Examination of witnesses (Questions 320
- 339)
WEDNESDAY 15 JULY 1998
MRS
HILARY
SIDDLE,
MR
ROBIN
ELLISON
and MRS
DIANE
BURLEIGH
320. Do you think it is technically retrospective
in its current shape and form? Are there bits of the draft legislation
that cause you concerns about that in particular?
(Mr Ellison) There are some technical areas. With
another hat on, I have been sitting in an NAPF committee looking
at the detail of the legislation and there are some ambiguities
on some of the sections. I cannot remember the numbers at the
moment, but there are some issues in the drafting.
Ms Hewitt
321. Looking at the note that we have here,
which is somebody else's note, a helpful note from the Solicitors'
Family Law Association, it is suggesting that this problem of
retrospectivity arises—and I think you are right about some
of the drafting—from Schedule 1, paragraph 6. What this
memorandum is saying to us is that paragraph 6(6) of Schedule
1 of this Bill is introducing pension sharing orders into the
Family Law Act provisions that deal with variation applications.
Therefore, as I understand it, you can have a divorce settlement
that was arrived at before this Bill comes into effect; the parties
come back to court to vary that settlement and this schedule,
by virtue of amending the Family Law Act, then makes it possible
for a pension sharing order to be granted by the court even though
the divorce and the original settlement were before this Bill
came into effect. I take it that is correct?
(Mr Ellison) The point is taken.
322. Could you give us your views on that,
on whether it is desirable or undesirable for the courts to be
able to do pension sharing on a variation?
(Mrs Siddle) I have to say we would need to consider
this because I have not considered it before this morning. I would
think it was not desirable to reopen pensions issues which had
already been dealt with on a previous hearing. Diane, do you have
a different view?
(Mrs Burleigh) No, I do not think I do have a
different view. I think we might generally find it unattractive,
even if it was a case where it had not been considered before,
because the implications and the importance of the pensions provisions,
and how they have been settled previously, are such that they
would be fundamental to a variation and could fundamentally change
the financial arrangements in such a way that would be normally
thought to be beyond a variation. It would be much more a fundamental
change rather than a variation of an existing order. That is my
initial reaction but I think we will definitely have to discuss
that.
(Mrs Siddle) Possibly, we can put in a response
in our paper.
323. We would be very grateful for a written
response. What you might want to consider is this: it may be this
was put in inadvertently. It may be that it was put in so that,
if an application for a variation was made for other reasons,
as it were, the courts would then have the power to do pension
sharing. Its effect may well be that you will get a whole host
of applications for variation solely in order to do pension sharing.
Therefore, the effect of this tiny little bit would actually be
to reopen a very large range of divorce settlements prior to the
Bill, so one could have quite a large effect of retrospectivity.
Further written evidence on that would be very welcome.
(Mrs Siddle) We certainly will look at that because,
as I am sure you appreciate, the general principles are, wherever
possible, the court looks at a clean break and the other principle
is that, when the final order is made, unless there are very,
very special reasons why it should be looked at again, it is not
looked at again. It is considered a final order. I think there
are important issues raised by this and, yes, we will, if we may,
Chairman, come back to you in writing on this.
Chairman: Thank you.
That is very helpful. Gisela Stuart has some questions about transfer
values.
Ms Stuart: Before
that, I would like to make a comment. I would describe Robin Ellison's
earlier comments as mischievous. One of the purposes of these
prelegislative hearings is to do precisely what you say we should
be doing, correcting errors. I take deep issue with saying that
we can take analogies from South Africa and continental law in
areas like pensions and just transfer them. This is a debate for
somewhere else but it does not contribute to what we are trying
to do here. When you take the CSA, where there was a political
consensus, the devil was in the detail and the whole purpose of
this is to correct the errors before we have this. I would have
expected the Law Society to raise such issues as looking at retrospectivity
and the ambiguity of that at this very point. I would like to
focus on the purpose of the hearing.
Miss Kirkbride: Can
I dissent from that view?
Chairman
324. Mr Ellison, do you want to respond
to that? I am here to protect you.
(Mr Ellison) It was not intended as mischievous.
It was intended as a constructive comment.
Ms Stuart
325. Point taken. Coming to the very technical
issue now of cash transfer values, it would be very useful to
have your view on how significant you think the shortcomings of
the cash equivalent transfer are because we all accept that there
are some shortcomings, but there is a consensus that it is probably
the best we have. How significant do you think the shortcomings
are, particularly paying attention to the inevitable fluctuations
which we have?
(Mrs Siddle) I will respond very briefly with
the layman's view and then I will let Robin give you the experts'
view. Our view, as a Committee as a whole, is that CETV is the
best we have and, for the majority of cases, I suspect it is,
cost wise and for so many other reasons, the most practical solution,
but we do think there are some cases where CETV does not give
a fair result. Robin, I know, has very strong views on this.
