Stewarts , 03 NOV 2017

Financial claims for children following parental separation: child maintenance and Schedule 1

Jenny Bowden

Solicitor

Financial claims for children following parental separation: child maintenance and Schedule 1

In the recent case of Green v Adams [2017] EWFC 24 Mr Justice Mostyn discussed the constraints of child support and the perceived shortcomings in the latest child maintenance regime (introduced by the Child Maintenance and Other Payments Act 2008).

Background

The parties were an unmarried couple with one child. They separated shortly after the child was born and were engaged in litigation (in various forums) since 2003. The father (F) was a wealthy individual whilst the mother (M) was of more modest means and was the primary carer of the parties’ son.

Child maintenance claims were pursued by M, followed by various appeals and further assessments instigated by both parties at various stages. Proceedings were also pursued by M under Sch 1 of the Children Act 1989 (which is often utilised by unmarried parents to pursue financial provision in respect of their children).

At the conclusion of the initial Sch 1 proceedings in 2005, orders were made that F provide the sum of £220,000 to provide the child with a home, and £24,800 towards moving costs.

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Schedule 1

Under Schedule 1 the court is able to make orders for periodical payments, lump sums or settlement of property for the benefit of a child. Orders for periodical payments are only possible in limited circumstances, including:

  1. where the jurisdiction of the child maintenance service (CMS) is not engaged;

  2. the parties agree that periodical payments can be ordered; or

  3. the CMS has made a maximum child support assessment.

The child maintenance regime has evolved over recent years, and in broad terms a maximum assessment is only likely to be obtained in circumstances where the paying parent (here, F) has income in excess of £3,000 gross per week. Under the old scheme, the figure was £2,000 net per week.

The current application

M’s current application to the court commenced in 2013 under Sch 1. She sought further capital provision (by way of lump sum) of just over £20,000 and periodical payments in light of a maximum child maintenance assessment provided by the Child Support Agency (CSA) – being the relevant assessment available at the time of the application.

Subsequent appeals (by both parties) against the CSA assessments delayed the current application. The question of periodical payments under Sch 1 could not be determined until there was a decision as to whether the CSA’s maximum assessment of F’s income was correct.

Some of the difficulties in this case arose as F structured his affairs such that he received no income and many of his assets were held by third parties (including corporate entities and trusts) rather than in his own name.

The previous legislation included the option for maintenance assessments to be considered with reference to a paying party’s (F’s) assets ('the asset based ground'). Under that legislation, F’s assets triggered an assumption as to his deemed income for the sake of the CSA assessment. The tribunal accepted that F had assets for the purposes of their assessment exceeding £800,000.

Notwithstanding M’s successful arguments, the Tribunal nonetheless replaced the original maximum child maintenance assessment with a reduced assessment (as the deemed income figure from F’s assets did not give rise to a maximum assessment), removing the court’s power to award periodical payments under Sch 1. Accordingly, only the capital element of M’s claim continued.

Of further note is the fact that the asset based ground is no longer available, as it was removed by the latest piece of legislation (the Child Maintenance and Other Payments Act 2008, which has been in full force since November 2013).

Looking then at M’s capital claims, these were reasonably modest and comprised funds for various holidays for the child, a new car, a new laptop and a kayak.

The judgment of Mostyn J

Mostyn J was highly critical of the changes to the child maintenance regime resulting in the asset based ground being removed, and highlighted his concern that this would result in a greater number of parents being left without suitable financial provision and/or being left to pursue such provision through the court.

The judge felt that F had assets 'in his sphere' exceeding £5m (compared to the £800,000 figure settled upon by the Tribunal). He was critical of F’s lack of financial provision for M and his son generally, stating that F’s 'parsimonious approach to the support of his son is little short of scandalous'.

Having criticised F and the shortcomings of the child maintenance system, Mostyn J nonetheless highlighted that pursuing capital claims under Sch 1 should not be used as a back door to bring claims for rolled up maintenance. He noted that 'the court cannot legitimately circumvent this prohibition [the prohibition of pursuing periodical payments without a maximum child maintenance assessment in place] by making a capital award which rolls up expenditure which would ordinarily be met by a periodical payments order'. That said, he was satisfied in this case that the expenditure was sufficiently 'one off' in nature and made an order in the terms sought by M.

Lessons to be learned

Head of Divorce and Family in Stewarts' Leeds office Adrian Clossick says of the judgment:

'This case highlights the interaction between the child maintenance regime and the court, and the risk that an increasing number of parents will be able to manipulate their finances to avoid a child maintenance obligation.

The "assets" based variation under previous child maintenance regimes has been removed, risking real injustice in such cases.

We are seeing an increased number of cases where Schedule 1 of the Children Act is being utilised to address the shortcomings in the current child maintenance regime.

What this judgment highlights is an apparent flexibility when considering whether expenditure can be classified as ‘capital’ in nature to justify an award.'


This article was originally published by Stewarts
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