Fair Shares: an evidential basis for financial remedies reform?

November saw the publication of the long-anticipated report, Fair Shares? Sorting out money and property on divorce. Led by Professor Emma Hitchings of Bristol University and funded by the Nuffield Foundation, the report promised to provide an evidential basis for financial remedies reform, especially important as the Law Commission embarks upon preliminary work assessing the reform options for the laws governing finances on divorce and the ending of a civil partnership, with a scoping paper expected in September 2024. It is also timely in light of the recently launched Resolution Vision for Family Justice.

I was fortunate to sit on the advisory board of the Fair Shares project and saw first-hand how years of hard work took shape and came to fruition. Academics will testify to the fact that these reports don’t just happen, but take endless hard work, reflection and at times being ready to re-think aspects of how data is being gathered and overall direction of travel. The end product – all 394 pages of a detailed report which bears careful reading – is testament to all of that and more, and means that we can have confidence in the robustness of the end product as a foundation for future discussions about financial remedies reform.

So what does the report tell us? And what significance does it have for practitioners?

Background to the report

The project aimed to investigate how divorcing couples in England and Wales negotiate financial arrangements, both within and outside the legal system.

Only one-third of the 100,000 or so couples who divorce each year use the legal system to reach a financial settlement; the remaining two-thirds negotiate their own arrangements or reach no settlement at all. Very little was known, before this report, about the processes by which divorcing couples reach their financial arrangements, or about the effects of different financial arrangements on them over time. The study aimed to provide the first detailed, fully representative picture of the position in England and Wales, including information on couples who do and do not make use of the legal system; and about how well divorcees feel they and their children are coping, financially and emotionally, with the post-divorce arrangements.

It involved a survey of c2,400 divorcees (all divorced under the old law, pre-no-fault divorce) who had divorced in the past five years. The survey profiled the use of different kinds of ongoing and “clean break” financial arrangements, including the processes by which these were reached; any professional support received; the respondent’s perception of the fairness of the agreement at the time of the outcome and (later) at the time of the survey; and how well they felt arrangements had been working in terms of living standards, relationships and other outcomes. In-depth interviews with 53 divorcees collected more detailed information on how arrangements were reached, what professional or other support was received and how they put their arrangements into effect.

Aside from hoping to provide data to inform debates on how the law should be reformed, it was also hoped that the report would help to inform guidance for the legal profession to improve practice.

A practitioner’s perspective

Emma and the team asked me to speak at the launch event to give a practitioner’s perspective on the report and its findings. In doing so, I acknowledged that most of us who work in this area will share the frustration which existed about how little was known, until this report, about the process by which divorcing couples settle their finances, and the fairness of those arrangements – especially among those who reach agreement outside of the courts. We’ve also seen our profession at times criticised in media headlines about sensationalist cases with eye-watering levels of fees, and outcomes seemingly difficult to justify.

So when I saw an early draft of the report, I knew straight away that practitioners would celebrate its publication – both because it addresses the knowledge gap about the cohort of people reaching agreement “under the radar” (which may give us pause to think, what more could we be doing to help those people, and how may we package our services so that they are accessible?); but also because it looks at the more “run of the mill” cases which don’t make media headlines and in doing so, challenges a lot of myths about splitting assets on divorce and the (exceptional) cases that make the headlines, with extensive assets and often very high costs. We all know that hard cases make bad law, and it is time that we looked at the experience of the majority. This report enables that.

Picking out highlights from a 394 page/125,000 word report is nigh on impossible, as it’s rich with material which will speak to different cohorts of people for different reasons. Some highlights for me were as follows:

Use of lawyers and the value we add

I was struck by the fact that only 32% of divorcees had made use of legal services in relation to financial arrangements, with 42% of those who didn’t do so saying they’d been deterred by fear of cost. Yet where legal or mediation costs were incurred, the report showed that they were relatively modest – 24% of people spent less than £1,000 on legal costs, and a further 18% had costs between £1,000 and £3,000. Where matters had been finalised through solicitors or with a court order, there was evidence to suggest more positive outcomes for the applicant (especially in relation to pensions and ongoing financial support).

The context of all of this is important. The report showed that a large number of divorcees were in constrained financial circumstances at the point of divorce: 43% had monthly net household incomes under £2,000; 68% had owned the matrimonial home, while 28% had rented, and of those who owned the matrimonial home, 80% lived in a home worth under £500,000, and 49% in a home worth less than £250,000. A third of divorcees’ homes had net equity of under £100,000. 17% had no assets to divide on divorce; 63% had total assets worth under £500,000. The median value of divorcees’ total asset pool, including those with debts and no assets to divide, was £135,000.