326. Would you then say there should be
exceptions to using CETV because the current legislation is quite
clear that that is the value we are using. Would you therefore
suggest that there ought to be exceptions to it, given that it
has shortcomings?
(Mrs Siddle) The difficulty with making exceptions
is you then have to give criteria for those exceptions. My understanding
of this legislation is we are trying to keep it simple. I would
hesitate to add to its complexity.
(Mr Ellison) I echo that. I think that CETV is
a cheap and cheerful valuation. In very many cases, it is not
a million miles from what people should be using. The difficulty
has been that it was in danger of being accepted as the only valuation
and there will be cases where it is an unfair valuation, particularly
for the ex-spouse and, in most cases, that is obviously the wife.
As Hilary has mentioned, it is difficult to decide when and where
it is an unfair valuation. My own view was that it was better
to allow the court to say, in certain circumstances, they would
accept evidence of another valuation where the parties thought
it appropriate not to be locked into a particular valuation system
which, in that particular case, was not appropriate. In cases
of short marriages, in cases where income is low, where perhaps
parties have not been in pensionable employment for a long time,
a CETV is a very cheap and cheerful remedy and is acceptable in
most cases. The fact that it is not accurate to a pound or two
I do not think matters because the divorce procedure is predicated
on the basis of the broad brush approach and is not looking for
very detailed valuations.
327. Can I take you now to unfunded schemes,
particularly public sector schemes, where they will have the right
but not the duty to allow people to take a transfer out? Public
sector schemes do not have rights of nominations so we are talking
about two different kinds of scheme. Do you think that is introducing
a kind of unfairness, not giving the same rights to people but
some of the rights are dependent on what scheme they have come
from?
(Mr Ellison) My view is you take what there is.
This is the Landau view. In other words, the spouse is
entitled to a proportionate element of what the member of the
scheme has. If the member of the scheme does not have rights to
transfer, then she would not have rights to transfer. You take
what you have and try and deal with it as best you may. The fact
that they are different benefits is just the luck of the draw.
Chairman: I want to
ask Malcolm Wicks to ask some questions about division of assets
but, before that, could Chris Pond turn to the question of prenuptial
agreements?
Mr Pond
328. Can I just say that I am a little concerned
at Mr Ellison's suggestion that the preparatory material which
has been put together by officials largely for this process might
be taken into account by the courts. It does rather undermine
the whole process that we are going through, because the purpose
here is for us to examine draft proposals and then to come up
with some amendments to that. If this process is going to be ignored
by the courts, or if it is going to be balanced with the preliminary
draft material, I think that throws into question this whole process.
The Minister has made it very clear that, in many of these areas,
guidance will be required. I think the courts would be unwise
to consider that draft material, but it is your professional judgment
and I have to take that on board. In terms of the whole question
about the sort of considerations that courts take into account,
should Parliament be laying down guidelines, do you think, in
terms of the division of assets—in particular, pensions?
Is that the role of Parliament in this process?
(Mrs Siddle) I personally would prefer that Parliament
does not lay down guidelines because the difficulty that we have
is that each marriage is different; the individual circumstances
in each case are different and, under the divorce legislation,
the Matrimonial Causes Act, there are principles there which the
courts follow. The pension is one of the assets which is taken
into account. If the guideline you are thinking of is that the
pension is given a priority, that would cause a lot of difficulties
with regard to the securing of the matrimonial home for the wife
and children.
329. On prenuptial agreements, do you think
pension sharing is going to make the use of those sorts of agreements
more frequent? Do you think they have any role in the current
arrangements for sorting out divorce?
(Mrs Siddle) We have just prepared a paper on
ancillary relief which we have submitted to the Lord Chancellor's
Advisory Group and we do support prenuptial contracts. Actually,
I do not think we think that prenuptial contracts will have the
fundamental difference which others expect of them, possibly they
might have more relevance with regard to second marriages where
both parties have been married before. They have assets from previous
marriages and they have children from previous marriages. Those
are situations where we think we will see an increase in the use
of prenuptial agreements if they are going to be in force in future.
I think changes may be contemplated, but with regard to the ordinary
young people who have never been married before I see them being
used less.
Chairman: May we turn
to division of assets?
Mr Wicks
330. I too was interested in the earlier
exchange about preliminary information, whether it might be used
in the courts, and I am certainly going to put all my doodles
through the shredder when I get back. On the division of assets,
Mrs Siddle, you touched on this issue earlier. What our Committee
is grappling with in part are two perspectives on this issue.
One is a family law perspective. You said you saw this coming
out of the Family Law Act. If so, the pension fund is another
asset to be considered by the court. The other perspective which
predates the Family Law Act by many a mile is a concern that women
in the main are hard done by on divorce and that there should
be some pension splitting so as to secure, hopefully for both
parties, some reasonable income in old age. There is a tension
between those two things, is there not? I think your position
is that it is another asset to be divided. Is that your position?
