petition itself contains a request for various financial orders and either party can apply to Court for such an order. The application for the financial order may take a long time to conclude and may not be finalised until after the divorce itself.
There is a Court fee payable and once the application has been made, the Court sends a notice to the other party informing them that an application has been made. It will also send a timetable to both parties indicating when the various forms need to be completed and filed at Court.
What the Court Will Take into Account When Making an Order
The Court has to take the following factors into consideration under Section 25 of the Matrimonial Causes Act 1973 when making any financial order:
- The first priority is always the welfare of any children
- All of the circumstances of the case
- The financial needs, obligations and responsibilities of the parties
- The income, earning capacity, and resources of both parties
- The standard of living enjoyed by the family during the marriage
- The age of both parties, and the length of the marriage
- The contribution of each party to the marriage
There are also a number of factors that the Court will NOT take into consideration:
- The reason the marriage failed
- The behaviour of the parties, unless it is extreme
- Who actually made the application for the divorce or ancillary relief
Financial Order Procedure
The case will require certain information and documentation to be made available to it and the other party before the court can make a final order.
Mediation
Before the parties issue an application, the Court must be satisfied that both parties have had the chance to attend mediation. The Court expects that the Applicant will have attended a Mediation Information and Assessment Meeting and this is confirmed on form FM1 when the application to the Court is made.
The Application
An application for a Financial Order can only be made after the commencement of divorce or civil partnership dissolution proceedings. The Applicant completes Form A and sends this with the fee (£255) to the Court. The Court serves notice of the proceedings on the Respondent and issues a notice setting out the timetable for the proceedings, including the date by which financial disclosure must be made and the date of the first hearing (the First Appointment).
The Financial Statement
The Financial Statement, or Form E, is the main document used by the Court, and needs to be completed separately by each party. It sets out the financial circumstances of each party. Various financial documents need to be attached to the form, such as bank statements, house valuations and pension statements. You will need to swear the Form E as being true, and there is a fee payable for swearing this form. Once completed, the Form E must be filed at Court and simultaneously exchanged with the other party.
The First Appointment
The first appointment will take place in front of a District Judge and both parties to the divorce must be present. The judge will determine which parts of the statement should be answered and will usually require either side to justify why certain questions should be allowed and why others should not. Part of this exercise will also be to determine which documents should be produced by each party in support of the statements.
The judge may also give directions as to the valuation of the parties' assets, which will most commonly be the former matrimonial home. Any further evidence to be filed will also be determined by the judge.
A party's refusal to co-operate might lead the Court to infer that they have something to hide and might therefore have more assets than they are declaring. Non co-operation could, at the very least, mean that the party will lose the sympathy of the Court.
Financial Dispute Resolution Hearing ('FDR')
The FDR hearing is essentially judge-led mediation, and is an effort to settle the matter through negotiation and discussion.
The parties and their legal representatives will attend court usually at least one hour before the hearing is due to start. The legal representatives will negotiate between themselves in an attempt to narrow down the issues in the case. During the hearing itself, the judge, having read all the papers filed in the case, will hear submissions from the legal representatives and then give an indication as to what would be an appropriate outcome in the case.
The parties will usually then leave court and resume their negotiations. The parties can return to court as many times as the judge can accommodate them for further assistance or indication, and if the court runs out of time on the particular day but it appears that the parties are close to an agreement, then the FDR can be adjourned.
If agreement is reached at the FDR, the parties will draft a consent order, setting out their agreement in the appropriate legal terms. The District Judge can then approve the order and the proceedings are concluded.
If agreement cannot be reached for whatever reason, the District Judge will list the matter for Final Hearing.
It is important to remember that even if agreement cannot be reached at FDR, it is still possible for negotiations to continue between solicitors in correspondence, and if the case can be agreed in that way, the matter can be brought back to court at any time for the making of a Consent Order.
Final Hearing
The final hearing in financial order proceedings is not dissimilar to the final hearing of other family matters; the evidence is given in statement form (usually just the Form E) and then oral evidence is given by the parties and, where relevant, experts and other witnesses.
