Financial Provision on Divorce
Under s8(1) of the Family Law (Scotland) Act 1985, in an action for divorce, the court has the power to make one or more of the following orders:
- an order for the payment of a capital sum to him or her by the other party to the marriage;
- an order for the transfer of property to him or her by the other party to the marriage;
- an order for the making of a periodical allowance to him by the other party to the marriage
- a pension sharing order;
- a pension compensation sharing order;
- a pension lump sum order (commonly known as an earmarking order);
- an order for payment of a capital sum from pension compensation;
- an incidental order, usually concerning matrimonial property.
There are two criteria which must be fulfilled before the court can make any order. S8(2) of the Family Law (Scotland) Act 1985 provides that the court shall make such an order if it is justified by the principles set out in s9 of the Act and is reasonable having regard to the resources of the parties.
The s9 Principles
In deciding what order is appropriate, the court shall apply the following principles:
- The net value of the matrimonial property shall be shared fairly between the parties;
- Fair account shall be taken of any economic advantage derived by either person from contributions of the other, or any economic disadvantage suffered by either person in the interests of the other, or of the family;
- The economic burden of caring for any children of the marriage (under 16) after divorce should be shared fairly between the parties;
- A person who has been dependent to a substantial degree on financial support from the other person should be awarded such financial provision as is reasonable to enable him to adjust, over a period of not more than three years from the date of decree of divorce or dissolution;
- A person who at the time of the divorce or dissolution seems likely to suffer serious financial hardship as a result of the divorce or dissolution should be awarded such financial provision as is reasonable to relieve him of hardship over a reasonable period.
In applying the s9 principles, the court will not take account of the conduct of either party unless that conduct has adversely affected the relevant financial resources, where there is substantial dependence or serious financial hardship or it would be manifestly inequitable to leave the conduct out of account.
Misconduct of either party is therefore usually irrelevant.
Reasonable with regard to the resources of the parties
The court has discretion to limit or reduce an award if the parties’ resources at the date of divorce make that award appear unreasonable. For example, where a party is prima facie entitled to a capital sum payment from his spouse, but by the date of divorce the spouse’s resources do not justify that level of payment, the court has discretion to reduce the capital sum due. This discretion does not however extend to increasing an award beyond that justified by the s9 principles.
The rules on financial provision on divorce and dissolution are aimed at encouraging each party to become as financially independent of each other as possible following a split – the clean break principle.
S13 of the Family Law (Scotland) Act 1985 provides that the court shall not make an order for a Periodical allowance unless:
- It is satisfied that an order for payment of a capital sum or for transfer or property would be inappropriate or insufficient to satisfy the requirements of s8(2); and
- It is justified by one of the overriding principles set out in s9(1)(c),(d), or (e) of the Act.
- S9, in so far as it applies to periodic allowances, allow the court to make an order for a periodic allowance to compensate for the economic burden of caring fro children or to relieve hardship.
Periodical allowances can be made for a definite or an indefinite period of time and can be varied if there is a material change in circumstances. An order for a periodical allowance can also be converted into the payment of a capital sum or a property transfer order.
In the event of the death or remarriage of a payee, the order will cease to be effective, however, on the death of the payer, the order will continue to operate against the payer’s estate.
Under the Family Law (Scotland) Act 1985, the court has the power to order a capital sum to be paid by a party to the marriage, either:
- on granting decree of divorce/dissolution or
- within such period as the court on granting the decree may specify.
The court may stipulate that the order shall come into effect at a specified future date. Typically this would be used where the matrimonial home is the most substantial asset and requires to be sold in order to raise the necessary finance to pay the capital sum.
Alternatively, the court may order that the capital sum be paid by instalments where, for example, a spouse has few capital assets but has a substantial income.
The court has discretion, under s12(4) to vary the order where an application is made by either party if there is a material change in circumstances. In relation to orders for payment of a capital sum, it is important to note that s.12(4) only allows variation in the date or method of payment.
The court also has the power to order a party to transfer his ownership of property to the other under s12. This often involves one party transferring his one-half pro indiviso share of the matrimonial house to the other party.
It is competent for both a capital sum order and a property transfer order to be made in the same action.
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