(Mrs Siddle) It is but I do not see a tension
between the pension and the other assets when there are other
assets. I see the tension arising where there are not enough assets
to divide the pension and to provide a home for the wife and children.
That is the difficulty which I see.
331. If you were representing a client,
a husband or a wife, let us take a simple example where in some
part of middle England the home is worth currently £100,000
and happily for my example the pension fund is worth £100,000.
There are dependent children staying with her. How would you go
about advising the court on that matter?
(Mrs Siddle) I can tell you now because that is
a very simple example which I deal with every day. There will
be a house worth £100,000, an endowment policy secured on
that, a car, matrimonial contents and very few other assets and
the husband's pension will have a CET value of £100,000.
I do not need to advise the court; I do not need to advise the
client. She will tell me: "I will have the house and I will
not make a claim on his pension". It will be her decision,
not mine.
332. You can understand why that might be
her decision.
(Mrs Siddle) Absolutely.
333. In the trauma of a family breakdown,
you need security not least for the children, but is it not more
complex than that, because although at this precise moment £100,000
is £100,000 we cannot assume that over the next 20 years
up to their retirement the assets are the same, can we? Obviously,
it depends on the performance of the housing market and all the
rest, but, on the one hand, she will be left in a home which still
has a value, but she has to maintain it and, as the children leave,
one may worry about it; whereas the pension fund, invested in
equities perhaps, may have increased to a far larger value. Are
we comparing like with like here?
(Mrs Siddle) We are not. We are looking at two
different aspects, are we not? We are looking at income and we
are looking at capital, because the pension fund supports income
and it supports income in retirement. Over the past 20 years,
our matrimonial legal system has been moving, wherever possible,
to the clean break. In fact, the wife often is not looking for
continuing maintenance. Sometimes she has to have continuing maintenance
because it is impossible for her to manage. The effect of higher
child support assessments has meant, in some circumstances, that
because the child support payments are much higher than they were
in the past she does not need to ask for maintenance for herself
from her husband. Her claims for maintenance, for income, are
dismissed by the court. She will accept that, providing she has
the security of her own home. One can argue that, when she reaches
retirement, if it is too big for her, it will have inflated in
value; she can buy something smaller and she will have a small
lump sum, certainly possibly not as much as the pension fund is
worth, but a small lump sum which will help her in retirement.
334. In the longer term he does better.
(Mrs Siddle) He certainly does.
335. She has that short to medium term security
of a home?
(Mrs Siddle) Yes.
336. I think that there are many people,
perhaps including some who are behind this legislation in the
Department of Social Security, who think that pension splitting
on divorce is about pension splitting on divorce. You are saying
it is not really. It is about and should be about treating the
fund as another asset. Are you telling me this is your experience?
(Mrs Siddle) I am telling you it is my experience.
337. Usually, it does not bring about pension
splitting. That is what you are saying?
(Mrs Siddle) The only cases where I have seen
earmarking orders are where the parties have been married a long
time so that the wife is over 50. There is no possibility whatsoever
of her obtaining any independent form of employment for herself
because unfortunately she is too old and she is out of the labour
market. Therefore, she has a need for continuing maintenance.
In those circumstances, she will normally receive the matrimonial
home and income provision which will continue with regard to pension
provision. She will get an earmarking order which will continue
on.
338. I genuinely recognise the tension here.
I can see all the reasons why you, as a lawyer, and she, as a
mother—her first instinct would be to keep the home. Is
there not a worry now in the current practice in the sense that
the culture of the family lawyer will mitigate against helping
that woman have a decent income for what could be 30 years of
her retirement?
(Mrs Siddle) I honestly do not think it is the
culture of the family lawyer. I think it is the culture of society.
I think it is the expectation of the woman herself.
Chairman
339. I want to glancingly ask you a question
about the potential problems, if any, about the two jurisdictions,
the civil law of Scotland being different from that of England.
I know that we have expert witnesses later on this morning and
we will pursue that maybe in more detail, but do you have anything
that you would like to say to us about the complexity involved
in trying to get a piece of legislation that is common to both
jurisdictions?
(Mrs Siddle) I do. I did not know a great deal
about Scotland until about a month ago when I had the privilege
of going and attending a seminar with Diane as an introduction
to ancillary relief in Scotland. There are vast differences between
our two jurisdictions which I had not appreciated. As you know,
in Scotland, they have a system whereby they look at matrimonial
property and all their disputes seem to have moved from dividing
the assets fairly to arguing about what is matrimonial property.
It does not seem that it has diminished the litigation; it has
just changed it. It has changed the nature of it. I do think there
are totally different approaches. Again, it is quite a big subject.
We have put a paper in to the Lord Chancellor's Advisory Group.
I would be very happy to either let you have a copy of that paper
or include it with our submissions.[2]
2 1 Not available at time of publication. Back
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