APPENDIX 6
Memorandum submitted by the Family Law
Bar Association (PS 17)
SUMMARY OF
RECOMMENDATIONS
1. The Lord Chancellor should have power, by
statutory instrument, to extend the application of pension sharing
to:
small self-administered pension schemes;
agreements between spouses.
2. Whilst the Bill clearly (and rightly) states
that its provisions are not retrospective, there are two exceptions
that need to be spelt out clearly, namely:
(1) variation of pre-existing maintenance
orders; and
(2) applications for financial relief after
a previous foreign divorce.
3. Section 25 of the Matrimonial Causes Act
1973 should be amended to give judges guidance on how to apply
pension-sharing.
4. The powers, contained in this Bill and the
Family Law Act 1996, to vary an order for financial provision,
property adjustment or pension sharing after the order has been
made but before it has come into effect, are inordinately complex
and difficult to apply. They require radical simplification.
5. There is no need to provide a special channel
of appeals from pension sharing orders and to do so will only
create confusion.
6. The courts should not be confined to making
percentage orders for pension shares.
ABOUT THE
FAMILY LAW
BAR ASSOCIATION
This Association consists of over 1,700 practising
barristers in England and Wales, besides associate members drawn
from the ranks of the judiciary at every level. It is a specialist
Bar association whose members appear regularly in family courts
all over the country. It enjoys close links with the Solicitors'
Family Law Association. Through its functions, seminars, publications
and by other means, it acts as spokesman for its members, keeps
pace with changes in family law and contributes to the legislative
process.
GENERAL COMMENTS
ON THE
BILL
1. The ambit of pension sharing
1.1 Agreements. The draft legislation
and consultation paper published in June 1996 proposed that married
couples should be able to effect a pension share by one of two
means:
by order made under Part II of the
Matrimonial Causes Act 1973 or the Family Law (Scotland) Act 1985;
by agreement made in the course of
marital proceedings.
1.2 In our representations to the Committee,
we pointed out the need for such agreements to be in a prescribed
form. We understand that the same observation was made by other
consultees.
1.3 Whilst we appreciate that the focus of current
concern is that the court should possess the necessary powers
to achieve pension-splitting, we recommend that the door is
kept open by giving the Secretary of State power to extend the
ambit of pension sharing to agreements between spouses.
2.1 Small self-administered schemes.
These are omitted from the definition of "pension arrangement"
in the new s 25D(3) Matrimonial Causes Act 1973.[40]
By implication therefore the court will have power under the Bill
to apportion rights under common types of pension contracts, but
self-administered schemes will have to be varied, if at all, under
the Brooks v Brooks doctrine. This could generate confusion
and inequality.
2.2 We recommend that the Secretary of State
has power, by statutory instrument, to extend the definition of
"pension arrangement" in section 25D(3).
3. Retrospectively
3.1 In our Response paper of August 1998, we
identified one situation where the Bill should look backwards,
namely where the court wishes to commute, and thereby discharge,
a wife's maintenance order. Sections 31(7A) to (7F) of the Family
Law Act 1996 have now been brought into force[41]
so that the court is now able, for the first time, to make a lump
sum or transfer of property order in commutation of ongoing maintenance.
It is consistent with this "clean break" philosophy,
and with the wider aims of pension sharing, that the court should
also be able to implement a pension sharing order in addition
to, or instead of, other kinds of capital orders.
3.2 It is to be noted that the powers in s 31(7A)-(7F)
were and are exercisable in relation to divorces that took place
before those subsections came into effect.
3.3 We therefore recommend that Clause
70(3) of the Bill be amended to omit the words "or 31(7B)."
3.4 Further, a new addition has been made to
the Bill in its present form in that it has been decided to include
Part III of the Matrimonial and Family Proceedings Act 1984 (financial
relief after foreign divorce) within its scope (Clause 18).
3.5 The Family Law Bar Association welcomes
this development but would point out:
(1) in many cases the court is called upon
to grant financial provision where the foreign divorce took place
some time, perhaps years, ago;
(2) there is no reason in principle why the
court should not have power to effect a pension share in such
a situation;[42]
(3) Clause 70 of the Bill is silent
on whether a pension share under s 21 of the 1984 Act (as amended
by clause 18(4) of the Bill) could take effect in relation to
a divorce granted after the commencement of the Act.
