The value of a family business or business interest is treated as an asset and therefore part of the matrimonial pot to be distributed when it comes to negotiating a financial settlement on divorce or...
cohabitation, TOLATA, child maintenance service, benefit, child, schedule 1, conference, family law, europe
In his introductory remarks to the Family Law Cohabitation Conference held in London in November 2016, John Wilson QC promised a ‘high protein’ day of seminars, with ‘a lot of bang for your buck’.
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The below article appears in the January issue of Family Law at Fam Law 114and has been made available, free of charge, as a service to our readers. In his introductory remarks to the Family Law Cohabitation Conference held in London in November 2016, John Wilson QC promised a ‘high protein’ day of seminars, with ‘a lot of bang for your buck’. John reminded the delegates that cohabitees had been passed over by the coalition government in 2014 when it rejected the Law Commission’s recommendation of changes to existing statutes governing administration of estates and intestacy, in the form of the Inheritance (Cohabitants) Bill. The legislation would have provided for ‘qualifying cohabitants’ to inherit property if certain conditions were met, including either cohabitation for 2 years ‘as the intestate’s spouse or civil partner’ if the cohabitees had had children, or for 5 years if not. Parliament had settled for the minor amendments introduced by the Inheritance and Trustees’ Powers Act 2014, thus consigning the cohabitee of a person who had died intestate to the more circumscribed provisions of the Inheritance (Provision for Family and Dependants) Act 1975. With the conscious uncoupling from Europe dominating May’s government, there is little appetite among ministers for legislative reform. Legal disputes involving ownership of property by, and financial provision for children born to, unmarried couples are therefore likely to grow.
Section 15 and Schedule 1 to the Children Act 1989
In the first presentation Charles Hale QC, explaining the increasing relevance of Sch 1 to the Children Act 1989, highlighted that between 1996 and 2016, the Office for National Statistics had reported that ‘cohabiting couple families were the fastest growing family type over the last 20 years’. In 2010, 31% of live births were those of women who were unmarried but cohabiting, and by 2011 the same percentage of cohabiting couples as married couples were parents. Despite this Sch 1, which provides for financial provision for children, remains underused. Charles warned against any expectation of relief for non-resident parents (see N v C  EWHC 399), and that no relief was available from co-habiting step-parents, with whom a child may have lived for many years.
For the benefit of the child?
The phrase ‘for the benefit of the child’ has been widely construed in big money cases. Nonetheless, the Court of Appeal in Re A (A Child: Financial Provision)  EWCA Civ 1577,  2 FLR 625 (a precursor to the mother’s fourth bite at the Sch 1 cherry in GN v MA  EWHC 3939 (Fam),  FLR (forthcoming)) upheld the rejection by Bodey J of the mother’s membership of Annabel’s Nightclub as being for the benefit of a 5-year-old child; but such expenses as the resident parent’s gym membership are likely to be approved.
Charles reminded delegates that following M-T v T  EWHC 2494 (Fam),  2 FLR 925, legal costs, while not being caught by the statutory framework for Legal Services Payment Orders applicable in matrimonial cases, and whilst only being referred to obiter dicta by Mostyn J in Rubin v Rubin  EWHC 611 (Fam),  2 FLR 1018, can be ordered to be paid to the applicant for the benefit of the child. The jurisdiction can even extend to applications for s 8 orders (spend time / live with), following R v F (Schedule One: Child Maintenance: Mother's Costs of Contact Proceedings)  2 FLR 991), and even (possibly) costs already incurred which were awarded by Bodey J in R v F.
HHJ Horowitz QC, in one of his final judgments, clarified (extended?) the court’s jurisdiction to make capital orders, even where the child does not live in the jurisdiction – see PG v TW (No 2) (Children: Financial Provision)  1 FLR 923. Secondly, it follows from the decision of Moylan J in AA v BB (Application to Set Aside Leave: Section 13, MFPA 1984)  EWHC 4210 (Fam),  2 FLR 1251 where an application to set aside leave, granted under Part III MFPA 1984 was refused, that if a child maintenance order has been made in another EU member state then a parent may be able to apply again here. Moylan J accepted that the wife’s case that child maintenance proceedings had concluded in Slovenia and that the English courts now had jurisdiction. In O v P (No 2) (Sch 1 Application: Stay: Forum Conveniens)  EWHC 2225 (Fam),  2 FLR 77 Baker J also offered helpful guidance on the lis pendens principle which Moylan J in AA v BB had held did not apply in that case.
Duration of orders and a lacuna
Where the court has jurisdiction to award child maintenance (the exception, of course, in light of the Child Support Act 1991) periodical payments under Sch 1 may begin from the date of the application, and usually do not extend beyond a child’s 18th birthday save where the child remains in education or is undergoing training for a trade, profession or vocation. Ongoing disability, as in C v F (Disabled Child: Maintenance Orders)  2 FLR 1 and lack of disclosure, as in T v S (Financial Provision for Children)  2 FLR 883 have both been persuasive reasons for an order extending the term.
