I.THE ROLE OF PERIODICAL ALLOWANCE II. THE MODERN LAW OF FINANCIAL PROVISION IN SCOTLAND A. Section 9(1) B. The Relevant Date C. Quantum... s9(1)(
D. Quantum... s9(1)(b) E. Quantum... s9(1)(c) F. Quantum... s9(1)(d) & (e) III. CHANGE OF CIRCUMSTANCES--VARIATION IV. PRIVATE ORDERING V. CHALLENGES TO PRE--OR POST--MARITAL AGREEMENTS BETWEEN SPOUSES VI. STATE FUNDING OF SEPARATED PARTIES VII. CONCLUSION Scots Law is proud of its system of financial provision on divorce. The system put in place by the Family Law (Scotland) Act 1985 has remained in place, minimally amended, since it came into force in September 1986. This has not been the result of legislative inertia but rather the effect of the strength of the statute and its practical blend of certainty and flexibility. We should not be so proud of the system it replaced, nor of the fact that that older system lasted so long.
This article begins with an analysis of current law from a historical perspective before turning to the statutory basis for periodical allowance and 'the five principles.' Afterward, the article will describe the statute's central concept--the Relevant Date.
THE ROLE OF PERIODICAL ALLOWANCE
Modern Scots Law relegates spousal maintenance (which we call periodical allowance) to a subsidiary role. The court should make no order for periodical allowance at all unless the circumstances of the case make it impossible to achieve a just solution by the payment of a capital sum, a property transfer order, a pension share, or a combination of these. The policy underlying this is the discouragement of any return to the court for any change to the order following a material change of the parties' circumstances. Modern Scots Family Law loves certainty, but it adores the Clean Break.
Before 1964, Scottish law had no provision for periodical allowance following divorce. (1) Instead, the court had only the power to award a capital sum. (2) If the paying spouse was wealthy then the court had scope to do justice, but if he (and it was almost invariably a 'he') was without capital then no award at all could be made, even though he may have been a high earner. (3) The law treated the 'innocent' spouse as if the "guilty" spouse had died, leaving the 'innocent' spouse with what would have been the "guilty" spouse's intestate estate. (4)
The Divorce (Scotland) Act 1964 brought the matter more up to date but still rendered it impossible for the 'guilty' spouse to receive any financial provision at all. (5) The result remained unsatisfactory because of the difficulty of assigning guilt between the parties. As any experienced family law practitioner knows, both spouses typically deserve at least some degree of fault, and it can be an arid task to assess those degrees.
Under the 1964 Act, however, the task became a necessary one. (6) The court had discretion to award either a capital sum, a periodical allowance, both, or neither, based on the behaviour of the parties. (7) In one example, the court awarded the wife a capital sum which was restricted because she induced her husband into the marriage by falsely stating that she was pregnant with his child. (8) A defender's actual income was the relevant factor. (9) His potential earnings could be considered, but there was no requirement on the man to maximise his income. (10)
Contemporary commentary addressed the loss of pension rights on divorce, but the courts in Scotland did not consider that issue. (11) Periodical allowance did form part of the post-1964 divorce landscape and that fact was undoubtedly a step forward for those innocent parties whose spouses were capital-poor and income-rich. The Divorce (Scotland) Act 1976 introduced grounds of divorce for periods of non-cohabitation for two years with consent and five years without the need for consent. (12) Fault-based grounds of adultery, behaviour and desertion remained (13), but the statute demonstrates a clear move away from fault as a requirement for divorce. However, that did not change the position in respect of financial provision.
The law in respect of financial provision was still in an unsatisfactory state and the Scots Law Commission undertook a review of the law in an attempt to bring it up to date and to establish a balance between reasonable certainty and appropriate judicial discretion. Many attribute the success of the Commission's work to one of the Commissioners, Dr. Eric Clive, an academic at Edinburgh University. (14) The Commission's report in 1981 recognized that the wide range of types of people and types of marriage and of reasons for family breakdown and financial circumstances made it impossible to create a one-size-fits-all solution. (15) The Commission wanted an answer: "capable of applying to many different types of marriage--whether long or short, with children or without, with property or without, whether housewife marriages or two-career marriages, whether entered into one year ago or forty years ago." (16)
The Commission's work ultimately resulted in the Family Law (Scotland) Act 1985. Over time, the 1985 Act has proven successful, and become the envy of family law practitioners in the rest of the UK, evidenced by attempts by the House of Lords to adopt the principles of the Scottish system in England & Wales.
