THE RIGHT TO MAKE FINANCIAL CLAIMS

The process of making financial claims after a divorce or the dissolution of a civil partnership is distinct from the actual divorce or dissolution itself. These are called Financial Remedy Applications. Before making decisions about the financial matters between you and your former spouse, it’s essential to understand the legal options available to you.

Spouses or former spouses can file financial claims against each other in Court, seeking orders for:

• Maintenance (regular income payments)
• Adjustments to property ownership (such as transferring a jointly-owned house to one spouse)
• Lump sum payments (one-off capital payments)
• Pension sharing or pension attachment orders

The right to file a financial remedy claim can only be extinguished in two ways. The first and most common way is through a Court Order. After either reaching a settlement or obtaining a Financial Order from the Court, a Clean Break Order is often put in place. This order prevents any future financial claims of any kind, both now and in the future, including after death.

The second way is the ‘re-marriage trap’. This occurs when someone remarries after their divorce but before applying for financial orders such as lump sum payments or property transfers. If they remarry without filing these claims, they lose the right to make them against their former spouse.

If no financial orders are made and the re-marriage trap does not apply, financial claims can remain open indefinitely, which can create uncertainty. One spouse could make a claim at any point in the future, which could be advantageous if one spouse’s financial situation significantly improves. On the other hand, if neither spouse intends to claim against the other, it’s generally better to apply for mutual dismissal of financial claims to avoid future disputes.

MEDIATION

At the outset, we will work to exchange financial information as soon as possible. Financial disclosure is essential for solicitors to advise you on appropriate settlement terms. If it becomes clear that early agreement isn’t feasible, we may recommend mediation as a potential solution. In fact, you can’t apply to the Court for a Financial Order until a Mediation Information Assessment Meeting (MIAM) has been held. However, we encourage mediation if it suits your case.

Mediation involves a neutral third party who helps the separating couple to communicate and reach their own informed decisions about financial matters. One significant advantage of mediation is that it avoids Court proceedings, often making it a more affordable option.

Another benefit of mediation is that it can help preserve a better relationship between the parties, which is particularly important when children are involved.

There are many organisations and individuals who provide mediation services. Please feel free to ask us for more details about these providers.

FINANCIAL APPLICATION PROCEEDINGS OVERVIEW

The following outlines the major stages in Financial Remedy Applications, but please note that these stages may vary depending on the specifics of each case. Many stages can be skipped entirely if the parties reach an agreement early on.

Typically, Financial Applications involve three key hearings:

1. The First Directions Appointment (FDA)
2. The Financial Dispute Resolution Appointment (FDR)
3. The Final Hearing

If your case goes all the way to a Final Hearing, it could take between 10 to 12 months from the date Form A is filed to reach a resolution. The reason for this is that there are mandatory stages under the Court’s rules, and there can be delays due to Court availability.

APPLICATION FOR FINANCIAL REMEDY

To begin, an application for financial remedy is made using Form A. Once Form A is submitted, the Court schedules a date for the First Directions Appointment, typically about 16 weeks after filing.

PREPARATION FOR THE FIRST APPOINTMENT

Prior to the First Appointment, both parties must comply with several procedural steps. These include:

• At least 35 days before the First Appointment: Exchange and submit Form E, which is a detailed financial statement covering capital, income, assets, and liabilities.
• At least 14 days before the First Appointment: Submit the following:
  • Statement of Issues: A summary of the contested matters
  • Questionnaire: A request for additional documents and information
  • Chronology: A timeline of key events in the marriage and divorce
  • Form G: A statement about whether the parties are prepared to treat the First Appointment as an FDR Appointment
  • Form H: A summary of the legal costs incurred to date

THE FIRST APPOINTMENT

Both parties and their legal representatives must attend the First Appointment, which is held in private before a District Judge.

During the hearing, the District Judge will:

• Establish a timetable for progressing the case, which is legally binding on both parties
• Determine whether further information is needed to advance the case and set deadlines for supplying it
• If necessary, direct that valuations of assets be conducted and set deadlines for these
• Transfer the case to the High Court if appropriate, particularly if the case involves complex issues or high-value assets
• Set the date for the Financial Dispute Resolution (FDR) Appointment, which usually takes place 3 to 4 months later, though this may vary depending on Court availability

PREPARATION FOR THE FDR

Each party must comply with the Court’s directions from the First Appointment. At this stage, both parties are also encouraged to negotiate a settlement. Various offers may be exchanged between the solicitors, and all offers will be presented to the Court at the FDR hearing.

