Memorandum submitted by
Martin Pointer, QC (PS 16)
QUALIFICATIONS
I was called to the bar in 1976. Since 1978 I
have been a member of chambers at 1, Mitre Court Buildings, Temple,
EC4: a set of chambers all members of which specialise in family
law work. I was appointed Queen's Counsel in 1996.
I am a member of the Family Law Bar Association;
and a Fellow of the International Academy of Matrimonial Lawyers.
My practice is predominately in ancillary relief
cases post divorce.
I was counsel for Mrs Brooks in Brooks v.
Brooks [1996] AC 375: which decided that the husband's company
pension scheme was a post-nuptial settlement as that expression
is used in the Matrimonial Causes Act 1973; and so was amenable
to variation so as to give the wife a pension in her own right
based on her years of service in the company and a deferred dependant's
pension.
GENERAL
1. I understand that the philosophy behind this
proposed legislation attracts broad cross-party support. Whether
or not that be the case, I doubt that my function in giving evidence
to the Committee is to act as advocate either for or against the
Bill. Nevertheless, it can, I think, fairly be said that family
lawyers have for a long time felt that the courts' power to do
justice between divorcing couples has been inhibited by their
inability to make orders affecting pension funds of which one
spouse is a beneficiary (except to a very limited degree since
the decision of the House of Lords in Brooks).
2. The structure of the revisions: the grant
to the court of discretionary powers to make a pension sharing
order in a specified proportion of the existing fund, with the
decision as to:
(a) whether to make a pension sharing order;
and, if so,
(b) in what percentage having regard to all
the available resources and the various other criteria that are
invariably appraised in determination of an ancillary relief claim,
is that which family lawyers will consider to be the most appropriate
revision to the existing statutory provisions.
Furthermore and, I venture, importantly, it
is also the structure that is most likely to lead to fairer ancillary
relief orders and, in all likelihood, a greater perception of
fairness in the minds of the general public.
PRACTICAL APPLICATION
OF THE
BILL IF
IMPLEMENTED
3. I have read the transcripts of the evidence
given to the Committee by the Minister (Mr John Denham MP) and
by Lord Justice Thorpe.
I observe that it is a concern of some members
of the committee that the proposed changes may be to incline the
courts to set off the value of the pension fund against that of
the house; to transfer the house to the wife and leave the husband
with the pension fund intact; this leading (it is feared) to inadequate
revenue provision for the wife in later years.
I believe this concern to be ill-founded. Indeed
(and while I acknowledge that this is necessarily a subjective
view), I believe that these proposed revisions to the law will
result in many cases in a fairer distribution of the available
resources that can at present be achieved. I attempt very briefly
to illustrate this below.
4. Current law in practice
At present the court is expected to take account
of all the resources of the parties. This includes any interest
in a pension fund, and, specifically any loss by reason of the
divorce of contingent widow's pension rights. Commonly there will
be evidence of the transfer value of the husband's pension fund;
and of the projected income available to him on retirement.
Brooks decided than many, if not most
pension funds are post-nuptial settlements as that expression
is used in the Matrimonial Causes Act 1973; and so amenable to
variation by the courts in divorce proceedings. However, this
is of limited application. The main reason for this is that variations
so as to give a divorcing wife a wholly independent fund would
in most cases offend Revenue guidelines and so jeopardise approved
status for the fund. Thus, unless the principle in Brooks
can be adopted, there is no order that the court can make that
invades the fund of which the husband is the beneficiary.
5. Effect of the Pensions Act 1995 on divorce
law
This was largely political window-dressing.
The power to direct the trustees of a husband's
pension fund to pay part of his pension to another already existed
under the Attachment of Earnings Act 1971.
The power to appropriate part of the lump sum
payable on retirement already existed: the court can order a lump
sum under the Matrimonial Causes Act 1973, and can secure the
fund (prior to its receipt by the beneficiary of the lump sum
order) by way of injunction and/or charging order.
The only true extension to the court's powers
was the power to oblige the husband to nominate the wife as beneficiary
in the event of his death in service.
In reality, this was a very small step: usually
this could be achieved by the threat or the activation of an application
for secured provision: a husband would then usually agree to make
the requisite nomination as to some or all of the death in service
lump sum.
[In this connection (the operation of the Matrimonial
Causes Act 1973, sections 25B to 25D as introduced by the Pensions
Act 1995), I observe that Lord Justice Thorpe said that he believed
that earmarking orders are regularly made. I have to differ from
him on this point. I am aware of only two having been made in
the High Court. No doubt they are made by District Judges; but
I doubt they are commonplace.]
6. So, under the existing law, often
in order to achieve or justify a clean break, a house may be transferred
outright to a wife and a pension fund left with the husband. This
can be unfair in a number of ways. The wife may be under-provided
for in retirement. The husband may be bereft of the liquid capital
owned by the parties and represented by the value of the matrimonial
home, some share of which he would prefer to utilise in the purchase
of accommodation for his residence and for their children to stay
with him.
In addition it may be said to be inappropriate
to compare directly a house (which is capable of conversion into
a capital sum) with a pension fund (which (subject to the limited
lump sum that can be taken on retirement) is receivable only as
income). Sometimes too, in a non-clean break case, the transfer
of the house will be justified by reference to the value of the
husband's pension fund. If the wife does not thereafter became
self-sufficient or remarry, the husband may end up paying maintenance
to the wife out of his pension income, the capital value of which
has already been set against the house transferred to her.
7. If the proposed changes are made, it is likely
that the division of all the resources will become more even.
If a wife is to share in the pension fund, it
may be that her retention of the matrimonial home until the children
are adult will be directed, but subject then to sale and payment
of a portion to the husband at that time (a Mesher order),
rather than an outright transfer.
The changes may therefore lead to the revival
of the under-used Mesher order. Although such orders were
at one time the subject of criticism in the Court of Appeal, they
are generally perceived as having attraction because of their
fairness. Alternatively, an immediate sale of the matrimonial
home may be ordered. This may not be a bad thing: often an emotional
attachment to a home and a fear of long-term insecurity drives
a wife's application for ancillary relief: when a more objective
appraisal of the parties' financial circumstances indicates immediate
sale and purchase of a more modest property. This when coupled
with a pension sharing order may be a more suitable outcome to
the ancillary relief proceedings.
8. Thus, introduction of the power to make a
pension sharing order will enable the courts to achieve a better
balance in the distribution of different kinds of assets than
at present. This is, as I believe, likely to lead to orders that
are and are perceived by the parties and the public to be more
fair than at present.
At the same time the use of this power will
not at all detract from the desirable objective of the clean break
where appropriate: rather it will facilitate it.
9. Flexibility
While the existing law as to the division of
assets on divorce incorporates wide-ranging powers and broad judicial
discretion, the same principles should, I believe, apply to the
question whether to make a pension sharing order and if so in
what proportion. To fix a percentage by statute or regulation
would be anomalous and likely to cause serious practical problems
when division of the other assets and/or the question of maintenance
is addressed.
10. I have referred above to the limited power
recognised in Brooks to alter pension arrangements as post-nuptial
settlements.
In the historic cases involving variation of
a post-nuptial settlement, there was an established principle
that the variation should be the minimum necessary to do justice
between the parties.
It is acknowledged (not, in my case, without
a tinge of regret!) that the Bill abolishes Brooks-type
orders.
Nevertheless, it may be thought desirable that,
in cases where there are liquid funds in addition to the house
and the pension fund, they should be utilised to compensate a
wife in priority to the making of a pension order.
It is suggested that consideration should be
given to the incorporation of some guidance to the courts. If
the view were to be taken that pension sharing orders should really
only be made where there are not sufficient other funds to compensate
a wife, then there ought to be some provision so directing the
judge.
This could be a positive direction prescribing
an order of priority; or it could be a more limited provision
such as an addition to section 25(2): so that among the factors
to be considered is:
"the extent to which those resources are
currently available to the parties and are readily realisable"
or some such wording.
11. Implementation
The Bill and the amendments to the Matrimonial
Causes Act 1973 are all drafted on the premise that the Family
Law Act 1996 is brought fully into force.
There is no certainty of that.
Within the legal profession the general view
is that these pension sharing reforms are fundamentally desirable
and ought to come into effect as soon as possible.
It is suggested therefore that the Bill be re-drawn
with two amending schedules in place of Schedule 1.
Schedule 1a (say) would be amendments to the
existing sections 23 to 25 to the Matrimonial Causes Act 1973:
these would be adapted from the existing Schedule 1, mutatis
mutandis, and would come into effect on Royal Assent if the
Family Law Act 1996 is not then in force.
