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For the love of our children

Date:25 FEB 2022

Schedule 1 of the Children Act 1989 allows the English family court to order financial provision for children. Applications under Schedule 1 can be made by parents, stepparents, guardians, special guardians, any person named in a Child Arrangement Order as a person with whom a child is to live and indeed any child themself.

Schedule 1 is commonly used by unmarried parents given the difference in financial provision that can be made following the breakdown of a relationship for cohabiting couples compared to those couples who are married.

This article provides a brief summary of the law on Schedule 1, analyses two recent reported decisions and considers the impact of these cases on future Schedule 1 claims.

What orders can be made?

The courts have the power to make orders for the transfer or settlement of property, lump sums, periodical payments (in certain circumstances) and school fees orders.  Any order made by the Court must be for the benefit of the child (Schedule 1 (1)(2) Children Act 1989).

The courts power to make maintenance orders for children has been limited by the Child Support Act 1991. The Child Maintenance Service (CMS) now has primary jurisdiction for assessing and enforcing child maintenance. The court does retain a jurisdiction in certain circumstances including where the one of the parents is resident abroad or where the CMS has assessed the paying parent’s income as being above £156,000 gross per annum. 

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Recent Case Law

DN v UD [2021] EWCA Civ 1947

Can an order be made for long term capital provision for children into their adulthoods?

This was an appeal from the earlier decision of Williams J (DN v UD [2020] EWHC 627 (Fam)) in which long term capital provision was made for children extending into their adulthood.

The parties had three children who, at the time of the first instance decision, were aged 22, 19 and 14. The Mother sought provision of a home, income for the children during their minority and education and capital provision for the two younger children once they finished tertiary education. The Mother’s arguments at first instance were that contrary to previous case law there was no need for “exceptional circumstance” to justify capital provision in adulthood but, in any event, on the facts of the case there were exceptional circumstances as the father’s conduct had been such that he was unlikely to contribute to their financial positions in the future.

Williams J considered father’s behaviour (there had been previous Children Act and Injunction proceedings) and determined that “[the children’s] vulnerability or potential dependency upon their father results in a clear need for financial and emotional protection” (para 162). Williams J considered that the only way to provide the children with such financial independence would be to make financial provision extending into their adulthood.

The Father appealed on a number of grounds; Moylan LJ granted permission to appeal only in relation to the settlement of property order. The grounds of appeal which were allowed were as follows:

  1. That any order for financial provision must be made before the relevant child attains the age of 18;

     

  2. That the court does not have the power to make a property transfer order or lump sum order to a person who is a child at the date of the order, but who will be aged over 18 when it takes effect or will be paid; and

     

  3. That, in any event, the judge was wrong to make an order under which the children would receive capital provision when they were adults because there were no special circumstances justifying such an award in this case.

The court concluded that it did have the power to make an order in circumstances where a child has attained the age of 18 before the application is determined. Lord Justice Moylan indicated that should that not be the case “a properly constituted application could be defeated by the effluxion of time” (para 60). In considering the second ground Lord Justice Moylan concluded that “the order must be made before the child is 18 but there is nothing to suggest that the financial provision made has to cease when the child is 18” (para 74).

The third, and arguably the most important aspect of this appeal, was whether the future capital provision awarded was wrong. On behalf of the father, it was argued that the authorities are clear, there needs to be a “special” or “exceptional” circumstance to warrant such an order being made. On behalf of mother, it was submitted that the court had a wide discretion when considering the “special” circumstances and the potential of father issuing a “financial ultimatum” to the children was such that it would “comprise a special circumstance”. Lord Justice Moylan remarked that it was in “[his] view, clear that such power as there is to order financial provision in favour of an adult child who is not in education or training is limited to “special” or “exceptional” circumstances” (para 76). It was determined that the first instance decision had been made on what the father’s behaviour in the future may be.

It was therefore held that the long-term capital provision made by Williams J was not justified and must be set aside.

Therefore, whilst an order could be made that provides financial provision beyond the child’s 18th birthday, it remains the case that capital provision cannot be made for adult children in the absence of a special circumstance.

CA v DR [2021] EWFC 21

Can a periodical payments order include provision for the receiving party to build up their own pension fund?

This matter came before Mrs Justice Roberts following an unsuccessful Private FDR. The matter related to a child, E, who at the time of judgment was 4 years old. E’s parents had been in a relationship for some 7 years, separating approximately 2 years after E’s birth.

The matter was allocated to be heard by a High Court judge by District Judge Hudd who considered that given the scale of the father’s resources and incomes and the mother’s contention that the court should revisit, update and/or restate the principles set out by the Court of Appeal in Re P ([2003] EWCA Civ 837).

The Mother sought, as an element of periodical payments, £40,000 per year to contribute to her own pension fund.

The Father, with wealth of circa £190 million, was running the “millionaire’s defence” and had therefore indicated that he could meet any “reasonable” order of the court.

This case provides useful consideration of what should be covered by periodical payments and whether any element of those payments could be used by the receiving party to contribute to a pension fund. Mrs Justice Roberts summarises the mother’s claim as “an entitlement to build up personal savings over many years of E’s dependency to fund ongoing income needs at a time when the child’s claims have come to an end as a matter of law” (para 65).

On behalf of Mother, it was submitted that the time had come for the principles in Re P to be re-visited. In Re P Thorpe LJ clearly rules out the existence of any “slack to enable the recipient to fund a pension or an endowment policy or otherwise to put money away for a rainy day” (para 49, Re P).  It was submitted that in the first instance these comments by Thorpe LJ we obiter and secondly there are now “public policy reasons why the burden on the state in retirement should be reduced by requiring adults to make provision for retirement” (Para 67, CA v DR)

The Father, in opposition, relied on the case of Re A (a child) ([2014] EWCA Civ 1577) in which the court was asked to determine “to what extent can the element of carer’s allowance take into account the future needs of the carer at the conclusion of the relevant child’s dependency by reason of the benefit to the emotional welfare of the child in knowing that his/her parent is not going to be rendered “destitute”?” (Para 5(iii) Re A). Macur LJ succinctly concluded that it was “none” (para 23(iii) Re A).

Mrs Justice Roberts concluded that she was bound by the decisions and guidance in Re P and Re A. Mrs Justice Roberts suggests that the submissions made on behalf of mother were an attempt to closely align schedule 1 claims with claims under the Matrimonial Causes Act 1973 in light of the courts wider powers, in the latter, to make lifelong provision for a mother via a pension sharing order and periodical payments which, over and above meeting needs, can be used to build up a capital reserve.

Mrs Justice Roberts concluded by reiterating the limits on the jurisdiction of the courts in dealing with Schedule 1 claims and refused to include any provision for a pension fund in the periodical payment award stating “however desirable the aspiration may be, and I make no comment on that in this judgment, the extension of the current law which [mother] invites me to endorse requires either the intervention of Parliament or a further decision of the higher appellate courts” (para 70 CA v DR). It therefore remains to be seen whether there will be a move towards longer term provision similar to that which can be ordered on divorce. 

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