THE FDR (FINANCIAL DISPUTE RESOLUTION) APPOINTMENT

The FDR appointment is a pivotal point in the process where both parties and their lawyers attend a private hearing before a Judge. Unlike other Court hearings, the FDR is a forum specifically designed to facilitate settlement negotiations. The Judge, who will not be the same Judge at a Final Hearing if the case continues, reviews the financial information, legal arguments, and offers made by both parties.

The Judge will provide an indication of the likely outcome if the case went to a Final Hearing, which can motivate both parties to reach an agreement. If a settlement is reached at this stage, it is formalised through a Consent Order. If no agreement is reached, the Judge will give further directions for preparing for the Final Hearing.

THE FINAL HEARING

If the case proceeds to the Final Hearing, both parties must present their evidence and arguments in front of a different Judge, who will make the final decision on how the financial assets should be divided. This Judge has broad discretion and will take into account the needs of each party, the standard of living during the marriage, the earning capacity of each spouse, and contributions made during the marriage, among other factors.

While the aim of the Court is to achieve a fair outcome.  Final Hearings can be emotionally taxing and expensive, but it is the last step in the financial remedy process if no settlement has been reached earlier.

FINANCIAL DISCLOSURE

Financial disclosure is essential throughout the process. Each party is required to provide a full and frank disclosure of their financial position. This includes income, assets, liabilities, and any other relevant financial interests. Failure to provide accurate disclosure may lead to significant consequences, including an adverse ruling in Court or the reopening of financial agreements.

In cases where there is suspicion that a spouse has not fully disclosed their assets or has tried to hide or transfer them, forensic accountants can be used to investigate further. Additionally, if assets are discovered after a settlement has been reached, it may be possible to reopen the case.

PENSION SHARING ORDERS

Pension Sharing Orders can be made as part of a Financial Remedy Order. Pensions are treated as part of the matrimonial assets, and the Court can order a division of pension assets between spouses. This might involve one party receiving a percentage of the other’s pension or a transfer of pension benefits into a separate pension fund.

NUCLEAR OPTION: REMARRIAGE TRAP

One of the legal nuances in financial claims is the so-called “re-marriage trap.” If you remarry without resolving your financial claims, you could lose the right to pursue any further claims against your former spouse, except for claims related to children. It’s crucial to ensure that all financial matters are settled before entering into a new marriage to avoid losing valuable legal rights.

SETTING ASIDE DISPOSITIONS

The Court has the power to set aside any dispositions of assets made by either spouse with the intention of defeating financial claims. This means that if one spouse tries to transfer, sell, or hide assets in anticipation of the divorce or financial remedy proceedings, the Court can reverse such actions. However, it is essential to act quickly if you suspect that assets have been transferred or hidden, as there are time limits on when the Court can intervene.

INHERITANCES AND OTHER NON-MATRIMONIAL ASSETS

Inheritances and other non-matrimonial assets, such as gifts, are often a point of contention in financial remedy cases. Generally, inheritances received before the marriage or after separation are treated differently from matrimonial assets. However, this is not always the case. The Court will consider factors such as the length of the marriage, the financial needs of both parties, and how the inheritance was used during the marriage.

In some cases, the Court may decide that inherited assets should be included in the financial settlement, especially if they were used to benefit the family during the marriage or if there are insufficient matrimonial assets to meet both parties’ needs.

LEGAL FEES AND COSTS

Legal costs in financial remedy proceedings can escalate quickly, particularly if the case is contested and proceeds to a Final Hearing. Each party is generally responsible for paying their own legal fees, although the Court does have the power to order one party to contribute to the other’s costs in certain circumstances, such as when one party has acted unreasonably.

It’s important to budget for legal costs and consider alternative dispute resolution methods, such as mediation or collaborative law, to avoid the financial strain of lengthy Court proceedings.

CONCLUSION

Financial remedy proceedings can be complex and emotionally draining, but they are an essential part of ensuring that both parties receive a fair share of the assets after a divorce or dissolution of a civil partnership. By understanding the process, seeking early legal advice, and considering options for settling the matter outside of Court, you can help to minimise the stress and financial cost involved.

Smalleys Solicitors provides exceptional Financial Claims and Applications and Financial Applications services to clients. People choose and recommend us not just in Nottingham, Arnold, Hucknall, Derby and Mansfield, but across Nottinghamshire, Derbyshire, Leicestershire & the East Midlands, and the whole of the UK, because we get results.

To receive expert advice and representation regarding Financial Claims and Applications and Financial Applications, please contact us using the form below, call us on (0115) 955 6555, email via the Request a Callback form on this contact page.