3.6 Accordingly we recommend that the retrospective
operation of Clause 18 is clarified in Clause 70
of the Bill.
4. Amendment of s 25 of the Matrimonial Causes
Act 1973
4.1 In our Response to the Consultation Paper,
we illustrated a number of injustices that could arise if the
courts were given no guidance on how to exercise the new powers.
We suggested there were three choices, not necessarily exclusive
alternatives:
(1) to leave everything to the good sense
of the courts;
(2) to set up a number of training courses
for the judiciary; or
(3) to insert some guidance into the statute
itself.
4.2 We maintained then, and repeat now, that
it would be a pity to pass over the opportunity presented by this
legislation of setting out at least some guiding principles by
which the new powers should be exercised. A suggested draft
is annexed.
5. Variation of pension orders: a complex and
confusing area
5.1 We are concerned that Schedule 3
paragraph 6 of the Bill, together with the amendments to s 31
Matrimonial Causes Act 1973 effected by Schedule 8 to the Family
Law Act 1996, form an almost unworkable code for the courts to
apply when hearing variation applications by one or both spouses.
5.2 In the law as it stands at present, a typical
divorce case tends to demonstrate the following sequence.
(1) if required, the dependent spouse applies
for interim periodical payments (or "maintenance pending
suit") under s 22 of the 1973 Act;
(2) following decree nisi, the court
hears the substantive application for financial relief and makes
a final order under ss 23, 24 and 25B-D. The order may
be made after decree nisi but does not come into
effect until decree absolute. That apart, it may be made "on
decree or at any time thereafter";
(3) some time later (perhaps years later)
one spouse or the other applies for a variation of maintenance
under s 31.
5.3 The Family Law Act 1996 enacts a new regime
in that all financial decision-making should, as far as possible,
take place before the divorce order is made. In accordance with
this philosophy, orders of a capital nature may be made at any
time after a statement of marital breakdown has been received
by the court,[43]
but will not come into effect until the divorce order is made.
Clearly, the intention is that the parties should not "cross
the Rubicon" until the divorce order is finally granted,
so that they can retract their hostilities and embark on a reconciliation
if so desired.
5.4 We follow the desire for flexibility implicit
in this Bill and the 1996 Act, in that the parties or the court
should be free to change the financial arrangements at any time
up to the divorce order. That aim can be achieved very much more
simply by providing either:
(a) that no order made under sections 23
to 25D shall be regarded as "final" until a divorce
order or separation order is made;[44]
or
(b) that any order made under those sections
is variable under s 31 at any time until the making of a divorce
or a separation order; thereafter a more restricted regime (corresponding
to the present s 31) will come into force.
This Association prefers the first alternative,
for the reasons advanced in our last paper.
5.5 Besides, we are concerned at the implications
of varying a pensions order when the pension share has already
been implemented by the trustees or managers of the pension scheme.
It may be impossible, or difficult, to restore the position to
what it was, or to change it to something else.[45]
We think is far preferable that no pension provider should be
under obligation to implement the pension sharing order until
the divorce order has been made. If that proposition is accepted,
then it is unnecessary to give the court any strict variation
powers under s 31 since the order remains, at this stage, purely
provisional or "executory" and, making amendments is
simply a matter of changing the wording.
5.6 We therefore recommend as a matter of urgency
that the whole structure of pre- and post-divorce financial orders
under the Family Law Act 1996, and in particular the power to
vary, is looked at with a view to rationalisation and simplification.
6. Appeals
6.1 Section 40A (Schedule 1, paragraph
9). This section, which attempts to lay down a detailed code for
appeals against pension orders that have taken effect, is in our
view both confusing and unnecessary.