James Pirrie pointed out the lacuna arising from the fact that a variation application can only be brought by a parent if the child is not yet 18. If aged over 18 the young adult herself could apply for maintenance but only if is there was no order in place immediately before her 16th birthday (para 2(3) Sch 1). If the young adult’s unmarried parents had settled child maintenance claims to the end of secondary education, and assuming a subsequent CMS application had not been made to discharge the child maintenance order, she would be left with nowhere to turn for maintenance in tertiary education.
The child as a party?
Referring to dicta of Thorpe LJ in Re S (Unmarried Parents: Financial Provisions)  EWCA Civ 479,  2 FLR 950, Charles commented that it was difficult to square the welfare-based jurisdiction of the courts under Sch 1 with the paucity of cases in which the voice of the child is heard, and reminded practitioners to give consideration to separate representation of the child.
Prohibition on outright transfers
Despite the wording of the statute in para 1(2) (e) of Sch 1 that property may be transferred to a parent or a child, there remain no reported cases on this (save possibly for H v P  Fam Law 515 in which a lump sum order was used to circumvent the prohibition) with Ward J cautioning in A v A (A Minor: Financial Provision)  1 FLR 657 that exceptional circumstances would have to prevail.
Circumventing an ineffectual child maintenance calculation
Finally, the court will not direct lump sum payments in lieu of non-existent or low payments pursuant to the Child Support Act 1991 – see Phillips v Peace  2 FLR 230. Leading us neatly on to …
Child Support – the Child Maintenance Service (CMS)
James Pirrie (undoubtedly this country’s expert on child support) urged lawyers to adjust their mind-set and ‘think like a lizard’. 87 pages of the handout (itself developed over 23 years) had been devoted to James’s slides and yet, with some wizardry, James was able still to offer a one page summary.
The three regimes
James delivered a highly comprehensible and exhaustive analysis of the three regimes (CS1 1993 – 2003, CS2 2003 – 2012 and CS3 2012 to date) focusing on jurisdiction, CS3 and then highlighting traps for the unwary. Figures for March 2016 show that combined arrears accrued under CS1 and CS2 are £3.7 billion. 70% of parents in CS3 are paying directly but are perhaps naïvely assumed to be behaving themselves and paying in full! CS1 and CS2 cases have been terminating between 2014 and 2017, with an end of any obligation to pay. Arrears will be carried forward into CS3.
Jurisdiction and guidance from the courts
Consideration first has to be given to the jurisdiction – geography, the child’s ‘age and stage’, parentage, the need for separate households and the presence or otherwise of a court order. Where the CMS has jurisdiction, the court’s powers are very limited, but extend to agreement, top-up payments, educational costs, costs associated with disability and reverse orders (possibly – see N v C  EWHC 399). Agreements in court orders to exclude the CMS are void (s 9(4) CSA 1991). Even if the CMS does not have jurisdiction the courts have urged parents to apply the formula: see GW v RW  EWHC 611 (Fam),  2 FLR 108 – a CS2 case, and more recently TW v TM (Minors) (Child Maintenance: Jurisdiction and Departure from Formula)  EWHC 3054 (Fam),  2 FLR 1386 where Mostyn J approved the formula even where the earnings of the paying party exceed the statutory maximum.
What has changed since 2014?
The most significant changes under CS3 have been in the scope for variations of decisions, with the removal from consideration of hypothetical income (at 8%!) generated by assets of over £65,000 and of a ‘lifestyle inconsistent with income’ formerly available in CS2. The centrality of the paying party’s tax return can lead to some unfair results, not least because it focuses on the income in the previous tax year. Paying parties (eg the self-employed) can ensure that some income is never seen by the receiving parent – especially if well-behind with the filing of their tax returns. There is no appeal if the paying parent is obviously lying about income: only if income has arguably increased by 25% can a reassessment of current income be requested.
180° turn in public policy
James observed that the statutory regime’s original professed aim of drawing all child support disputes under its umbrella had been expressly reversed so as to deter parents from approaching the CMS and to encourage self-authored solutions without the need for the ‘collect and pay’ scheme (for which the paying party pays 20% on top, and the receiving party 4% of the maintenance figure). The role of the information service CM Options has changed from concerned, informative sign-poster to officious gate-keeper. However, perhaps the new policy of encouraging paying parents to pay first, argue later (and pay 20% on top if wrong) may obviate many enforcement applications.
According to the Child Support Calculations Regulations 2012, disputes as to quantum of shared care arrangements effectively lead to a one-seventh reduction in child maintenance (reg 47), and if care is completely equal, there may in fact be no paying parent (reg 50). James warned that if the CMS has got the numbers wrong then there is a period of just 28 days to ask for a ‘mandatory reconsideration’ and then, if no remedy has been found, a further 28 days to appeal to the First Tier Tribunal.
Don’t be negligent!
James concluded that practitioners should ensure that their clients are properly advised of the transience of court orders, the fact that many of the variables at play are in control of the paying party (geography (jurisdiction), pensions, school fees, contact costs, possibly income), and that the CMS is about rules not about fairness.