THE MODERN LAW OF FINANCIAL PROVISION IN SCOTLAND
Periodical Allowance in Scotland derives from section 8(1) of the Family Law (Scotland) Act 1985 which provides that in an action of divorce either party to the marriage may apply to the court for one or more of the following orders: "a) an order for the payment of a capital sum; aa) an order for the transfer of property; b) an order for the making of a periodical allowance; baa) a pension sharing order; ba) an order under s 12(A) (2) or (3); c) an incidental order." (17)
Section 8(2) goes on to provide that where an application has been made for any of these orders, the court shall make such order, if any, as is: "a) justified by the principles set out in s9 of this Act; and b) reasonable having regard to the resources of the parties." (18)
Section 8(2)(c), the periodical allowance provision, plays a very small part in Scots family law due to a deliberate policy of Scots law before and after the birth of the Scottish Parliament in 1999. That policy is expressed in section 13(2) of the Family Law Scotland Act 1985 which provides that:
the court shall not make an order for periodical allowance under s8(2) of this Act unless--(a) the order is justified by a principle set out in para c), d) or e) of s9(l) of this Act; and
it is satisfied that an order for a payment of a capital sum or for transfer of property, or a pension sharing order, under that section would be inappropriate or insufficient to satisfy the requirements of s8(2).... (19)
Although a form of spousal maintenance does exist in Scotland, that statute has relegated it to a subsidiary role. Thus, to understand periodical allowance, it must be viewed within the broader context of the financial provision.
An order for periodical allowance must consider not only parties' resources but must also meet the requirements of section 9(1). We must look at all of these five principles when taking any view about periodical allowance in Scotland.
The core of the Scottish system of financial provision on divorce is found in a single subsection of section 9 of the 1985 Act. It has stood the test of more than 30 years of radical social change and has proved flexible enough to account for these changes while remaining rigid enough to discourage the speculative litigation of some neighbouring jurisdictions:
S9(1) The principles which the court shall apply in deciding what order for financial provision, if any, to make are that
|) The net value of the matrimonial property should be shared fairly between the parties to the marriage...;
(b) Fair account should be taken of any economic advantage derived by either party from contributions by the other, and of any economic disadvantage suffered by either person in the interests of the other of the family;
(c) Any economic burden of caring, after divorce, (i) for a child of the marriage under the age of 16 years should be shared fairly between the persons...;
(d) A person who has been dependent to a substantial degree on the financial support of the other person should be awarded such financial provision as is reasonable to enable him to adjust, over a period of not more than 3 years from the date of decree of divorce to the loss of that support on divorce;
|) A person who, at the time of the divorce... seems likely to suffer serious financial hardship as a result of the divorce should... be awarded such financial provision as is reasonable to relieve him of hardship over a reasonable period. (20)
Parallel provisions are in place in respect of the parties to a dissolved civil partnership. (21)
The Relevant Date
The linchpin of the Act is the "Relevant Date," which refers to the date when the parties cease to cohabit as husband and wife. (22) Even after physical separation, it can be months or even years before a court will rule that couples ceased to cohabit as husband and wife for purposes of establishing the "Relevant Date." (23) Although establishing the Relevant Date can radically affect the calculation of the matrimonial property, there has been surprisingly little litigation on the issue. (24)
Matrimonial property does not include property independently owned by either party before marriage. (25) If, for example, a couple marry and live for many years in a house that belonged to the husband before the marriage and had not been bought as a family home for himself and his present wife, then that house does not form part of the matrimonial property which is to be divided on the parties' eventual divorce once the three children have grown up and gone. This is so despite the fact that the wife may have lived in the property for many years...