Having heard the evidence, the judge will make a final order. It is important to note that the judge at the final hearing will never be the same judge who attended the FDR hearing.
Types of Relief - Court Orders
The main orders that a Court can make under Section 25 of the Matrimonial Causes Act 1973 are as follows:
1. Income Orders:
Periodical payments to a party to the marriage or to/for a child of the family
A 'child of the family' includes stepchildren and those conceived by one party outside of the marriage.
As a result of a periodical payments order, one party must make regular payments to a party to the marriage or to/for a child of the family. The regularity of the payments will be determined by the court, but it is usually weekly or monthly. This kind of order is often referred to as an order for 'maintenance'.
Once made, it is possible to vary the order by applying to the court. A common reason for seeking to vary a periodical payments order is a change in the financial circumstances of the person ordered to pay, usually following a loss or change of employment.
The order may well be specified to last for a certain amount of time: it may be deemed to run 'until further order' or until either party marries again or dies.
Secured periodical payments to a party to the marriage or to/for a child of the family
This is not a particularly common order. It is similar to a simple periodical payments order, but there is an order that secure capital fund is provided from which payments can be made. A common example of such an order is where payments are secured against a property owned by the party making the payment.
The main benefit of such an order to the party receiving the payment is that they are protected if the party ordered to pay disappears or becomes insolvent.
2. Capital Orders:
Lump sum to be paid to a party to the marriage or to/for a child of the family
A lump sum is an amount, paid in one or several instalments, which is used as a final order to conclude matters.
Common examples of when a lump sum is used include for the purchase of property; as a way of capitalising maintenance (paying a single large amount in respect of maintenance rather than many smaller amounts); or compensating a party for handing over control of a jointly run business to another party.
Transfer of Property Order
Such an order transfers property, usually the former matrimonial home, from one party to the marriage to the other party or to/for the benefit of a child of the family.
The transfer can take place immediately or may be made subject to a charge in favour of the person transferring the property. In very brief terms, such a 'charge' may take effect at a certain point, such as a specified date or specific event, for example upon the remarriage of the party receiving the transfer of property. When such a date is reached, or such an event occurs, the party who transferred the property will be entitled to receive payment of either a specified amount or a percentage value of the property. In such cases the sale or re-mortgage of the property may be the only way to release the payment.
Whilst the former matrimonial home is the most common type of property transferred, there are many other examples of 'property', including: cars, furniture, land, shares, etc.
Order for Sale
An order for sale can only be made where the Court has ordered either:
(a) A secured periodical payments order; or
(b) A lump sum order; or
(c) A property adjustment order.
The sale is ordered to allow the capital generated to be used to facilitate one of these orders.
Pension Orders - please see our Pensions & Divorce Factsheet
Does the Court Always Have to Decide or Can The Parties Agree Between Themselves?
Of course, parties can reach a financial settlement at any point during the proceedings. In many cases application for relief financial order is not needed, and parties reach an agreement regarding finances as part of the Divorce proceedings.
If an agreement is reached, a Consent Order will be drawn up by the parties setting out the terms of the agreement, and stating that the agreement is in full and final settlement of all financial claims one party has against the other. The Consent Order is filed at Court together with a form setting out all of the assets and income of both parties. A court fee is payable. A judge then has to approve the order before it is made into an order of the Court.
How Long Will it All Take?
The total time spent will depend on the willingness of both parties to co-operate and negotiate, and the complexities of the financial issues in question. Obviously, if an agreement can be reached between the parties then it will take far less time to finalise the matter. If no agreement is reached then the whole court process then it can take up to a year until the final hearing.
How Can We Help?
Divorce is a difficult time for those involved. Our qualified and experienced family team will seek to advise you through the divorce process, as well as offering you information about alternative resolution options. We can also help you with the protection and distribution of jointly owned assets, both property and financial, and with any issues relating to your children.
For information of users: This material is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm.