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Minutes of evidence (Questions 240 - 259)
MR MARTIN
POINTER, QC,
Family Law Bar Association, was examined.
Mr Goggins
240. In paragraph 3 of your memorandum to
the Committee you quite rightly say that you have observed in
the transcripts of evidence so far some concern shared by some
members of the Committee that a split of assets which saw the
wife keep the house and the husband keep the pension might result
in later life in the wife having an inadequate income. You go
on to say that you believe that this concern is "ill-founded".
I wonder if you could tell us why?
(Mr Pointer) My reading of the transcripts that
I had, led me to think that some members of the Committee were
of the view that prior to this legislation pensions were really
left on one side, that when ancillary relief claims were being
decided they were not brought into the scales at all, and that
the introduction of this legislation would mean that courts would
tend to put the house on one side of the scales and the pension
fund on another. I do not think that is a fair reflection of what
has been happening over the last 20-odd years. I think that the
courts have brought pension funds into the scales to a degree;
I believe, in an inadequate way, because there has been a lack
of information and understanding about pension schemes and the
way they work and how you should value them, but there has been
a tendency to do the very thing that members of the Committee
were expressing concern about—justifying the transfer of
the house outright to the wife by reference to the pension fund
in the husband's name.
241. I think the concern arises from the
fact that whilst the split may be fair at the time of the split,
the pension fund can continue to appreciate in value—quite
considerably sometimes—whilst the house can become a liability,
and therefore what is fair at the split is not fair 20 years later
when the house is a liability and perhaps the income that the
wife has is a very modest one. Would you like to comment on that?
I think it is not a lack of fairness at the split, it is how that
split works out 20 years later.
(Mr Pointer) I think there can be a lack of fairness
at both times, if a pension fund is simply set against a house.
If it is a case where there is a wife who is a long-term dependant,
she may find herself short of income in retirement, but I think
that it may lead to a husband receiving a disproportionately low
share of the more liquid capital that the parties have built up
during the marriage. I do not readily accept the premise that
you invite me to accept; that there is necessarily fairness at
the time the order is made.
242. Do you think at the time the order
is made, that both parties should be able to demonstrate how they
would provide for at least minimum income in retirement, irrespective
of how the assets are actually shared?
(Mr Pointer) Whether that would be necessary in
every case I am not sure because there are many cases now ending
in divorce, where parties are in their young 30s, and the court
may say that retirement is a long way off and we can divide the
current assets without having to address the question of retirement.
That would obviously involve considerations of whether there were
children and how young they were, and what impact they would have
on the wife's earning capacity if the children were living with
her. But I do agree that it is desirable that the courts should,
so far as possible, take a long-term view of the parties' financial
requirements. The current statutory provision, section 25 of the
Matrimonial Causes Act, requires a court to have regard to the
income and assets that the parties have, or are likely to have,
in the foreseeable future. Most of the cases that have debated
that phrase have regarded "in the foreseeable future"
as in the next three to five years. The revisions that were made
by the Pensions Act 1995 provide that this particular phrase is
to be excluded when looking at pensions. My own view is that if
this proposed legislation comes into force, the courts should
be encouraged to take the broad view that you are suggesting,
the long-term view.
243. Thank you for that. Could I move on
to earmarking orders. In paragraph 5 of your memorandum, you observe:
that Lord Justice Thorpe said that he believed that earmarking
orders are regularly made.[1]
I suspect he may have also said that it was too early to judge
just how effective or how frequently earmarking was actually used.
I wonder whether you could tell us, from your own experience,
whether you feel earmarking has or has not worked.
(Mr Pointer) I, myself, have only hitherto been
involved in one case in which earmarking has been argued. I have
been asked to come into another case which is a decision of Mr
Justice Singer called Thompson, of which I know your Clerk
has a transcript of the judgment, because that is on its way to
the Court of Appeal. I am aware of another decision in the High
Court by Mr Justice Cazalet, in which he followed Mr Justice Singer's
decision in Thompson. I understand from discussions with
colleagues that earmarking orders are made from time to time but
the impression I have is that they are, at the moment, not very
often made. I do not think there is any statistical information
about this. It is really rather early, as you say. However, their
utility, as I have already commented, is, I think, doubtful.
Mr Goggins: Thank
you very much.
Chairman: Could we
turn to the division of assets. We are obviously quite interested
in that whole question. Malcolm Wicks has some questions to ask.
Mr Wicks
244. Thank you very much for what you have
said already. You have touched on some of this issue very directly
already. One starting point for this is a pensions starting point.
Many of those people campaigning for pension splitting on divorce
have done so on the basis that they feel that both the man and
the woman should have a decent pension in old age, so there is
a pensions starting point. What our Committee is grappling with,
as we seek to understand the issue, is that much of the starting
point for the Bill is a family law starting point, where the fund
is simply treated as an asset. It is this issue that is exercising
us because, I suppose, at the back of our minds is a feeling that
this may not make a great deal of difference to the Bill, if we
are not careful, to the pensions that women achieve in old age.
I wonder if you could say more about that. If we took a simple
example, say, of a divorce where the family home is worth £100,000
and the pension fund of the man is currently valued at £100,000,
how would a court go about dividing those assets if there were
young children in the home?
(Mr Pointer) If the legislation is brought into
force?
245. Yes.
(Mr Pointer) The geography would be quite important
because £100,000 in the south-east would not provide a great
deal of accommodation.
246. Middle England.
(Mr Pointer) There would be evidence about the
cost of suitable accommodation for the wife and the children.
If the judge were satisfied that a suitable house for the wife
and children could be provided for, say, £60,000, then he
might well order the sale of that house and 60 per cent of the
proceeds to go to the wife to provide that accommodation. If the
£100,000 pension fund had been built up during the marriage—I
do not know, one would have to look at when in terms of the husband's
working life the parties had got married because he might have
worked for ten years before marriage, building up a pension fund,
and then married for another ten years, so that only half of that
pension fund had been built up during the marriage—it might
be thought unfair for the wife to get 50 per cent of the £100,000
if she had only been there for half of the period it was being
built up. It might be said she should get 25 per cent; ie, half
of the half built up during their time together. If that argument
were successful, then there would be a pension sharing order and
25 per cent of the fund would go across to the wife. That would,
I think, be of great benefit to the wife who, if she had not already
returned to work, would no doubt aim to do so following the breakdown
of the marriage. That would be a significant start to her, in
terms of creation of the pension fund in her own right, because
although it might not sound a lot of money—£25,000
or whatever percentage it might be—if it was building up
over the next 20 years until she did actually retire, then it
would become a significant amount.
247. So you are saying that you think this
is the kind of judgment that would be made in my hypothetical
example? You are not concerned that the judgment might be far
cruder and basically saying in that case she keeps the home and
he keeps his pension fund? There is no danger of that happening,
is there?
(Mr Pointer) There is a danger of that happening.
It is difficult to know quite how judges will approach that. I
think it would be a mistake for them to go down that particular
route, but there is no doubt but that, in their approach to ancillary
relief cases, judges very much prefer simple orders. While that
is obviously laudable from one perspective, I think it is important
that the different character of these assets should be reflected
in the orders that are made.
248. What strikes me as a layman reading
the Bill and trying to understand, is that on the one hand there
is a great deal of detail about how pensions should be valued
and so on; and then on the other hand there is a part of the Bill
which says it is up to the courts really. Do you think there is
a case for Parliament looking again at the draft Bill—which
is our purpose as a Select Committee, and albeit understanding
the complexities and the difficulties about the family home, which
often should be preserved for the sake of the children—do
you think there is a case for Parliament to be rather clearer
about its ambitions in terms of pensions splitting, and somehow
at least trying to signal to courts that we rather expect a pension
splitting to enable the woman to have some security in old age?
(Mr Pointer) Yes, I do think there is a case for
Parliament indicating in the statute that this approach should
be adopted, if that is the view of Parliament. I think that to
go further and start prescribing the percentage a wife should
have would not fit satisfactorily with the other statutory provisions
which give the court a wide discretion. I know that the Lord Chancellor's
Committee is looking at ancillary relief generally, including
the approach in Scotland, and obviously there is a case for a
completely different approach to the division of assets on divorce.
While the remaining provisions give the court a general discretion,
I do not think that the prescribed percentage would work at all
satisfactorily. However, as a matter of general approach and priority,
I think it would probably be helpful for Parliament to give an
indication.
249. Could I ask one more question on a
point which, Mr Pointer, you raised almost as an aside when you
were helping me with my hypothetical example, when you said that
the judge might take into account, when it comes to the pension
fund, the fact of, say, a 20-year fund, as it were, building up,
and including ten years of marriage and ten years when the man
was single. You did say that the judge might take that into account.
