Cash for children
By Tony Roe
As the proportion of children born of unmarried parents rises, Tony Roe explores how their financial interests can be protected
The proportion of children born outside marriage in the UK has grown from 12 per cent in 1980 to 42 per cent in 2004. From 1986 to 2004, the percentage of non-married people under 60 who cohabited rose from 11 per cent to 24 per cent among men and from 13 per cent to 25 per cent among women (Social Trends '“ 36th Edition, 21 February 2006, National Statistics). All this has a knock-on effect on children of unmarried families.
Since the implementation of the Child Support Act 1991, the court has a much more limited role in the sort of financial provision it can make for a child. The court's residual powers to make such provision for a child are to be found in s 15 and Sched 1 of the Children Act 1989.
What does Sched 1 say?
Schedule 1 covers three scenarios:
- An order for periodical payments, lump sum or settlement, or transfers of a property to a child when the first application for such an order is made when the child is a minor. However, an order for periodical payment can be extended if the child is continuing education or there are other special circumstances.
- An order for periodical payments or lump sum, where the first time an application is made is when the child is over 18.
- Alteration of maintenance agreements containing financial provision for a child either during the joint lives of the parents or, indeed, after the death of one of them.
Early reported case law
In A v A (A Minor: Financial Provision) [1994] 1 FLR 657, a mother applied for a whole range of financial provision for her ten-year-old daughter. The mother had two other children.
Ward J examined para 4 of Sched 1. He noted that the father was so rich that he could transfer a North London property, held in the name of an offshore company within his control, to the mother and not even be aware that he had done so. The father's obligation was to provide for the child's maintenance until she had completed her education. The child had no physical or mental disability. The proper order was for a settlement of the property for the benefit of the child. While the child was under the control of her mother, the mother would have a right to occupy the property to the exclusion of the father and without paying rent, but only for the purposes of looking after the child.
When fixing the appropriate level of periodical payments, no deduction was made for the presence of the other two children in the household as they were not said to materially affect the cost of keeping a roof over the head of the child in question and her mother. The terms of the settlement were that the house in which the family had lived should be settled on trust for the child for a term expiring six months after the child had attained the age of 18 or completed full-time education (including tertiary education).
The court took into account all the circumstances, including those specifically referred to in para 4(1), Sched 1, and also the fact that the amount of maintenance for a child could properly include an allowance for the benefit of the parent with care: see Haroutunian v Jennings [1980] 1 FLR 62. Accordingly, the father was ordered to pay the child's school fees and extras and make periodical payments of £20,000 per annum for her maintenance. It was immaterial that part of the sum might be spent for the benefit of the two half-sisters. Periodical payments were secured as the father lived a precarious life.
In T v S (Financial Provision for Children) [1994] 2 FLR 883, the unmarried father of children aged 15 and 7 told the court that he had been earning and spending at the rate of about £300,000 per annum and had worked as a commodity broker. Unfortunately for the father, the police found him in possession of cocaine and £75,000 concealed in the vacuum cleaner and he was sentenced to two years' imprisonment. The district judge concluded that the only resources available were some £74,000, slightly less than what was found in the vacuum cleaner. The judge ordered that £29,000 be spent on school fees arrears and the remainder to be used to buy a small property for the mother and the children to be held by trustees with the power of sale, the exercise of which was to be postponed until the youngest child reached 21 or ceased full-time secondary education, whichever was the sooner. Johnson J allowed the father's appeal. The property would be held on the same terms save that the sale would be postponed until the youngest surviving child was 21 or all the children had completed their full-time education, whether secondary or tertiary. Upon the trust for sale coming into effect, the property would revert to the father.
In Phillips v Peace [1996] 2 FLR 230, the mother had pursued a career as a model and a singer but by 1991 was in receipt of income support and housing benefit. The father had been given a nil assessment by the CSA despite living in a house worth £2.6m.
