Clean break under attack

The statutory contrast

Financial provision on divorce and dissolution is governed in Scotland by the Family Law (Scotland) Act 1985, an Act that has not needed substantial revision since it came into force. It was of course amended in 1999 to reflect pension reforms and then again in 2006 to solve the Wallis conundrum. But by and large it has worked well these 20 years, and though there has been a high level of litigation the courts have not had any doctrinal difficulty with the approach encapsulated in the Act.

It is very different in England, where ancillary relief (as it is called there) is governed by Part II of the Matrimonial Causes Act 1973, as amended by the Matrimonial and Family Proceedings Act 1984. In that jurisdiction the higher courts have often felt the need to restructure the approach to be taken, due to the far less rigid framework set out in the English legislation. Our 1985 Act favours legal certainty, to encourage pre-court settlement; their 1973 Act favours flexibility, trusting judicial discretion to achieve fairness in the individual case. In Thomas v Thomas [1995] 2 FLR 668 Waite LJ said at 670D: “The discretionary powers conferred on the court by the… Matrimonial Causes Act 1973 to redistribute the assets are almost limitless”. This is alien stuff to us, which is the major reason why decisions from the English courts on financial provision on divorce and dissolution are usually ignored in Scotland.

However, even in Scotland much attention has been given to a recent English House of Lords decision of great importance to the operation of the 1973 Act. This is because the Scottish judge on the Appellate Committee, Lord Hope of Craighead, launched an attack on the way things are done in Scotland and called for our legislation to be amended to become more like the English. His speech was directed not to the cases before him but to the hypothetical question of how these cases would have been decided had they arisen in Scotland. Such a comparative discursus would usually be welcome, especially from such a source and particularly for law teachers. But Lord Hope’s comments in Miller v Miller; McFarlane v McFarlane [2006] UKHL 24 are not welcome for they misinterpret Scots law, and his proposed reform would rob our system of its most successful feature.

Career loss and clean break

Both cases involved very wealthy couples, but the marriages were quite different. In Miller the marriage was short, lasting less than three years. But within that period of time the husband’s wealth had increased substantially and he acquired expectations of even more substantial increases in the future. In McFarlane the marriage had lasted for 16 years and had produced three children. The wife had given up her career as a solicitor just before the birth of the second child; the husband maintained his career as a chartered accountant and, because the wife was at home, was able to enhance it significantly. Both cases raised what the English judges referred to as the issue of “compensation”, that is to say the extent to which one spouse should be compensated by the other for the loss of expectation of a certain standard of living, either through the lost career or through diminished standards caused by the divorce.

Lord Hope cannot see how such women could be dealt with fairly under the Scottish system. He calls for added levels of statutory flexibility, to be achieved by increased levels of judicial discretion: he is clearly not persuaded by the benefits of certainty in this area of the law. More than this, however, he seems not at all convinced by the philosophy of the clean break. It is this philosophy that underpins the 1985 Act, and its benefits in terms of social policy are too well-known to be rehearsed in this short commentary. Indeed even Lord Nicholls, who gave the lead judgment, accepted that the benefits of the principle were “self-evident” (para 35).

Clean break in the 1985 Act

Rather oddly, Lord Hope sees the clean break philosophy as being encapsulated in s 9(1)(d) and he assumes that the women’s claims would be made under that paragraph. This is the s 9 principle that allows for a “three year readjustment” period to be funded by way of periodical allowance. Yet surely a more important location of the clean break principle is the injunction to courts in s 13(2)(b) not to make a periodical allowance at all unless an award of a capital sum or property transfer order would be inappropriate or insufficient. Lord Hope, who never mentions s 13(2)(b), sees the three year readjustment period as insufficient to deal with the concept of “compensation aimed at redressing a significant prospective disparity between the parties arising from the way they conducted their marriage” (para 114). He suggests that social changes to marital relationships since 1985 have shifted the balance of fairness, and he concludes that flexibility achieves fairness better than certainty. This leads to his call for reform of the 1985 Act because, in his view, “the flexibility which sheriffs and judges need to adapt the law to what would be regarded as fair today as compared with what was regarded as fair 25 years ago is denied to them”.

Dealing particularly with Mrs McFarlane’s claim, Lord Hope asserts (para 116) that “It would not be possible to design an award under the Scottish system that provided her with an amount of income for the future that gave fair recognition to her entitlement.” This of course assumes what it sets out to prove, which is what Mrs McFarlane was “entitled” to. Making no reference to statutory authority, Lord Hope says that Mrs McFarlane “is entitled to an award that reflects the agreement that she and her husband entered into [that she give up her career to bring up the children], because in their case the capital assets that would be needed for this are not available” (para 116, emphasis added). Not so. She is “entitled” to what the legislation governing her marriage gives her. “Fairness” might suggest something else, but it is not an entitlement.

Even if Scots law requires “fairness” over and above what it provides in terms of the 1985 Act, Lord Hope then indicates an unduly narrow interpretation of section 9, for the major flaw he identifies is that Mr McFarlane would continue to enjoy the benefits of his high earning capacity, while Mrs McFarlane “could not” be compensated for her future economic disparity, due to his lack of capital. “She would be required instead to adjust to a lower standard of living. And she would have to do this over a period of no more than three years.” In the next paragraph of his speech (para 117) Lord Hope agrees with Lord Nicholls that the situation of Mrs McFarlane (a higher earner who gives up her career) “is a paradigm case for an income award that will compensate her for the significant future economic disparity… arising from the way the parties conducted their marriage. That is impossible under the rules which apply in Scotland”.

