There is no standard formula for calculating appropriate financial provision on divorce. The court has a duty to consider all the circumstances of the case and to consider a range of specific statutory factors set out in section 25 of the Matrimonial Causes Act 1973 (section 25 factors). The court's approach is to calculate and then distribute the parties' available resources between them to achieve a fair outcome.
Before considering the individual section 25 factors, the court first considers the welfare of any child(ren) of the family under the age of 18.
The court then considers the section 25 factors, which can be summarised as follows:
- the income, earning capacity, property and other financial resources which each of the parties to the marriage 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 party to the marriage to take steps to acquire;
- the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future;
- the standard of living enjoyed by the family before the breakdown of the marriage;
- the age of each party to the marriage and the duration of the marriage;
- any physical or mental disability of either of the parties to the marriage;
- the contributions which each of the parties 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;
- the conduct of each of the parties, 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 divorce or nullity of marriage, the value to each of the parties to the marriage of any benefit which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring.
Where possible, the court seeks to achieve a clean break between parties on divorce, so that they are no longer financially dependent on one another.
When considering the section 25 factors and determining a fair financial outcome for the parties, different judges may reach different conclusions on the same facts, all of which would be within their judicial discretion. However, over the years, case law has developed a standard approach to the way the courts are likely to consider a given situation. The guiding principles that apply to reaching a fair financial outcome for the parties are ''sharing'', ''needs'' and ''compensation''.
The starting point is that assets accrued during a marriage (matrimonial assets) are divided equally. The matrimonial home is normally considered a matrimonial asset, so its value is divided equally between the parties even if it was owned by one of them before the marriage.
Where an equal division of matrimonial assets adequately provides for the capital and income needs of each party and any children, this is the appropriate financial outcome.
Where the needs of the parties and any children cannot be met by an equal division, an unequal division of assets may be appropriate instead. In these cases, needs are likely to dictate how the assets are divided. The parties' needs are the priority and the fact that there may be assets inherited or acquired by one party before or after the marriage (non-matrimonial assets) is not important. However, where possible, the court tries to ensure that a party who inherited or acquired a particular asset retains it as part of the resources to meet their own needs, even if this means allocating a larger share of the matrimonial assets to the other party.
Achieving a clean break between the parties on divorce may include capitalising a party's maintenance requirement. If there are insufficient assets to achieve a clean break on this basis, one party (the payer) may pay ongoing maintenance to the other (the payee) if this is fair in the circumstances. This maintenance generally ceases when one of the following occurs;
- The payee remarries.
- Either party dies.
- There is a further order of the court.
Sometimes, the court awards maintenance for a limited period, for example, to enable the payee to take steps to become financially independent. It may either leave open the possibility of the payee applying to extend the term if, for example, they are unable to find employment to support themselves, or it may close off that possibility by directing that they cannot apply to extend the term.
Where significant matrimonial assets have been generated by the special contribution of one party (that is, by exceptional efforts that are greater than the contribution of the other), the court may provide the other party with a less than an equal share to reflect this. However, special contribution arguments succeed only in rare cases.
The sharing principle does not apply to property that is inherited or introduced by one party during the marriage. The exception is where such property has become part of the matrimonial assets, for example, by being put into joint names or converted into a different type of property enjoyed by the family (such as the proceeds of sale of an inherited picture used towards the purchase of a holiday home).
Where assets are entirely, or largely, non-matrimonial, the division of resources may be determined entirely by the applicant's needs. These needs are generously interpreted. Financial provision for the applicant in a case where the parties' resources exceed their needs may also include compensation for economic disadvantage (for example, because they have given up a successful or lucrative career to look after children).
Child maintenance is a separate issue. The Child Maintenance Service (CMS) has primary jurisdiction for assessing and enforcing child maintenance, although the parties may agree child maintenance between themselves and have the agreement set out in a financial consent order.
Parties to an order for child maintenance made on or after 3 March 2003 (excluding a school fees order and an order for costs attributable to a child's disability) are still able to apply to the CMS provided the order has been in force for one year. Once a maintenance calculation has been made by the CMS, this automatically ends any court order for child maintenance with the exception of orders made to meet educational costs or costs attributable to a child's disability.