Examination of witnesses (Questions 346
- 359)
WEDNESDAY 15 JULY 1998
MR
DAVID
DAVIDSON,
MR
RICHARD
SAX
and MR
DAVID
SALTER
Chairman
346. Can I reconvene the public session
of evidence and welcome our next guests, the Solicitors' Family
Law Association, Mr David Davidson from Charles Russell, Mr Richard
Sax from Manches & Co and Mr David Salter from Addleshaw Booth
& Company? Gentlemen, you are very welcome. Thank you very
much for coming and I am sorry that we have kept you waiting for
a few moments. As you know, we are engaged in an inquiry at the
prelegislative stage on pension sharing in divorce. We have the
same kind of questions to address to you as we have just addressed
to the Law Society, but perhaps you would like to make an opening
statement yourselves, just to set the scene. Is there anything
in particular that you wanted to draw to our attention? Then we
will try and cover some of the other areas later on in the evidence.
(Mr Salter) As an Association, we do welcome this
opportunity of giving evidence and of the whole partnership approach
towards considering this draft legislation. We certainly welcome
pension sharing as a new piece of weaponry which the court will
have. You have before you what is nothing more than a preliminary
note, which gives you three areas which may, in a way, seem very
detailed, but they were the principal concerns that we have. Beyond
that, it is our intention to submit a fuller report which will
be with you by your deadline so that you can have further thoughts
from us. That is all I wish to say.
347. Thank you very much. The preliminary
note is very helpful because it sets out your membership and a
bit of the history of the Association. That is very valuable.
Can I ask you about training, though? Once this legislation is
enacted, do you intend to provide training for your own members?
Could you say a word about that?
(Mr Sax) We do intend to produce training by way
of lectures, by way of precedents and by way of general guidance.
We are also encouraged by the fact that, on the DSS Consultation
Panel, they wish to involve us in substantial guidance in input
into court forms and in input into precedents because we think
this is very necessary. It was lacking with earmarking and, as
a result of that, I think there has been a failure of proper drafting
of earmarking orders, a failure to have a procedure of consulting
the pension provider first, and this is something we should learn
from and we should adapt in this particular Bill.
348. You would not envisage any sort of
system of examination or pricing certificate to be required for
this specific piece of legislation?
(Mr Sax) We have some reservations about the Law
Society's scheme. We encourage their scheme, but we would like
the standard to be higher. In that respect, we have said to them
so far that we will look and see how far it goes but we are actively
considering ourselves whether or not we should also have an accreditation
scheme. Of course, we would involve just this kind of complex
area where many family lawyers will need assistance in order to
make it work properly.
349. Can we turn to the question of fees
and charges? We have heard some evidence demonstrating concern
about levels being difficult for people to face up to. Do you
have any thoughts about that which you could share with us?
(Mr Salter) We do have concerns about that and
certainly, through the DSS Consultation Panel, it does seem to
be accepted that the Bill is not perhaps ideally drafted there.
There is no definition of the word "reasonable". So
far as we are concerned, it would seem sensible that the pensions
industry itself should be responsible for regulating the levels
ultimately through the pensions ombudsman. The only alternative
to that would seem to be for the court to do it through the system
of taxation of costs. That is not an area where currently the
judiciary have perhaps the necessary experience.
(Mr Sax) The other thing that concerns us is that
there may well be many wives—it will usually be wives—who
have credits which they wish to place into an alternative scheme.
It would be very helpful to us if the regulators of those schemes,
first of all, would be able to have proper practice for advice
to clients about what was appropriate in choosing their new scheme
and, secondly, that there should be some regulation or voluntary
code in relation to the charges which they propose to make for
wives going into those new schemes. There is an enormous variation
between the commissions and other charges which are made by pension
providers. I am not really talking here about the ICIs of this
world but about other pension providers.
350. Edward Leigh was asking the Law Society
about some legal aid questions, do you think the legal aid rules
need to be adjusted in any way to deal with this?
(Mr Salter) I think they may need to be clarified.
The situation with regard to earmarking is at the moment that
earmarked periodical payments are exempt as such, and as Hilary
Siddle said earlier, the lump sum, apart from the first £2,500,
is subject to the charge but the charge only bites when that lump
sum is received with an earmarking order, so normally the Legal
Aid Board will seek to attach the charge against any other available
assets such as the family home. That effectively means that the
interest, which is an important aspect for the wife to consider,
will only begin to run when the charge crystallises upon receipt.
