Clean break orders are very much preferred by family court judges when making decisions in financial remedy proceedings. They mean severance of all financial ties between the spouses and cut off the prospect of any future financial claims by either spouse against the other.
In certain cases however complete financial separation following divorce is neither advisable nor practical, and there are well-established alternatives to a clean break. Here we look at why clean breaks are preferred, why a spouse might wish to avoid a clean break financial settlement when they divorce, and the kind of court orders spouses can apply for as an alternative to a clean break.
What is a clean break order?
Under a clean break order each spouse gives up any financial claim against the other, usually on payment of a lump sum or transfer of certain assets to the financially weaker spouse. (A future claim may be made in very limited circumstances, chiefly when one spouse has hidden assets from the other and this has resulted in an unfair settlement.)
As we pointed out above judges favour clean break orders, and they will often make such orders even where the spouses have not requested one. In one case from 2019, Quan v Bray the court made clear its preference for clean breaks. Judge Mostyn stated,
‘Ultimately the court’s goal should be wherever possible, to achieve, if not immediately, then at a defined date in the future, a complete economic separation between the parties.’
The sticking point in arriving at a clean break is often the question of spousal maintenance, where one spouse seeks an open ended maintenance order. In such cases the onus is on the spouse seeking ongoing maintenance to show good reasons why there should not be a clean break. It is not for the other spouse to demonstrate why there should be a clean break.
When is a clean break order unsuitable?
Despite the emphasis on securing a clean break settlement wherever possible there are circumstances when such an approach will not be appropriate. In deciding financial matters the courts must take into account the factors listed in s25 of the Matrimonial Cause Act, 1973. If, having considered these factors the courts believe that a clean break would be unfair or cause undue hardship it can approach financial matters in a different way. This may be the case where there are:
- Ongoing Financial Needs. If one spouse lacks sufficient income to support themselves then ongoing financial maintenance or other support may be necessary. This could be because of ill-health, childcare responsibilities or because the sacrifices one spouse has made in their career to look after children for example has severely impacted their future earning capacity.
- Complex assets or assets that cannot be easily sold or divided. Some assets, such as businesses, pensions, or long-term investments, cannot be immediately divided or sold without significant financial penalty. Is there a punitive early redemption fee on any mortgage that would kick in if a house was sold to effect an immediate clean break?
In circumstances like these the courts may consider alternatives to a clean break. We look at the possibilities below.
What are the alternatives to a clean break?
It’s important to emphasise that, as we have outlined above, clean break orders will usually be the preferred route for the courts to take. However there are a range of options available to the courts to deal with the situation where a clean break is impractical.
These include:
- Spousal Maintenance Orders
Spousal maintenance is a court-ordered financial payment from one spouse to another to help them meet their financial needs after divorce and where possible to maintain their existing standard of living. While maintenance can offer the receiving spouse financial stability it can create long-term financial dependency and cause disputes in the future if the paying spouse sees their financial circumstances change.
The case of Clarke v Clarke in 2023 made clear that where an order for ongoing, periodical maintenance is made (so that there is no clean break) such an award should only extend long enough to ensure the spouse in receipt of maintenance does not suffer undue hardship. The court’s overarching goal is to achieve a complete economic separation between the parties. If this can’t be secured immediately, then the aim should be for a clean break to take effect at a clear point in the future.
These orders enable one spouse, usually the parent with whom the children live, to remain in the family home until a ‘trigger event’ occurs. This might be when the youngest child finishes full-time education. From a technical point of view the home will remain in joint names and be sold following the trigger event. The proceeds of sale are then divided in accordance with the terms of the order.
Like a Mesher Order a Martin Order results in the sale of the former matrimonial home being deferred. One spouse is permitted to occupy the home until death of remarriage. Courts will usually only make these orders of the non-occupying spouse has sufficient resources to support themselves, including being able to rehouse themselves, without requiring access to the equity in the former home.
Mesher and Martin orders are less common now than in the past. There’s a growing realisation that with Mesher Orders in particular, postponing the sale of the family home merely serves to delay the inevitable difficulty the financially weaker spouse faces of finding suitable accommodation. And the postponement is often to a time in the future when that spouse is older, with less earning capacity and a reduced ability to take on mortgage debt.
These orders also defer the sale of assets until some point in the future and are another way of avoiding a completely clean financial break from your spouse when you divorce. They are useful when marital assets are illiquid – that is, they can’t easily be sold or capitalised at their fair market price at the time of divorce. Wells Sharing orders are most commonly applied to business assets, complex investments and pensions.
Comment
The general approach of the courts in financial remedy cases is to impose a clean break settlement where appropriate and fair. However, the nature of the matrimonial asset and each spouse’s ability to achieve financial independence after divorce must be considered. And as we have seen this sometimes means avoiding an immediate clean break.
If you are getting divorced and are unsure about how to approach your financial settlement, contact us. It’s important to get legal advice to ensure your settlement reflects your individual circumstances. In Auckland and Auckland judges have a great deal of discretion when it comes to financial decisions. An experienced divorce solicitor can offer you invaluable guidance at a critical time.
