What factors will the courts consider when deciding a financial settlement?

The Matrimonial Causes 1973 (MCA 1973) governs many aspects of matrimonial proceedings, save for those now replaced by the Divorce, Dissolution and Separation Act 2020 (DDSA 2020). Section 25 of the MCA 1973, in particular, acts as the starting point in how the court determines how to divide the family assets between a divorcing couple.  

The ultimate aim of the court is to produce an outcome which is fair and equitable in all circumstances, and to ensure that both parties can meet their needs and maintain a reasonable standard of living after the separation.  

How the courts choose to use their power is dependent on many factors, one of which being how many children or dependents are affected by the separation. This discretionary aspect of UK courts is what makes it so difficult to apply a single rationale to divorce cases.  

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Welfare of any child of the family (s.25(1)) 

Section 25(1) of the Matrimonial Causes act requires the court to consider all the case circumstances, with the first consideration being given to the welfare of a minor child of the family. The court will first need to ensure that there is adequate financial support for them, including the consideration of the costs that the resident payment may incur such as school fees, childcare, extracurricular activities and other expenses. 

The income, earning capacity, and financial resources of the parties (s.25(2)(a)) 

This factor examines the income, earning potential, and financial resources of each spouse, by considering what the spouses have at their disposal and how this is likely to change in the future. It helps assess the financial standing and contributions made by both parties during the marriage, as well as considering any potential changes that may affect their financial circumstances. 

Future earning capacity

The court is required to consider the party’s current income as well as their future income and earning capacity. For example, if one party is near retirement, the income change would need to be considered. Also, if one party refuses to seek employment when they should, this will also be considered. The court can attribute an earning capacity to either party of the marriage. 

The financial needs, obligations and responsibilities of the parties (s.25(2)(b)) 

The court considers the financial needs, obligations and responsibilities of each spouse, including their current and future financial requirements. This factor considers various aspects such as housing, child support, debts and ongoing expenses. It seeks to ensure that both parties can maintain a reasonable standard of living after the divorce. 

In relation to obligations and responsibilities, the court will consider any legal obligations that cannot be avoided, such as mortgages, loan repayments and Child Maintenance Service payments.  

The standard of living enjoyed prior to the breakdown of the marriage (s.25(2)(c)) 

The standard of living enjoyed by the couple during the marriage is given consideration. This is because the court aims to ensure that both parties can maintain a similar standard of living as far as possible after the divorce. Factors including lifestyle, accommodation and amenities enjoyed during the marriage are taken into consideration to determine a fair settlement.  

This factor is not something courts will always seek to replicate as one household becomes two. However, the court will take note of how parties lived when they were married when assessing needs. The longer the marriage, the more relevant this becomes. 

The age of the parties and the duration of the marriage (s.25(2)(d)) 

In divorce proceedings, age is not just a number. The courts will take the ages of each spouse as an important factor, as it can impact their ability to earn, find employment, or accumulate assets. It will be considered whether potential limitations or advantages related to age exist when determining a fair distribution of resources. 

Regarding the duration of the marriage, longer marriages are generally more likely to lead to the assets being divided equally and shorter marriages may lead to an unequal division of the assets – although this is dependent on the facts of each case. It is important also to note that although the court may only have regard to the period between the marriage and the breakdown when considering the length of the marriage, case law has suggested that where the parties have moved seamlessly from cohabitation to marriage it is unrealistic to treat the periods differently. Similarly, it can be unrealistic to treat the period of estrangement conducted before the divorce petition as part of the duration of the marriage. 

Any physical or mental disabilities of the parties (s.25(2)(e)) 

The health of each spouse is assessed to determine their ability to earn, work and manage their financial affairs. Serious health issues or disabilities may also require additional support or adjustments to ensure fairness in the settlement. The court considers the impact of health conditions on the financial picture.  

Contributions made by the parties (s.25(2)(f)) 

This factor examines the contributions made by each spouse to the family, both financially and non-financially. It includes considerations such as caring for children, homemaking, and supporting the career of the other spouse. This acknowledges the value of both monetary and non-monetary contributions in the context of marriage.  

Another aspect of this is where one party has made a significant contribution that should not be ignored. This is more relevant to shorter marriages where perhaps one party has accumulated or inherited significant wealth prior to the marriage and has brought that in.  

However, it is to be noted that these arguments hold less weight in needs-based cases where there is not enough in the matrimonial pot to meet the needs of the parties. 

‘Special contributions’

At its core, ‘special contribution’ refers to extraordinary financial contributions made by one spouse during the marriage. These contributions can arise in the following situations: 

• Exceptional financial success during the marriage; 

• Portraying business or entrepreneurial genius; and/ or 

• Possessing truly unique skills and talents. 

However, understanding what constitutes a ’special contribution’ is anything but straightforward. In practice, these cases are extremely rare and complex to argue. In fact, there are just a handful of reported cases where ‘special contribution’ has been successfully argued. 

In essence, it is not about comparing one party’s contributions to the other party’s contributions. Instead, the Court focuses on evaluating the contribution itself. To be deemed ’special,’ these contributions must possess an entirely exceptional and truly outstanding individual quality. The contributions should shine out as glaringly inconsistent with fairness if overlooked. 

Deciding what counts as ‘special’ largely rests in the hands of the judge. This means that there are no strict rules or clear-cut definitions, and the Court will consider the arguments made by lawyers in the case carefully as a result. The Court will only consider an uneven division if there is a compelling reason to do so. 

Read more on special contributions here. 

Conduct of the parties (s.25(2)(g)) 

The court will consider conduct among the other listed factors when making a financial order during the course of divorce proceedings “if that conduct is such that it would in the opinion of the court be inequitable to disregard it”. Such conduct must be ‘gross and obvious’ or have the ‘gasp factor’. As a result, there is a high threshold to meet and successful conduct arguments in divorces are rare. 

To read more about conduct in divorce, click here. 

Any benefits which may be lost to either of the parties due to the dissolution of the marriage (s.25(2)(h)) 

The court will consider whether either party will be deprived of any benefits due to the breakdown of the marriage. Most commonly, this is a direct reference to pensions (especially those that are long held) and the loss of a widows/widower’s pension upon death. However, it can also include things like life insurance policies, business ventures or career advancements.  

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