6.2 It is confusing for two reasons:
(1) because there is no meaningful sense
in which the pension provider or Secretary of State can be said
to "act to his detriment in reliance on the taking effect
of the order". Assuming the pension provider implements the
order in the way envisaged by the court, he is at liberty to recoup
his administrative charges from the parties and therefore suffers
no "detriment". Similar considerations apply to the
Secretary of State who merely acts in a ministerial fashion and
incurs no personal harm or expense;
(2) because there is no clear definition
of when a "decision of the appeal court can itself be the
subject of an appeal". Most appeals in family matters lie
to a High Court or county court judge, and no further appeal lies
without the leave of that judge or the Court of Appeal. It is
unclear therefore whether such a decision "can" be the
subject of an appeal in this sense.
6.3 It is unnecessary, in our view, because
appeals from pension orders will fit quite satisfactorily into
the existing law and practice, namely:
(1) any appeal should be commenced within
certain time limits (14 days in the case of an appeal from district
judge to judge, 28 days in other cases);[46]
(2) the appeal does not operate as a stay
unless asked for;
(3) leave to appeal may be granted out of
time provided:
(i) the delay is not too long;
(ii) it is satisfactorily explained;
(iii) the appeal has merit; and
(iv) the respondent will not be unduly
prejudiced;[47]
(4) the appeal is not likely to succeed where
the order below has been carried into effect and it would be difficult
to restore the statu quo ante.
6.4 These principles will apply with ample force
to appeals against pension orders. It is the responsibility of
the appellant to press on with the appeal and, if necessary to
apply for a stay. If he fails to do so and allows an intractable
position to arise, he has only himself to blame.
6.5 We therefore recommend that the proposed
s 40A is omitted from the Bill.
7. Percentage orders
7.1 A new provision inserted in Schedule
4, paragraph 1(6) of the Bill by way of amendment of section
25B of the Matrimonial Causes Act 1973 requires the court to express
its order in terms of a percentage of the payment which
becomes due to the party with pension rights.
7.2 We think this is unduly restrictive and
will prove difficult to operate in practice, for two reasons.
7.3 First, courts operate on the rough basis
of valuing, and apportioning accrued pension rights to
the date of the divorce or (in Scotland) the date of separation.
In this way, overall fairness is preserved because the party with
pension rights can go on making further contributions to his scheme
knowing that in principle they will be for his own (or perhaps
his new wife and family's) benefit rather than his former wife's.
If now the court is obliged to stipulate a percentage pension
share, the former wife will stand to share in the enhanced value
of the pension caused by his further contributions, which many
people would regard as unjust.
7.4 Secondly, we are concerned that if the courts
attempt to discount the position between divorce and retirement,
as described in the preceding paragraph, by awarding the wife
a lower percentage of the pension, they will have no accurate
information on which to do so since no-one (not even an actuary)
will be able to forecast with confidence what the value of the
pensionwhich must be subject to many contingencies such
as redundancy, early retirement, etcwill be worth in future.
The courts will perforce have to resort to guesswork.
7.5 We therefore recommend that Schedule
4 paragraph 1(6) is omitted from the Bill.
March 1999
40 As substituted by Schedule 4, para 3(5) of
the Bill. Back
41
With effect from 1 November 1998: SI 1998/2572. Back
42
In a case that is currently pending in the Court of Appeal (Jordan
v Jordan), a court in San Diego made an order in 1993 that
the husband's pension arising from his UK employers should be
divided equally "if permitted by the laws of Great Britain".
The limited retrospection proposed would enable the US court's
intention to be fulfilled under pension sharing. Back
43
S 22A(2), 23A(1) Matrimonial Causes Act 1973, as inserted by Schedule
2 to Family Law Act 1996. Back
44
With the implication (which can be spelt out in the legislation)
that a court of first instance has jurisdiction to alter or vary
its terms as long as it remains "provisional". Back
45
A concern obviously reflected in the proposed s 40A Matrimonial
Causes Act 1973 (inserted by Schedule 3 para 9 to the Bill). Back
46
Family Proceedings Rules 1991, r 8.1(4); RSC Order 59. Back
47
Van Stillevoldt v EL Carriers [1983] 1 WLR 207. Plainly
this can be interpreted in context to equate to the "detriment"
envisaged by the draftsman of para 9, Schedule 3 to the
Bill as it stands. Back
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