Cumulative effect

But a fair result is not impossible in Scotland, for the following reasons. First, the cumulative nature of the principles in s 9(1) should never be forgotten. It is a mistake to see

s 9(1)(d) in isolation, and in any case that principle is not designed for the purpose Lord Hope sees it addressing. That principle is of narrow scope and only applies when there is “dependence to a substantial degree”, so it would not cover, for example, a woman who compromises but does not give up completely her earning capacity and therefore is not so “dependent”. Secondly, the lack of immediately realisable capital on the part of the husband can be dealt with by means of an award of a capital sum to be paid in instalments (permitted under s 12(3)). Thirdly, making the award one of a capital sum (in instalments, if necessary) brings into play the principles in s 9(1)(a), (b) and (c), which can easily achieve all that Lord Hope wants to achieve for Mrs McFarlane.

Section 9(1)(a) contains the flexibility perceived to be inherent in the word “fair”. Matrimonial property must be shared “fairly” and, though this is presumed to mean “equal sharing”, any claimant is able to argue for a different division on the basis that equality does not achieve fairness. Future earning capacity is a matter that can be taken into account in Scotland in determining a fair division (contrary to what Lord Hope believes): see for example Cunniff v Cunniff 1999 SLT 992, where the wife received 100% of the matrimonial property instead of 50% explicitly because the husband had high earning potential and she had none. And it is important to note that it was no judicial innovation by the Inner House to permit judges and sheriffs to take into account future earning potential: s 27(1) of the Act defines “resources” available for distribution under s 8 to mean “present and foreseeable resources”. So future disparities in wealth caused by differential earning capacities can indeed be taken into account in determining what is a “fair” distribution of matrimonial property (a concept for England, bewilderingly, that the English judges in this case could not agree the content of – do we really want that level of “flexibility”, i.e. uncertainty, in Scotland?).

Continuing economic advantage

Sometimes of course s 9(1)(a) is of limited value because there is little or no matrimonial property, but the 1985 Act has a solution for that because resources may be distributed (in instalments if necessary and by definition at a later date) in order to achieve a “fair” result under s 9(1)(b) also: “fair account should be taken of any economic advantage derived by either party… and of any economic disadvantage suffered by either party in the interests of the other party or of the family”. This is an underused provision but is much more flexible than

s 9(1)(d), and a more obvious route to deal with the likes of Mrs McFarlane who gave up a career for the sake of her husband and children. This was clearly an economic disadvantage, and a commonly suffered one.

The fact that s 9(1)(b) uses the past tense “suffered” should not be taken to limit the court’s consideration to past disadvantages but should, it is submitted, also refer to past acts which create continuing disadvantages, such as an agreement between parties that one would sacrifice their career for the other. Confirmation that this must be so is found in s 9(2), which defines “economic advantage” for the purpose of

s 9(1)(b) to include “gains… in earning capacity”: capacity by definition refers to the future. If this is so, then the fact that Mrs McFarlane gave up her career some time ago to allow Mr McFarlane to continue with his conferred an “economic advantage” on Mr McFarlane, within the terms of s 9(1)(b), which continues after divorce. There is nothing in s 9(1)(b) to prevent the court taking into account that continuing advantage, and making an award (of a one-off payment, or of capital instalments) to give a fair share of that advantage to the likes of Mrs McFarlane.

So the Scottish legislation can, in my view, achieve exactly what Lord Hope stated it could not do. That leaves his call for amendment without valid basis (other than a frankly tired reference to Wallis v Wallis, as if the narrow point in that case was symptomatic of an underlying weakness in the whole Act). But what does he actually want to happen? He suggests (para 121) two amendments to the 1985 Act.

Reasons not to amend

First, s 9(1)(d) should be amended in order to extend the three year period if, in exceptional circumstances, the judge finds that the disadvantage of reduced earning capacity ought to be compensated out of the other’s future income because the capital needed to provide this is not available. But this is not needed because other principles in s 9 (bearing in mind the inclusion in s 9(2) of future earning capacity, and the instalment provision in

s 12(3)) can achieve precisely the compensation sought. In my view removing the three year limitation to s 9(1)(d) would seriously compromise the clean break principle – as well as being a denial of the reality, accepted by their Lordships in Miller; McFarlane, that it is usually impossible for both parties to maintain existing standards of living after divorce.

Lord Hope’s second suggestion is to allow a periodical payment to be made under s 9(1)(b) (a principle he never, in fact, discusses). This would not so much compromise as remove completely from our law the idea of a clean break on divorce.

So it is really the clean break principle that is under attack here. Parties would continue to have a financial relationship with each other after divorce or dissolution. Parties would be given no encouragement by the law to readjust to a lower standard of living or to return to independence, and would indeed be discouraged from doing so. Marriage and civil partnership in themselves, whether short, medium or long, would create an enforceable expectation of lifelong sharing. Lord Hope may want all this. I certainly do not.

Kenneth McK Norrie is a professor of law at the University of Strathclyde