Finances

Step One: Take legal advice

Once you have decided that you are going to separate, you need to know where you stand and the options available to you. For some, you may not have made a final decision to separate but wish to consider the ‘what if’ scenario. Either way, you need legal advice to understand the law and how it applies to your situation. Obtaining good, clear legal advice at the outset is essential to bridging the gap between where you are now and where you want to be post-separation. In particular, you need to know all of your options and the must do’s and don’ts.

Step Two: Financial disclosure

This is where you exchange details of your personal finances with your spouse. Clearly you need to know what you have before you can divide it fairly.

Financial disclosure includes not only details of your house, savings, investments and cars, but also pensions, life policies, possessions worth over £500 and all debts, including your outstanding mortgage. Business valuations are sometimes required, depending on the nature and structure of a business, and formal house valuations may also be needed.

Depending on the complexity of the family finances, formal disclosure may be required by way of a sworn financial statement (Form A), particularly if there are any doubts as to the validity or accuracy of a spouse’s finances. Supporting financial documentation, such as bank statements, mortgage statements, pension and policy valuations will also be required. For those with less complex and entirely transparent finances, a simpler, shorter financial statement known as a Form E may suffice or just a spreadsheet.

Each party is under a duty to provide current and accurate disclosure of their finances, and failure to do so could lead to a financial order being set aside.

Step Three: Reach an agreement

There are a number of options available to help separating parties reach an agreement in respect of finances and children. All are voluntary, so ultimately if one or both parties are not willing to engage then the only real alternative will be to issue an application to court.

a. Client led negotiation

This is very common and often parties have tentatively discussed settlement before approaching a lawyer. At this stage, no ‘agreement’ is binding on the parties. Legal advice is essential at this time to clarify your options and for you to understand what would be regarded as a fair and appropriate settlement.

Once you have taken legal advice and you are satisfied that you have knowledge of all the assets and liabilities, this may be the time for direct face to face negotiation. Clearly, you should never seek to negotiate directly with an abusive spouse or place yourself in danger.

b. Lawyer led negotiation

This is also a common approach and often leads to an agreed settlement. For this reason alone, any divorce lawyer worth his/her salt should actively pursue negotiations to try and reach an agreement. Unfortunately this is not always the case, thus wasting unnecessary costs. Prior to any negotiation, full financial disclosure is required (as detailed above). Once this is complete, offers can be made via correspondence or round table meetings.

c. Collaborative law

The parties’ Advocates work constructively together to try and reach agreement by way of a series of four-way round table meetings. Correspondence is kept to a minimum and any valuations are obtained jointly. If agreement is reached, this is converted into a binding court order.

d. Mediation

This is where the parties meet together with a trained family mediator to discuss the issues between them. The role of the mediator is to encourage dialogue and explore settlement options, but not to give legal advice or impose a decision on the parties. Any agreement reached, although not legally binding, is recorded in a summary. At this point, the parties can take independent legal advice if required and the agreement can then be converted into a binding court order.

e. Arbitration

Family law arbitration is still relatively new and there are few trained family law arbitrators in Guernsey, one of whom is Adrian Brown. The process involves both parties appointing an independent family law arbitrator to resolve their dispute.

Step Four: Make it legal

After receiving legal advice, full financial disclosure has been completed and you have successfully negotiated a financial settlement, you are within touching distance of separating amicably.

The final stage is to seek court approval of your negotiated settlement. This is done in one of two ways, depending on whether divorce proceedings have been issued. If your divorce has been completed, the agreement is recorded in a consent order. If there are no divorce proceedings or they are still pending, then the order is called a judicial separation.

The financial order, be it a consent order or a judicial separation order, will need to be carefully drafted to include division of all the assets, liabilities, any maintenance and arrangements for the children. Drafting the order will need specialist advice, with most orders achieving a clean final break between the parties. If a property is to be transferred, then a vesting order is prepared and later registered at court. Also filed with the consent order or judicial separation is a statement of information (Form E). The agreed documentation is signed and filed at court ahead of a short hearing.

