What is fuelling the rise in financial disputes?

According to figures from the Ministry of Justice, the number of financial remedy orders being contested in the family courts has reached the highest level in 15 years as separating spouses battle for the best outcomes in volatile financial times.

Whilst these figures could be skewed by the number of people who waited for the no-fault divorce legislation, which came into force in April 2022, there is an evident rise in financial cases being contested, and we’ve seen more clients investing their time and money to achieve a fair settlement. However, we see an equal number who cut too many corners to save time and costs, risking something which might end up being very unfair in the future or not sufficient to meet their financial needs. Like most things in life, there is a balance.

Factors driving the increase

Economic uncertainty

Throughout the divorce process, clients experience uncertainty about what their new lives will look like. The current economic volatility is exacerbating this, impacting asset values and driving up expenses, making clients increasingly anxious about what they need to maintain a good standard of living post-divorce.

The cost of getting a divorce itself has also increased considerably, even though we have a no-fault system now, meaning when people do come to separate, receiving a fair financial settlement is a top priority.

When I first started practicing in 1995, the divorce court fee was £30. Just recently, it’s increased to £603, making it one of the highest court fees and, in my opinion, an indirect tax on people. Not only is this leaving some people stuck in unhappy marriages, unable to afford a divorce, but it also means that people are spending more on the process, adding to the financial strain.

Court delays

Prolonged divorce proceedings are also playing a part in the rise in financial disputes. Court delays are resulting in people waiting several months or years for their financial cases to be finalised, during which time, financial circumstances are changing.

Matters are not helped by delays in the receipt of, for example, pension information and obtaining a pension report to look at the various options, including pension sharing. Combined, these delays cause uncertainty and an ever-changing asset base. It feels that the goalposts are always moving, and by the time the pension report is obtained, the information can be out of date. This can lead to people cutting corners, either ignoring pension information or failing to get a pension report. This will save time and money, but the weaker party could be losing out on a share of substantial pension benefits. Next to the family home, the pension is often one of the most valuable assets, so this is very risky.

The systematic closure of courts and the demise of legal aid have contributed heavily to the court delays. People who cannot afford the legal fees are now representing themselves in court without legal advice or the knowledge of how to settle a case. As a result, judges are increasingly faced with parties attending court alone, without guidance or expertise, meaning cases are taking longer to hear. The family court has become bottlenecked.

A two-tier system

As a result of these delays, parties who are able to afford it are departing from the court process and opting for private negotiations before a senior barrister or retired judge or entering into arbitration. Whilst this does mean that there are fewer people in the queue for hearings, it has created a two-tier system, whereby those who have the money can quickly reach a resolution, whilst others wait in line.

Will financial disputes continue to increase?

Whilst the Matrimonial Causes Act of 1973 does not consider the concepts of ‘matrimonial’ and ‘non-matrimonial’ property, increasingly the courts are alive to these concepts, particularly concerning an inheritance which ideally is not seen as a ‘fruit of the marriage’ so should not be shared unless financial needs cannot be met. However, where an inheritance, family gift or trust exists, it presents a layer of complexity or potential dispute.

The Supreme Court has recently delivered a judgement in the eagerly awaited Standish v Standish case, which attracted attention as a potentially landmark ruling on how pre-marital assets are treated in divorce cases. Whilst the Supreme Court upheld the decision made by the Court of Appeal (siding with Mr Standish in terms of the court having to consider the source of the monies and not just whose name they are in), we now have some further guidance which may result in fewer disputes in cases of this nature. However, the case has also put a spotlight on a ‘compensation argument’ – whereby parties may start to point to the length of the marriage, their loss of career, or non-financial contributions when negotiating a financial settlement. This case, along with the rise in financial disputes, emphasises the growing importance of pre- and post-nuptial agreements to protect wealth, ensure all parties' financial needs are met and provide certainty of outcome.

Final thoughts

Economic uncertainty, rising costs and increasing court delays are all contributing to the rise in financial disputes. However, these factors are also aiding deeper issues, keeping people in unhappy marriages and with uncertainty about their future. With high court fees, virtually no legal aid, the lack of affordable legal advice and a dwindling number of family courts, parties are facing many hurdles when it comes to parting ways, and this doesn’t look set to improve anytime soon.

The advent of AI might be one solution if people, lawyers and the courts embrace it, particularly for running cases efficiently, thus saving time and costs. But we are not there yet, and AI is not a substitute for proper legal advice.