Sharing, Needs, and Compensation – What Does it Mean For Me?
Sharing, Needs, and Compensation – What Does it Mean For Me?
Over the years, the family court’s approach to deciding financial matters on divorce has evolved. Section 25 of the Matrimonial Causes Act 1983 enlists a number of factors to be considered in regard to financial provisions. After the House of Lords’ ruling in White vs White, the general principles for deciding the outcome of financial matters changed. Prior to that, decisions regarding financial order cases were largely based on whether the ‘reasonable requirements’ of the parties are met.
To reach a fair outcome, the financial remedy cases will be decided after taking into account three key principles: sharing, needs, and compensation. The circumstances surrounding each case are different, however, the judgment in White vs White made achieving fairness a top priority when dividing finances following divorce. It also put a stop to discrimination between the roles of money-earner and homemaker.
The aforementioned three key principles should be applied to decide a fair outcome. After considering needs, sharing, and compensation, the weight will be given to other Section 25 factors depending on the circumstances specific to each case.
These three principles are interlinked and help the judge reach a fair and equitable settlement. Of all the three principles, ‘needs’ would be a paramount consideration that must be taken into account when searching for fairness.
Needs
Primarily, the judge will aim to divide the marital assets equally between the couple, however, it is only an ideal solution when the needs of both parties and the dependent children are met.
If the equal division of assets does not meet the needs of the concerned parties, the judge will search for alternative solutions to prioritize the needs of both parties, even if it leads to an unequal division of assets.
When determining the financial needs of the parties, the court will consider the persons ages, duration of the marriage, standard of living, and any mental and physical disability.
Sharing
Another strand of fairness is sharing. This principle means that both parties to the marriage are entitled to be awarded an equal share of marital assets unless there are compelling circumstances to depart from equality. Since both parties to the marriage value equality, it makes sense that they should share the assets equally on divorce.
Following the divorce, dealing with finances can be quite complex and it is not always possible to share the assets equally. Equal division of property does not always equate to a fair and equitable settlement.
The sharing principle sets out that equal division should be the starting point of all ancillary relief cases unless it is appropriate to award a greater share to either party. In the majority of financial remedy cases, sharing principle is directly related to the needs of the party.
If no surplus assets remain after dividing matrimonial resources to meet the needs of all parties involved, fairness is achieved.
Compensation
This principle is applied only in exceptional circumstances if the judge considers that either party should be compensated for the relationship-generated disadvantage. Any party does not have the right to compensation unless they suffered a relationship-generated disadvantage.
Usually, the contribution is considered when deciding compensation, however, it rarely has an impact on the sharing principle. It is worth noting that the contributions of the homemaker are considered equal to those of money-earners. There is an extremely high threshold for the compensation to be awarded based on the contribution.
In a majority of cases, compensation is rarely a relevant factor or has a significant impact unless either party has suffered in terms of earning capacity.
Disclaimer:
The information in this blog is for general information purposes only and does not purport to be comprehensive or to provide legal advice. Whilst every effort is made to ensure the information and law is current as of the date of publication it should be stressed that, due to the passage of time, this does not necessarily reflect the present legal position. Connaught Law and authors accept no responsibility for loss that may arise from accessing or reliance on information contained in this blog. For formal advice on the current law please don’t hesitate to contact Connaught Law. Legal advice is only provided pursuant to a written agreement, identified as such, and signed by the client and by or on behalf of Connaught Law.
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