That was something that interested us earlier on, as to when,
in a sense, you start counting in terms of the build-up of pension
funds. Can you say more about that, because I was unclear. I think
I began to think in my own mind that perhaps the law was that
all the pension fund was taken into account, regardless of the
duration of the marriage, but that is obviously not the case,
is it?
(Mr Pointer) That would not be the case if the
legislation were to have the form of the present draft Bill. The
court would look at all the listed factors in section 25, one
of which is the duration of the marriage. One can see why that
would be appropriate in the circumstances that you were postulating.
Nowadays many marriages that end in divorce do so after what in
historic terms is a comparatively short term, whereas when the
Matrimonial Proceedings and Property Act 1970 was passed marriages
that ended in divorce might have lasted for 20 or 25 years. I
do not know the precise statistic now, but I think that the average
length of marriage that ends in divorce is something like nine
or ten years. It might be a second marriage. The husband might
take a second wife when he is aged 40, having been building up
a pension fund for 20 years or the best part of 20 years, and
that marriage might last seven, eight, nine years or even ten
years. Should the wife really get a significant portion of a fund
that has been built up by then over, say, 30 years, when she has
only been there for the last third of it? The reaction of most
judges who do this work would be that no, there should be some
calculation of what would be a fair percentage of the total fund.
It would not actually be that difficult, because the approximate
value of the fund at the time of the marriage would be ascertainable.
250. I should know this, I suppose, but
is that spelt out in the draft Bill, or is that just practice
in courts?
(Mr Pointer) It is not spelt out in the draft
Bill. It is my view of the practice that would in fact be adopted.
I know that Mr Justice Wilson gave an address in which he dealt
with the question of pension splitting and was himself expressing
the view that the percentage that a wife should have should reflect
the duration of the marriage. He is very experienced in this field,
and I think it is a common view among family lawyers.
Chairman
251. In England and Wales?
(Mr Pointer) Yes. All of my observations have
been about England and Wales.
Miss Kirkbride
252. This is a point which rather fascinated
me, and you have clarified some of it, but I still do not quite
understand why that is the case, when every other asset of the
marriage, it is my understanding, goes straight down the middle
after a divorce. The house is shared half and half equally. Why
should pensions be deemed to be any different?
(Mr Pointer) Houses are not shared 50/50.
253. They are not?
(Mr Pointer) No.
254. I thought it was the case in Scotland
but not in England?
(Mr Pointer) I am not an expert on Scottish law,
and I may have to be corrected, but my understanding is that under
Scottish law there is a presumption that the matrimonial property
which is specifically defined shall be divided fairly, and there
is a statutory provision that an equal division is fair. So the
general practice in Scotland, subject to certain exceptions which
can be invoked, is that the assets are divided 50/50. That is
not the law in England. In England there is no currently defined
objective that the judge has. Under the law from 1 January 1971
there was a provision that the judge's objective was to place
the parties, as far as practicable, in the position they would
have been in had the marriage continued, but that was widely regarded
as unworkable in the vast majority of cases and was really an
historical relic. That particular provision was repealed in 1984,
but without any replacement. So the judges do not have any prescribed
objective, they have to do what they think is fair, their priority
being provision for the children, and that is statutorily provided.
So there is no assumption of 50/50, and very commonly it is not
50/50.
255. So where there are no children of the
marriage, the duration of the marriage will take into account
a distribution of the assets accrued during the marriage, that
will be the more likely outcome than in cases where that is not
the case, where there are children in the way of that—for
want of a better way of describing it—in that they have
to provide for militating against that split of the assets accrued
during the duration of the marriage?
(Mr Pointer) In a case where there were no children,
yes, the duration of the marriage would be important, but so would
the contributions, because you might have a high-earning husband
and a low-earning wife, and he would say, "Well, I've been
the generator of the resources that we have, and although my former
wife should be properly provided for, it would be unfair for her
to have 50 per cent of what has really been built up through my
expertise and effort." That argument might very well be successful.
It is quite common in fact for a wife to get more than 50 per
cent of the assets in, I suppose, the majority of cases, because
of the perceived need for her and the children to be appropriately
housed. In cases where there is significantly more money, a wife
will get significantly less than 50 per cent.