Schedule 1b would be as the current draft schedule
1, i.e. based upon the Family Law Act 1996 being brought into
effect and would come into force at the same time as that Act.
12. Retrospectivity
It is important that the statute should not
be retrospective in its effect.
If it were, it would lead to costly arguments
as to whether the value of a pension fund had already, historically,
been taken into account in arriving at the original order.
As drafted, the Bill does not contain any limiting
provision: if enacted in this form, any wife already divorced
could launch an application for a pension sharing order.
I see from the consultation paper, page 11,
that it is intended that the legislation will only apply to new
divorce proceedings. Presumably the intention is that this will
be dealt with in regulations. Is there any reason why it should
not be in the statute?
C. TECHNICAL
13. Form of order/agreement
By clauses 3(1)(b)(i), 3(1)(c)(i) and 3(2)(b),
the parties may make a pension sharing agreement in a form to
be approved. Consensual resolution of these issues is desirable;
but the technical requirements are not straightforward and there
should definitely be a prescribed form.
This idea should also be extended to pension
sharing orders: they too should be in a prescribed form.
If this is not done, the opportunities for defectively drafted
orders will be manifold. This is important in relation to the
administration costs of pension sharing orders: for these will
be passed on to the divorcing couple.
14. Appeals
In the consultation paper it is said (at page
16) that the pension sharing order:
shall not be effected for 21 days to allow time
for an appeal; and
shall be implemented within four months.
The latter provision finds voice in the Bill
in clauses 8 and 9. There seems to be no provision for the former
time period (21 days).
However, by Schedule 1 a new section 40a to
the Matrimonial Causes Act 1973 is introduced. This provides that
if an appeal is mounted, and by the time the appeal is heard,
the pension sharing order has been implemented, the court cannot
do much about it directly, but can make negativing pension sharing
orders to achieve the right result. This is extremely convoluted.
It is understandable why the provision is there: to spare the
pension managers from having to undo the arrangements they have
made, which may include a new pension contract if the wife has
transferred out her share. One consequence may be that a husband,
in an attempt to thwart or impede an appeal, in fact implements
the pension sharing order very rapidly.
15. What should be provided is that:
(a) the pension sharing order does not take
effect for 35 days. The time for lodging an appeal from District
Judge to Circuit Judge or to High Court Judge is 14 days; but
the time for lodging an appeal from High Court Judge (who may
be a judge of first instance in such a case) to the Court of Appeal
is 28 days.
(b) Any Notice of Appeal or Notice of Application
for leave to appeal to the Court of Appeal shall be served on
the pension administrators.
(c) The service of the Notice of Appeal or
Notice of Application for leave to appeal shall operate as a stay
of the pension sharing order until determination of the application/appeal
or earlier order of the court lifting the stay.
16. Variation applications
a. Were there has been an ancillary relief order,
not made on a clean break basis, and a variation application is
made, the court will have power to capitalise the periodical payments
by making a lump sum order and/or a property adjustment order
[the intended sections 31(7A to 7F) to be brought in by the Family
Law Act 1996] and/or a pension sharing order [by virtue of the
new section 31(7B)(ba) to be introduced by Schedule 1, paragraph
6(6)]. This is eminently desirable: that a pension sharing order
should be one of the tools available to achieve capitalisation.
However, consideration should be given to the
retrospectivity of this power. Is this intended to apply to all
continuing periodical payments orders, whenever made? (It is so
drafted at present.)
Or only to new orders for periodical payments?
Whichever is contemplated, it is important that the transitional
provisions are explicit.
b. Variation of a pension sharing order.
Schedule 1, paragraph 6(2) introduces an amendment
to the Matrimonial Causes Act 1973 section 31 that permits variation
of a pension sharing order. It would appear from paragraph
6(4) that this is intended to allow variation of a pension sharing
order made before the divorce order (the decree of divorce) up
until the divorce order itself is made, but not thereafter.
As presently drafted, however, the amendment
has a wider effect: the new section 31 (2) (g) permits variation
of a pension sharing order made before the divorce order.
The Family Law Act 1996 contemplates that this will be the standard
practice.
Thus all pension sharing orders will be variable.
I am sure this is not intended; it certainly
should not be the case.
What is required is that the new section 31
(4C) should provide that:
No variation of a pension sharing order shall
be made
(a) after the making of a divorce order;
or
(b) so as to take effect before the making
of a divorce order.
in relation to the marriage.
July 1998
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