At court, both parties and their Advocates attend for a judicial separation, whereas just the lawyers appear for a consent order. The hearing itself is likely to take only a few minutes, to enable the court to consider the terms of the proposed order. Once approved, copies of the sealed orders are provided to each party and the terms of the order have to be implemented, with the transfer of properties, bank accounts and any other assets.

Whilst separating amicably won’t work for everyone, it should be a realistic option for most people, most of the time, with the help of proactive lawyers and a genuine desire to resolve matters.

Court

Court should always be the last resort, but for a number of reasons there are some cases which have to be decided by a judge. This could be because of a difficult or obstructive opponent, problems with disclosure, arguments relating to expert valuation evidence or a plain refusal to negotiate. Some cases will start off down the court route, but then settle along the way.

How the court decides

To determine the appropriate financial settlement, the court will take into account all the available facts, and in particular the following:

• Welfare of any minor children.
• Financial needs.
• Length of marriage.
• Ages of the parties and state of health.
• Each parties’ income, earning capacity and all available resources now and in the foreseeable future.
• Each party’s contributions.
• The value of any benefits that will be lost on divorce.
• Standard of living.
• Anything else the court deems to be relevant.

The law relating to the division of assets on divorce is very complex. The main reason for this is the very wide discretion retained by the court. On the one hand, this is good as it enables the court to be flexible and craft any decision to take into account the particular facts of the case before it. The downside of this is that such a wide discretion means it is difficult ascertain what decision the court will make. This is another reason why it is generally not advisable to pursue your case to trial, aside from the cost and stress of doing so.

The court procedure

The basic court procedure for financial provision is summarised below:

1. Applicant files financial application (Form B) and sends this to the other side.
2. Directions hearing takes place before the Royal Court when the case is timetabled, including exchange of Form A’s, disclosure and other directions.
3. Form A’s and valuations are exchanged.
4. Any additional disclosure is requested and provided.
5. Financial dispute resolution (FDR) hearing takes place.
6. Final hearing takes place.

Orders

The main orders available are as follows:

1. Lump sum and interim lump sum

A lump sum is payment of a sum of money, usually either dividing up joint savings or buying out an interest in a property or investment. Provision for an interim lump sum payment is new law under the Matrimonial Causes (Bailiwick of Guernsey) Law, 2022.

2. Re-vesting or sale of real property

Re-vesting is a transfer of property from one party to the other and is usually done by way of a vesting order.

3. Spousal maintenance

In practice, spousal maintenance is relatively rare as most parties seek a ‘clean break’ settlement with no ongoing financial ties between them.

4. Child maintenance

Child maintenance is very common, especially where there is a significant income disparity between the parties.

For the record, the Royal Court cannot currently make a pension sharing order nor an order transferring debts from one party to the other.

Common Questions

Do I need a lawyer to reach a financial settlement?

Whilst there is no legal requirement, it is strongly recommended that you seek legal advice before negotiating a settlement.

Do I need approval of the court to obtain a binding financial settlement?

Yes you do, but only for a short hearing once you have reached agreement.

Is it always 50/50?

It is generally accepted that the starting point to divide assets on divorce is an equal split, however a court will consider a number of factors to decide whether it is appropriate to move away from an equal division.

What is a clean break order?

A ‘clean break’ is a financial order which prevents either party from bringing any further claims against the other. A clean break order can relate to claims for capital or maintenance, or both.

Will my inheritance be taken into account in my divorce settlement?

This is a complex area of the law that requires specialist advice specific to your circumstances. The basic principle is that any inheritance will be taken into account if the available assets do not meet the basic future housing needs of both parties. This is usually referred to as a ‘needs case’. If the value of the assets are significant and far exceed the parties’ reasonable future housing need, then a court may be persuaded to exclude an inheritance from the sharing principle.