Miss Kirkbride: I
am just thinking of the divorces I know about, and that does not
seem to apply, but you obviously know more about it than I do,
so I am fascinated by that.
Chairman
256. We are struggling a wee bit in terms
of the difference in the two jurisdictions north and south of
the English border. With justification, I understand that professionally
you are nervous about making pronouncements about jurisdictions
with which you have not as much professional experience as you
have in England and Wales. Is there not a case for trying to reconcile
the differences which exist? Never mind which side of the argument
you are on, should not this Bill actually try to cut through all
that?
(Mr Pointer) I think there is a case for there
being the same policy in England and in Scotland. It is difficult
to see how this Bill could achieve that, because it only touches
on one part of the matrimonial assets. My personal view is that
it is extraordinary that there should be two such different approaches.
In one of the cases which is mentioned in "At A Glance",
which I did a few years ago, there was a marriage where the husband
and wife had been together for something over 60 years. They were
obviously both very old. I was acting for the wife. I said in
argument to the judge, "Could we please have 50 per cent?
The judge said, you don't need 50 per cent, because she can be
nicely housed for £X and a handsome income can be provided
for her with capital of £Y." I said, "The husband
doesn't need 50 per cent, because he's older than my client is,
so his need is actually less. In Scotland, if my client were getting
divorced in Scotland, she'd get half, so if that's fair in Scotland
why isn't it fair in England?" The judge said, "Well
I'm not concerned with what happens in Scotland."
257. Precisely. You are right. I understand
that this Bill does not have the scope really to address as fundamental
a question as that, but that is helpful. Before we go on to talk
about flexibility, could you say something about Mesher
orders? They are a completely new form to me as a Scots lawyer.
Your note which you submitted was very interesting as to the way
in which they could be resurrected. Could you say a word about
that?
(Mr Pointer) The order is an order the usual form
of which is that the house be transferred from joint names into
the name of the wife, but with a charge of a defined percentage
in favour of the husband—that is, in effect, like a mortgage,
but with no interest payable—the charge to be exercisable
when the youngest child attains the age of 18 or, it might be,
21. The percentage does not have to be a half, although in a number
of cases it was a half. There were differing views in the Court
of Appeal about whether this was a good idea. One member of the
Court of Appeal in the late 1970s was very outspoken in his opposition
to this and said, "No, no, the house should be transferred
outright to the wife." Other members of the Court of Appeal
dealing with this said that this was not unfair because it leads
to a fairer division of the assets and you could always adjust
the percentage, if you are concerned about whether the wife has
enough money to rehouse herself, when the property comes to be
sold, when the charge is realised later on. Of course a charge
might, in fact, be paid off by the wife remarrying along the way,
being put in a position thereby to raise the money to pay off
her husband. My perception is that many divorcing parties regard
this as a fair way of dealing with their assets where they are
limited and principally centred on the house. Many husbands will
say, "I quite accept the children should be properly housed
or that they should remain living in this particular house during
their minority, but that should not lead to the complete loss
by me in the share of that property which I have built up over
many years of hard work."
Chairman: That is
interesting, thank you.
Miss Kirkbride
258. So going back to what you said about
the division of assets, if people had been married for 30 years
and are in their early 50s when they are divorced and the children
have gone, if she had never worked but had brought up a family
and he had had a high powered job, what you are saying is that
in those circumstances it would not necessarily be 50/50 on a
pension if it was his pension. If he was the high earner, therefore,
it would still be reasonable, under the things that you have been
saying, that it still might be a 30/70 split because she would
have to be compensated for her lack of earning time but she would
never, one might say, have been capable of accruing those levels
of assets even had she gone out to work?
(Mr Pointer) If it was a 30-year marriage, and
by agreement the wife had remained at home, (I think inferentially
you are saying bringing up the children), then I imagine she would
have a powerful case for 50 per cent of the pension. When I was
answering your earlier question, I had in mind that you were thinking
of quite a short marriage case where there were no children, a
five- or ten-year marriage, and the parties were rather younger
than in their 50s—perhaps they were 35 or something like
that—and the wife may well have worked but not taking anything
like as much as her husband. So I was actually considering a much
different situation.
259. So children change this?
(Mr Pointer) Children make a radical difference.
1 Note: Mr Pointer's comment was based on an error
in the original transcript: Lord Justice Thorpe actually said
that earmarking orders were not frequently made. (See Q100) Back
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