There is arguably lots in that for lawyers to reflect upon, especially in how we package up and price our services, and how we convey the value we add as practitioners (not only to divorcing couples, but also to government, in the context of campaigning for funding for initial legal advice, a key ask under the Vision for Family Justice). If we did that effectively, I wonder whether we might reach some of the 36% of divorcees who did not make any particular financial arrangement with their ex on divorce? And improve outcomes for more of the 52% of those who did reach a financial arrangement, but who did it themselves?

Mediation

We need to think about what is said about mediation in the report, which should give us pause. Comments showed some ongoing confusion among the public about what mediation actually is. And the strongest indicator of referral to mediation is where a solicitor was involved (evident to all post-LASPO, when mediation numbers fell off a cliff).

Also striking was the variation there was in satisfaction levels after the event depending upon the route by which couples got to their arrangement. 90% of full arrangements arrived at by the divorcing parties themselves had worked out as expected, thought to reflect the better relations of those who had felt able to negotiate their own arrangements. 76% of full arrangements made via lawyers, and 76% of those made via a judge, had also worked out as expected. However, only 44% of full arrangements made via mediation had worked out as expected.

The researchers thought that this may reflect that those undertaking mediation may have already tried and failed to negotiate an agreement between themselves (including with the help of lawyers), so that when they did then reach a settlement via mediation, it may have been the result of a “grudging compromise” rather than a real meeting of minds, and thus more likely to unravel. From a practitioner’s perspective, arguably this feeds into both how we, as mediators, explain mediation and robustly ensure that we filter only appropriate cases into the process; and how we ensure that there is a more joined-up DR offering, appropriately packaged and costed, to meet consumer needs. And we also need to continue to tell government, who arguably have a tendency to focus on mediation to the exclusion of all else, that it isn’t a silver bullet and that properly timed and funded legal advice, together with couples having a voucher to use for whatever DR service they feel appropriate, is the better way. The findings certainly serve as a warning about the risk of any reform involving compulsory mediation, as anticipated in the Supporting Earlier Resolution consultation launched in March.

Client motivation

In terms of substantive outcomes and what the report tells us, there is a lot of rich material in there for lawyers to reflect upon, including what drives couples in their decision-making around financial outcomes and the fact that they may sometimes be motivated by emotional rather than practical reasons. Arguably this is evidenced by: the continued low take-up of pension sharing orders, with the report finding that only 11% of divorcees with a pension yet to be drawn have pension sharing; the focus by many women on keeping the family home rather than thinking about pensions, with 46% of all homeowners having transferred ownership of the marital home on divorce; and the overriding keenness to have a clean break – with spousal maintenance in only 22% of cases, and overwhelmingly for a fixed term until a defined event (so much for the supposedly pervasive meal ticket for life peddled in the media!).

The report offers insight into the unequal financial footing of parties going into and coming out of divorce. We must reflect upon the advice we give to clients to try to temper this (especially where they may interact with us only fleetingly, if concerned about costs – as we know they are – and are accessing unbundled legal services).

No-fault divorce impact?

In all of this, it will be interesting to see the impact of the move to online/no-fault divorce. All participants in the study divorced under the old law. I wonder whether, if anything, the relative simplicity of the new law will make it ever less likely that divorcing couples will contact a solicitor, with consequential impact on financial outcomes. This will be something that policy makers will need to be alert to and it is already clear that a “Fair Shares no 2” report in a few years’ time will be critical, to assess whether the way in which couples approach finances on divorce has indeed changed as a result of simplified law and process.

Conclusion

As the Law Commission reviews the laws implemented half a century ago, against a backdrop of clamour in certain quarters for urgent reform along the lines of the Scottish system, it is important that we read, digest and embrace this impressive report and bring our own experience as practitioners to the table. We know that when law reform is being considered in any area (such as with no-fault divorce), a successful campaign depends on several ingredients, including the evidential basis; the practitioner perspective; having real life examples of the difficulties caused by the existing law, as with Mrs Owens; learning from experiences of other countries; and getting media interest/support.

Whilst I won’t prejudge the Law Commission’s important work, speaking for myself – and with the benefit of this report – I’m not sure that wholesale reform of financial remedies law is a pressing priority ask. Using the Fair Shares report, we should be looking closely at what is working for the average couple going through divorce; considering what needs fine-tuning; and reflecting upon whether more principled discretion, together with reviewing process, and access to joined-up information and timely, affordable advice, will mean that couples will be even better served by existing legislation.

 joanne.edwards@Forsters.co.uk

Jo Edwards is a Resolution National Committee member and Chair of the Family Law Reform Group