FINANCIAL APPLICATIONS

THE RIGHT TO MAKE FINANCIAL CLAIMS

Court proceedings to determine financial arrangements following divorce/dissolution run on a separate track from the divorce proceedings/civil partnership dissolution, and are known as Financial Remedy Application proceedings. It is important that you understand the options available to you before you decide on how to deal with the financial arrangements between yourself and your former spouse.

Spouses and former spouses have rights to make financial claims against each other by applying to the Court for Orders for any or all of the following:

  1. Maintenance (i.e. income payments).
  2. Adjustment of property ownership (e.g. transfer of a house from joint ownership to the sole ownership of one spouse).
  3. Lump sums (i.e. capital payments).
  4. Pension sharing or attachment orders.

The right to make a financial remedy claim can only be brought to an end in two ways. The first and most usual way is by a Court Order. Spouses either reach agreement, or the Court make a Financial Order and thereafter a Clean Break is ordered, that is no further financial claims of any nature, now, in the future or on death.

The second way is where someone obtains a divorce and then re-marries. In this situation, unless that person has already applied for Orders for a lump sum or transfer of property which they are seeking either in the divorce Petition or by way of formal application on Form A before they re-marry, then they are caught in ‘the re-marriage trap’. The effect of this trap is that they have lost the right to make those financial claims against their former spouse.

Should the spouses decide not to obtain Court Orders dealing with financial provision and in the event that the re-marriage trap does not apply, then the claims which each of them have against the other are simply left open. This situation is unsatisfactory in that it creates a degree of uncertainty because it leaves the possibility of one spouse making a claim against the other at any time in the future. On the other hand, where one spouse’s financial position is likely to improve substantially it may be in the other’s interest to delay a final financial settlement.

Where neither spouse wants to claim against the other it is usually better for an application to be made by consent for the respective claims of each spouse to be dismissed.

MEDIATION

Upon instruction we will endeavour to exchange financial information at an early stage as it is only when financial disclosure has been exchanged that Solicitors can advise upon appropriate financial settlement terms. If it becomes apparent to us that an early agreement cannot be reached we will advise you to consider to try to reach agreement within Mediation. Indeed, an application cannot be submitted to the Court for a Financial Order until a Mediation Information Assessment Meeting (MIAM) has taken place although we would encourage you to engage in Mediation if the circumstances of your case make it suitable for Mediation.

Mediation is a process in which an impartial third party assists those involved in family breakdown to communicate better with one another and to reach their own agreed and informed decision about some or all of the issues relating to arising from separation. One advantage of reaching agreement through Mediation is that Mediation does not involve going to Court and it is therefore almost always considerably cheaper.

Another advantage of reaching agreement through Mediation is that it is more likely you will retain a better relationship with your former partner, it is of course particularly important in cases where children are concerned.

There are a number of different organisations and individuals who carry out Mediation and conciliation. Please let us know if you want further details of these organisations.

SUMMARY OF FINANCIAL APPLICATIONS PROCEEDINGS

Here we have aimed to set out the principal stages of the Financial Applications process in simplified form, which apply to most cases, but which can be altered. Please remember that each stage can be avoided if prior agreement or settlement of claims is reached.

There are generally three hearings within the Financial Applications proceedings:

  1. The First Appointment (FDA)
  2. The Financial Dispute Resolution Appointment (FDR)
  3. The Final Hearing

If your case goes to a Final Hearing the interval between the filing of Form A and the Final Hearing may be 10 to 12 months. The reason for this, as will become clear later, is that under the Court rules there are stages which cannot be shortened, and cases have to wait their turn to get into the Court lists.

APPLICATION FOR FINANCIAL APPLICATIONS

An application for Financial Applications is made on what is known as a Form A. Once the Form A has been filed with the Court, the Court will set a date for the First Appointment, usually 16 weeks after the Form A has been filed.

PREPARATION FOR THE FIRST APPOINTMENT

The Court will set out the timetable for the matters to be dealt with by both parties prior to the First Appointment.

Both parties have to exchange and send to Court:

  1. At least 35 days before the First Appointment: Form E, a lengthy financial statement setting out full details of the parties’ capital and income, assets and liabilities, and details of other matters.
  2. At least 14 days before the First Appointment:

Statement of Issues – summarises the issues in dispute

Questionnaire – sets out what additional information and documents should be supplied by both parties which could be relevant to the issues stated to be in dispute in the Statement of Issues

Chronology – of the key dates before, during and after the marriage

Form G – stating whether each of the parties are ready and willing to treat the first appointment as an FDR appointment

Form H – a summary of the legal costs you have incurred to date.

