Whether you can reach an agreement or not, the resolution of financial issues on divorce has two fundamental concepts at its core:

• The need for full financial disclosure which involves each party fully disclosing their financial positions. Before you can address the division of the family finances it must be determined what exactly there is to divide in terms of income and capital.
• Financial arrangements should be formalised in a court order. Only then are the parties bound by the settlement and if there is any default that the settlement can be enforced.

If an agreement is reached between you in mediation or by collaborative law, through solicitors or even when court proceedings have begun, a court order is still necessary. The court always retains the power to approve an order or not. It does not simply rubber stamp agreements but has to be satisfied that any order is fair and reasonable before it is made.

Factors that the court considers in a Financial Settlement

The law concerning financial disputes on divorce is discretionary and therefore can sometimes be uncertain. Much will depend on how a particular judge decides matters. Judges are not guided by mathematical tables or calculations but by factors that they must consider and apply to the facts in each case. First consideration is always given to the welfare of a child who has not attained the age of 18.

The other factors are:

• The income, earning capacity, property and other financial resources which each party has or is likely to have in the foreseeable future;
• The financial needs, obligations and responsibilities that each party 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 and the duration of the marriage;
• Any physical or mental disability of either of the parties;
• The contributions which each of the parties has made or is likely to make in the foreseeable future to the welfare of the family;
• The conduct of each of the parties (in very limited circumstances);
• The value of any benefit which a party will lose the chance of acquiring by reason of the divorce

From the decisions that judges have made it is also clear that the courts are driven by the principles of need, compensation and sharing. Quite often assets accumulated during the marriage (matrimonial property) are treated differently to those brought to the marriage (non-matrimonial property).

Orders that a court can make

The court cannot make any order it chooses. Broadly speaking there are two types of order:

• Those relating to income;
• Those relating to capital

The income orders are those relating to spousal maintenance (which can be for a certain period or be left open ended) or child maintenance (including school fees). The courts have limited powers concerning child maintenance. Income orders can always be varied providing the term has not expired. It is also possible to capitalise such orders.

Capital orders on the other hand are “one off” orders and are either orders for a lump sum, orders altering a person’s interest in a property (including the outright transfer to a spouse), orders for the sale of a property, and pension sharing orders.

The court has the power to make these orders at the Decree Nisi stage of the divorce but the order cannot come into effect until the final decree of divorce (Decree Absolute).

The court cannot make an interim award of capital but it can order interim maintenance so the other spouse has to financially support the other until a long term settlement is reached. Sometimes it is also possible to ask the court to order one party to pay an amount to cover their legal costs as their case progresses.

The court procedure

An agreement can be reached concerning financial disputes at any stage even after court proceedings have begun. In a financial application there are usually three court hearings. Before the first, both parties are ordered to provide their financial disclosure in a certain format. Before the first hearing a number of other documents must be prepared by each party including a questionnaire which sets out requests for further financial information from the other party.

At the first appointment the judge will decide which questions should be answered and also make directions concerning any expert evidence that is needed, for example, property or business valuations.

The second hearing is a Financial Dispute Resolution Hearing (FDR). Before this hearing each party should be totally aware of the other’s financial position and it is expected that offers of settlement have been made. The purpose of the FDR is for the parties to negotiate to try and reach a settlement on a without prejudice basis. The judge can give the parties guidance and an indication as to how they would decide matters. This indication is not binding on the parties and the judge giving it cannot decide matters at a final hearing nor can any indication be referred to at a final hearing but it can encourage settlement.

If matters do not settle the case will proceed to the third hearing which is the final hearing at which the parties will give their evidence and can be cross examined. The judge will then make a decision which is then binding on each party.

How long will it take? How much will it cost?

The time it takes to achieve a settlement is dependent on a number of factors. Much will depend on how easily an agreement can be reached and at what stage. How you chose to deal with your matter can also have an effect as Mediation and Collaborative Law can offer a quicker solution as opposed to contesting matters through the courts.

Court based settlements can take 12-18 months from start to finish. If an agreement is reached at an early stage, the process can take as little as six months and will be considerably cheaper

For advice on this subject call on 0208 554 6263 or alternatively email on aroraashtonpatel@gmail.com for a free call back.