Arbitration unravels pension allocation in lengthy divorce
Michelle Uppal represented a husband in divorce proceedings initiated by his wife following a lengthy marriage. Michelle provided him with general advice on the financial position and the likely re-distribution of assets on divorce where there was no pre-nuptial agreement.
The only capital assets were the husband’s teachers’ pension and the value of the tenancy on the family home. The husband decided of his own accord to transfer the tenancy to his wife to ensure that it continued to be a home for his children, and he moved to live with his family.
Significant time had passed and as no progress had been made on the divorce or agreeing the finances, the husband instructed Michelle again. For the last five years, he had discharged any joint debts and continued to make ad hoc payments to support his wife. Despite striving hard to provide for his family, he felt there was no light at the end of the tunnel.
Michelle explained that he also had the right to a life of independence and both parties’ needs would be taken into account. She described how finances are distributed and what the court would consider in deciding financial provision. Due to the length of the relationship, there would be a disparity in pension provisions. To establish whether or not there should be spousal maintenance or a capital division, the first step would be to ascertain what was in the matrimonial pot.
The first step was voluntary disclosure and although Michelle encouraged mediation, the husband preferred disclosure to take place through solicitors, as the parties had tried mediation in the past.
The wife was acting without a solicitor, so Michelle ensured that all letters were appropriate for a litigant in person.
While the wife maintained that her husband had not made full financial disclosure, in reality there were no other assets. Michelle recommended instructing a pension expert to obtain a valuation.
The husband wanted to achieve a clean break and offered to share his pension up until their separation to exclude any post separation increase.
The wife rejected this first offer and sought a lump sum. Michelle explained to the husband that the wife retained a significant resource in the family home, and that the ultimate goal of the court is to ensure fairness.
Michelle discussed whether a clean break could be achieved and whether or not his wife could adjust without undue hardship. Accordingly, a further offer was made to the wife which the wife rejected again. She sought a pension share and a lump sum which the husband could not raise as there were no other assets. She also sought yearly maintenance. The parties were substantially apart.
Opting for arbitration
Michelle recommended obtaining advice from Counsel and a pension report. Counsel confirmed that husband’s approach was right, as there were no other capital assets. Michelle then explored whether the wife would consider arbitration and approached her with this option. The husband agreed to fund the process, which was on a fixed fee basis.
Both parties signed the arbitration form and the Arbitration Act 1996 and IFLA Code of Practice. Before arbitration could commence, a mediator ensured that the in-person meetings would be safe. Michelle supported the husband throughout the mediation but deliberately took a step back to ensure the wife did not feel alienated by an inequality of arms, and she did not attend the meetings. In any event, there was only one face-to-face meeting and the rest were by video-conference due to the pandemic.
Seeing the big picture
Michelle also introduced a welfare expert to advise on benefits that would be available to the wife. As it had been a long marriage where the wife had looked after the children, this had impacted on her ability to work.
The wife thought that her husband’s future inheritance should be taken into account in the matrimonial pot. However, Michelle explained that the arbitrator would not be able to take this into consideration, as his family had given no promises of support.
As part of the husband’s submission, he proposed a number of jobs that his wife could apply for to move towards supporting herself.
He also put forward his own housing needs. It was not unrealistic for him to move out of his father’s home and rent his own property in the future. He would need a 2-bedroom home. In contrast, his wife provided particulars for a bed-sit for around a third of the cost.
A child maintenance assessment was calculated on the basis that the husband was having no overnight contact.
Both parties were reluctant to instruct a pension expert as costs were a big issue for them. However, a fixed fee was agreed and the husband borrowed some money from his family to cover this. Michelle obtained some advice from a pension-on-divorce expert who confirmed that the pension fees were substantial for teacher’s pension, but that they could actually be paid from the funds.
The husband sought to ringfence his post-separation pension, but Michelle explained that as the wife had been caring for the children post-separation it was very likely the whole of his pension would be subject to sharing.
Following submissions by both parties the arbitrator made a written judgment ordering that:
- slightly higher child maintenance payments needed to be made by the husband until the youngest child leaves secondary school;
- the whole pension would be shared 50:50, and wife would pay the pension fees;
- there would be no lump sum payment to the wife, as the husband had already paid for the process costs, welfare benefits and pension expert, and he owed his father money to cover legal fees; and
- a nominal spousal maintenance order would be paid to the wife until 2025, as spousal maintenance would impact on the wife’s benefits.
Michelle took time to reiterate the difference between nominal spousal maintenance and a clean break order. The wife would be able to adjust to the termination of support, but the possibility of a claim remains in case something goes wrong. If the wife did make a claim any adjudicator would carefully consider any evidence she produced and her efforts to secure work.
Although the husband was keen to apply for the decree absolute as soon as possible, Michelle explained that timing was everything and a court would reject it if made too soon. The orders would need to be served on his pension provider first, before making the application.
While the husband was initially disappointed that there was not an absolute clean break in that he had to continue nominal payments to the wife for a further 5 years until his youngest reached 18. He was ultimately extremely relieved that he could finally move on with his life and felt the outcome was fair. By choosing the arbitration process, he felt that it was far more cost effective and resolved in a timely fashion without having to attend any court hearings or ongoing delay. The meetings were arranged at both his and the wife’s convenience and the experienced arbitrator explained the legal process and the law very clearly to both. Whilst Michelle was supporting and advising the husband in the background, the wife did not feel disadvantaged by being a litigant in person as the arbitrator was able to dedicate time to ensure she understood all of the steps.
The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.