THE FIRST APPOINTMENT

Both parties and their solicitors must attend the First Appointment. The hearing takes place in private before a District Judge and is fairly informal.

At the hearing, the District Judge will:

  1. Set out a timetable for the future progression of the case, and the timetable will be set out in a Court Order binding on both parties.
  2. Consider what further information the parties need to supply in order to progress the case and give deadlines by which such information is to be supplied.
  3. If agreement cannot be reached on the value of any assets, direct that any necessary valuations are carried out, and give deadlines by which such valuations are to be carried out.
  4. If the District Judge is of the view that the High Court is the appropriate Court to deal if the assets value is high and/or the issues are complex, order the transfer of the matter to the High Court.
  5. Fix the date for the Financial Dispute Resolution (FDR) Appointment, often 3–4 months later, but this will depend on how busy the Court is, whether the case has been transferred to the high Court, and the complexity of the issues involved.

PREPARATION FOR THE FDR APPOINTMENT

Each party must comply with any directions given by the Court at the First Appointment.

The Court will also expect both parties to try and negotiate a settlement. Various offers in writing may pass between the parties’ solicitors at this stage. You should be aware that at the FDR hearing, the Court will be supplied with copies of all offers made and will therefore be made aware of what attempts (if any) the parties have made to negotiate a settlement.

THE FDR APPOINTMENT

Both parties and their Solicitor or Barrister must attend the FDR Appointment. The FDR is a semi-informal hearing which may last an hour or more.

The purpose of the hearing is to try and reach an overall financial settlement. The District Judge acts as an arbitrator and will try and encourage the parties to explore how a settlement could be reached. In some instances, the District Judge may also give an indication as to what kind of award he/she thinks the Court might make in the event that no settlement is reached and the case proceeds to a final hearing. Both parties are expected to continue negotiations at Court on the day of the FDR and this can often take up half or a whole day.

Frequently, but not always, an agreement is reached between the parties, and the District Judge can then make a Consent Order setting out the terms of the financial settlement, which once complied with will mean that the case has concluded.

If no agreement is reached the District Judge will give further directions (i.e. Orders) necessary to progress the case, for example for further evidence to be supplied, the filing of statements in preparation for the Final Hearing and will fix a date for a Final Hearing, probably several months ahead. In some circumstances the District Judge may list the case for a further FDR before listing a Final Hearing.

THE FINAL HEARING

The vast majority of cases are settled and never go to a Final Hearing. We cannot promise that this will happen in your case, but our objective is for you to reach an agreement if possible with your (former) spouse at as early a stage as possible.

The final hearing will usually take place 4-9 months after the FDR and lasts anywhere between 1-5 days or more depending on the complexity of the case and the nature of the assets involved.

At the final hearing both parties will need to give oral evidence. Expert evidence and witnesses may also be called if appropriate. The District Judge will give judgment and make a final order at the end of the hearing; and there may then be arguments as to costs.

In deciding what financial provision should be made for each party and or what financial provision should be sought, the Court gives first consideration to the welfare of any children of the family under the age of 18 , and the following factors in particular are taken into account:

  1. The income, earning capacity, property and other financial resources which each spouse 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 be, in the opinion of the Court, reasonable to expect a person to take steps to acquire.
  2. The financial needs, obligations and responsibilities which each spouse has or is likely to have in the foreseeable future.
  3. The standard of living enjoyed by the family before the breakdown of the marriage.
  4. The ages of each spouse and the duration of the marriage.
  5. Any physical or mental disability of each spouse.
  6. The contributions which each spouse has made or is likely to make in the foreseeable future to the welfare of the family, including any contribution by looking after the home or caring for the family.
  7. The conduct of each spouse, if that conduct is such that it would in the opinion of the Court be inequitable to disregard.
  8. The value to each spouse of any benefit which one spouse because of the divorce will lose the chance of acquiring (most usually pension provision).
  9. The welfare of the children (if any).

The aim of the Court is to achieve fairness. The Court has to consider an equal division of assets built up during the marriage, unless the marriage was of short duration, or the assets are insufficient to satisfy capital needs in particular re-housing.