I presume, but it is not as yet clear, that the charge will arise
in the same way in relation to a pension sharing order. In other
words, it will only bite upon eventual receipt by the wife of
the lump sum element and any interest will only run from that
point.
351. Can we turn to implementation then.
Do you share the fears expressed earlier by the Law Society about
retrospection? The current wording of your memorandum highlighted
some sections of the Bill which you were uncomfortable about.
(Mr Salter) This is one of our main concerns.
It may seem to be a minor drafting point but we see major implications
arising from it. It is quite clear that it was the intention behind
the Family Law Act and its amendment to section 31, which provides
for variation applications, that it should be possible to make
lump sum orders and property adjustment orders upon the variation
of an order made before the implementation of the Family Law Act.
The amendment contained in the Pension Sharing Bill builds upon
that and in so building upon it introduces this concept of retroactivity,
and so we could have the spectre of an order made, shall we say
in 1985, containing continuing periodical payments, the wife after
implementation in, say, 2000 applies for a variation of that order,
and in so doing seeks a pension sharing order. That will then
involve the court in mounting investigations as to how if at all,
pensions were originally taken into account in 1985. Furthermore,
it will put potentially that wife in a better position than one
whose case was perhaps dealt with by the restrictive remedies
available in 1985. We therefore think that the drafting of the
Bill at the moment is defective insofar as it runs against the
Government's stated objective of no retroactivity which this Association
certainly supports.
Chairman: That is
very useful.
Mr Leigh
352. How do you stop that then? The courts
always will be tempted to re-open things if there is hardship.
I do not know how, on the face of the Bill, you can stop that?
(Mr Salter) I think it is, with respect, a simple
drafting amendment, so it will not be possible to make a pension
sharing order on variation application where the order pre-dates
April 2000.
353. Even if there is hardship caused?
(Mr Salter) Even if there is hardship. I think
it is one of those black and white situations or otherwise you
have a floodgate situation.
Ms Hewitt
354. Presumably you delete sub-paragraph
(6) of paragraph 6 in Schedule 1 to the Bill?
(Mr Salter) Yes.
Chairman
355. Do you have a view about the present
discretionary system we have got being reformed to make equalisation
of provision an objective?
(Mr Sax) I recently had the benefit of learning
about Scottish law, about which I knew relatively little before——
356. I am very pleased to hear that!
(Mr Sax) You may be less pleased to hear that
I felt so far as wives were concerned it was not as attractive
as our own system.
357. English lawyers always say that!
(Mr Sax) We too have prepared a detailed paper
which we have submitted to Lord Justice Thorpe on ancillary relief,
and we can let you have a copy of that.[4]
I sit on that committee myself and in that context maybe it would
be more helpful to you to see our full arguments about it.
Chairman: Thank you.
Mr Pond
358. I wanted to ask Mr Sax, given this
steep learning curve you are going through on the Scottish system,
if he can clarify something for me. There is some confusion about
the differences between the Scottish system and that in England
and Wales about the assets which are taken into account on divorce,
and I understand that in the Scottish system it is only the assets
accrued during the marriage which are taken into account.
(Mr Sax) Yes.
359. That is not so in England and Wales.
In yesterday's session of evidence, some doubt was thrown on that.
Can you clarify that for us?
(Mr Sax) I noticed this in evidence to you earlier.
If you take the example of a portfolio of shares, the husband
has a portfolio of shares dating from before the marriage, during
the marriage he does not touch that portfolio of shares at all,
that is excluded property. The more prudent husband who then has
his portfolio managed during the marriage and there are various
changes which take place in that portfolio, where there are changes
that then becomes included property. There were other complexities
we have learnt about, about farming companies and so on and so
forth, so there did seem to be quixotic differences as to what
might or might not be included. Basically the rule is, what accrues
during the marriage is all they deal with. We tend to look more
to things like loss of earning capacity and looking to the future
and the effect which the marriage has. There are exceptions to
the Scottish rule which deal with that, but they do not seem to
have developed those nearly as far as we have developed them here.
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