TOLATA: law, practice and procedure
Andrzej Bojarski and Rhys Taylor delivered an informative and comprehensive guide aimed at family practitioners seeking to apply their legal skills in cohabitee property disputes. However, it was emphasised that one cannot simply dip one’s toe into this area of the law.
It’s not fair!
Andrzej and Rhys began by outlining the stark differences between TOLATA disputes and matrimonial disputes. Property ownership is governed by the laws of express, constructive and (occasionally as in Laskar v Laskar  EWCA Civ 347,  2 FLR 589) resulting trusts. TOLATA 1996 cases can frequently end up being ‘all or nothing’ rather than ‘tot up the assets and divide by two’ (the simplified view of matrimonial proceedings!), and the outcome can depend on what was said many years ago. The case will be backward-looking with little application – if any – of the principle of fairness.
Many disputes can simply be resolved by referring to the express trust declared at the time of purchase. However, if there is no express trust for a jointly-owned property, the quantum of contributions made at the outset is of lesser significance than what the contributions say about intentions. Arguments about gifts, loans and contributions may abound. Furthermore, just because the purpose for which a property was purchased has come to an end, there will be no alteration of shares, without more – Turton v Turton  Ch 542.
Key differences from matrimonial disputes
Endless pre-litigation correspondence detailing intentions and assertions can later become a cross-examiner’s paradise. Details matter, importance attaching to careful pleadings, dates, places and the detail of what was agreed at the time. Detrimental reliance on an agreement will need to be established. Front-loading of costs is to be expected, not least because conferences with counsel are advisable prior to the sending of a pre-action letter. Then there is the litigation risk: no client should ever be allowed to proceed to trial without knowing fully the consequences of what they are doing, not least given the fact that costs orders are likely to be made. If a poorly thought-through case is set out on a claim form, it can be very difficult to row back from inadequate pleadings and inexplicable omissions. Nonetheless, once the preparatory work is complete, the family lawyer’s soft skills and negotiation skills can play their part, not least in the pursuance of ADR in the form of mediation (involving lawyers). Arbitration is particularly appropriate for TOLATA disputes.
Rhys and Andrzej reminded those present of the confusing point that claims to beneficial ownership of property under a trust are for EU purposes rights in personam, not rights in rem (se Webb v Webb  QB 696 and Prazic v Prazic  EWCA Civ 497,  2 FLR 1128) but that a claim for an order for sale is a claim in rem and hence has to be brought in the jurisdiction where the property is situate G v G (TOLATA Application: Jurisdiction)  EWHC 2101 (Fam),  Fam Law 454 (currently under appeal), and the Finnish case of Komu v Komu and Others  4 WLR 26.
An additional claim to TOLATA: proprietary estoppel?
The recent ‘Cowshed Cinderella’ decision of Davies v Davies  EWCA Civ 463,  Fam Law 815 and the useful judgment of Moore v Moore  EWHC 2202 (Ch),  Eld LJ 388 have helpfully set out the principles of proprietary estoppel. Rhys and Andrzej emphasised the continued importance of proprietary estoppel in cohabitation disputes, together with the unpredictability of such arguments and their sensitivity to facts. The claimants in both Southwell v Blackburn  EWCA Civ 1347,  2 FLR 1240 and Liden v Burton  EWCA Civ 275,  Fam Law 687 received relatively modest amounts, thus focusing legal minds on the risks and proportionality of embarking upon such litigation.
Buy-outs, equitable accounting, chattels, gifts and joint accounts
The particular features of orders for sale and of ‘buy-outs’ (see now Bagum v Hafiz  EWCA Civ 801,  2 FLR 337) were addressed as were the principles of equitable accounting. The seminar also gave helpful guidance on the thorny question of unilateral improvements to property – highlighting the continuing utility of the case of Leigh v Dickeson (1884) 15 QBD 60 and the useful rule as to the lower of the costs of the works or of the increase in value found in Re Pavlou  1 WLR 1046. Claims regarding chattels can be made pursuant to s 188 LPA 1925. After some brief words about partnership assets, children’s property shares and gifts, Rhys and Andrzej considered in detail the legal position with respect to joint bank accounts / choses in action, and the view of Morgan J in Drakeford v Cotton  EWHC 1414 (Ch).
Playing by whose rules?
In light of the applicability of the CPR 1998, Rhys and Andrzej had produced a helpful procedural table. They also offered tips on gathering evidence, and on which documents would likely assist – eg TR1, office copies, conveyancing files, emails, mortgage applications, insurance documents, utility bills, wills, receipts, proofs of income, and correspondence about the purchase and intentions as to ownership. The importance of the complex Precedent H form was also emphasised.
The day was densely packed with all sorts of arcane and helpful pointers but it was also full of practical and directly applicable advice. The event was very well attended and early booking for next year’s instalment is recommended. The full version of this article appears in the January 2017 issue of Family Law.
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