However, often a key and decisive factor is the reasonable needs (especially housing needs) of the parties, which often overrides any possibility of an equal division of assets.

In most cases, the Courts no longer have power to make orders for child maintenance except by agreement. Instead, an application to the Child Maintenance Service has to be made for child maintenance to be assessed.

It is not always possible to appeal the Court’s decisions. There is no automatic right of appeal and indeed appeals are not common in Financial Applications cases. This is something that will have to be assessed at the time of the judgment and order. The judgment will contain the District Judge’s detailed reasons for his/her decision.

MISCELLANEOUS MATTERS

PENSIONS

The Court has certain powers regarding pensions:-

  1. The first is known as ‘off-setting’. This means that the Court looks at the transfer value of the pensions and decides that the person without significant pensions should receive payment in capital from some other source instead of a Pension Sharing Order.
  2. The second option open to the Court is to make a Pension Sharing Order. This means that an existing pension fund is divided, not necessarily 50–50, and passed over to the other person which, in practice, in most cases, will then have to be invested in a new pension.
  3. The third option, not often used, is Pension Attachment, formerly known as ‘earmarking’. The Court has the power to order that a proportion of a pension, once received both as to the annual income and the lump sum, should be paid to the other spouse. The Court has the power to order that a proportion of any death in service benefit should be paid to the other spouse as well.

The problem with Pension Attachment Orders is that if the person receiving the Attachment Order remarries then no continuing annual payment will be made. If someone changes job then that will mean that any Order regarding a death in service benefit will be of no effect.

This is a highly complicated area of the law and almost every case is different. Quite often we will recommend that advice is sought from a pension expert to ensure that fairness is achieved.

DISPOSAL OF ASSETS

If your spouse has disposed of assets with a view to frustrating your claims for a financial settlement or he/she is about to do so, then it is important that you should know that the Court has wide powers to deal with such situations.

Under section 37 of the Matrimonial Causes Act 1973, the Court can restrain someone from carrying out a transaction or from transferring assets out of the country or to someone else. In addition, the Court can set aside (i.e. reverse) certain transactions which have already been carried out where they were completed with the intention of defeating a claim for financial settlement arising from a marriage.

The Court can exercise these powers whilst a financial application such as your own is proceeding or, indeed, in some cases after a financial provision order has been made.

However, the Court cannot order a transaction to be set aside if someone bought the asset from your spouse in good faith without knowing that the motive behind the sale was to reduce your spouse’s assets to frustrate your claim.

If you make such an application to set aside a transaction made by your spouse then, if the transaction took place less than three years before your application, the Court will presume that the transaction was completed to frustrate your financial claim unless there is convincing evidence to the contrary.

In addition to these powers, the Court also has ‘inherent’ powers to prevent someone trying to defeat financial claims without the requirement that they have to prove an intention to frustrate their spouse’s or former spouse’s claim.

If you do consider that your spouse has acted in this way or that there is a risk that he/she will do so, please let us know immediately because we will need to prepare documentation to present to the Court to persuade the District Judge to exercise the appropriate powers.

DISCLOSURE

Both you and your spouse have an absolute duty to each other and to the Court to give full and frank disclosure of your financial position (and any significant changes during the case) so that a proper financial arrangement can be made. This is an ongoing duty which continues until an order is approved or made by the Court.

A Solicitor is an officer of the Court and as such, we cannot permit you to conduct your case, or prepare any documents on your behalf, in such a way that we deliberately know is misleading to the Court. Therefore, as soon as financial information comes to our attention we are obliged to insist that you disclose that information, otherwise we can no longer represent you.

If it becomes clear that you have not made full disclosure of your financial situation

  • Any final Order which is made could be set aside (overturned) in the future.
  • You could be at risk on costs i.e. you could be ordered to pay the other party’s costs, which could run to many thousands of pounds.

NON DISCLOSURE BY YOUR (FORMER) SPOUSE

If your (former) spouse fails to supply information required by the Court, we could apply to the Court for an Order that your (former) spouse complies within a specified period of time and for a penal notice to be endorsed on that Order.

The effect of a penal notice is that if your (former) spouse fails to comply with the required time limit set down by the Order, they will be in contempt of Court. It would then be open for you to apply for your (former) spouse to be committed to prison or punished as the Court sees fit. Obviously, this would be a drastic step which would probably only inflame the situation and increase costs. We therefore hope that such actions will be unnecessary.

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