The mother applied for a lump sum order that could be used in such a way to provide regular support for the child. She proposed a lump sum sufficient to purchase a property up to £350,000. In contrast, the father suggested a figure of £75,000. Johnson J confirmed that, regardless of any assessment made by the CSA, the court retained its jurisdiction under s 15 of the Children Act 1989 to make orders for the transfer and settlement of property. However, the court should not exercise the jurisdiction in such a manner as to make a provision designed to avoid the terms of s 8 (3) of the Child Support Act. Thus where the Child Support Act applied, the court, in exercising its jurisdiction under s 15 of the 1989 Act, should do so only in order to meet the needs of the child in respect of a particular item of capital expenditure. On that basis, the proper order was for the father to pay a lump sum of £90,000 to enable the mother to buy a house, plus £24,307.51 for furniture and birth and other expenses.
The application in J v C (Child: Financial Provision) [1999] 1 FLR 152 was prompted by the father's £1.4m lottery win. The Child Support Agency had assessed the father's contribution as nil because he had been in receipt of benefit even though, in evidence to the court, he had stated that he worked as a club doorman and in the car valeting business. Eventually an interim assessment was made by the CSA. The court noted that although the Children Act does not expressly state that the child's welfare is the first consideration for the purposes of financial provision, the welfare of the child was a consideration, if not the paramount or the first consideration.
It was held that, while para 4, Sched 1 provided that the court should have regard to all the circumstances of the case, there is nothing to distinguish between a wanted and an unwanted child. The child, T, was entitled to be brought up in circumstances that bore some sort of relationship with the father's current resources and present standard of living. The acquisition of wealth after the relationship breakdown did not affect that proposition. Public policy required that where a parent could provide resources that has reduced the need for state support, he should be obliged to do so. The father was ordered to purchase a four-bedroom house for T to live in, together with her mother and two sisters, to be held on trust for T's benefit throughout her dependency and to revert to the father on her attaining 21 or completing full-time education, whichever was the later. Cohabitation or remarriage of the mother would not result in the reversion of the property to the father as that would affect T's need for her mother to care for her. There would also be further capital provision to provide a reasonable family car (£9,000), the mother's past expenditure (£2,000), and adequate furnishings for the new property (£12,000).
No order was made for a further maintenance fund for the upkeep of the property, as it was in the father's interests to maintain it voluntarily.
The mother's lump sum application in Re L-M (A Minor) [1997] EWCA Civ 2065 was to pay for a nursery placement three days a week and then for a child minder to collect her 15-month-old son from school for the following four years. The county court judge decided that in this case a lump sum was not appropriate and relied, in particular, on Phillips. On appeal, Sir Stephen Brown P noted that it appeared to him that the mother was asking for a supplemental periodical maintenance payment. This was an ingenious attempt to circumvent the Child Support Act. The President said that he thought it might be that one could find items of capital expenditure which were not restricted to particular items and that Johnson J went too far when he said otherwise in Phillips. However, in the President's judgment, the mother's application was misconceived and the learned judge had been correct to refuse to make the lump sum order. Her appeal was dismissed.
Subsequent developments
Re P (Child: Financial Provision) [2003] EWCA Civ 837; [2003] 2 FLR 865 was the first Sched 1 case to be fully considered by the Court of Appeal. Five years after she commenced her relationship with an immensely successful international businessman, the applicant had a daughter, L, aged three at the time of the appeal. The father had a large house in central London, valued at well over £10m and owned a house in South Africa. He conceded that he could pay a lump sum of £10m if ordered to do so. At trial, the mother's award included £450,000 for a house, £30,000 for furnishings and periodical payments of £35,360 per annum to be reduced by £9,333 on the child's seventh birthday. She was also awarded maintenance of £7,500 for 26 months of shortfall. The court held that a more generous approach to the calculation of the mother's allowance was not only permissible but also realistic. The welfare of the child should be not just one of the relevant circumstances, but in most cases a constant influence on a discretionary outcome. The mother's entitlement to an allowance as the primary carer should be checked, but not diminished by the absence of any direct claim in law. The court should recognise the responsibility, and often sacrifice, of the unmarried parent (generally the mother) who was to be the primary carer of the child. The carer should have control of a budget that reflects her position and that of the father, both social and financial. The dominant feature in the case was the scale of the father's fortune and of his chosen way of life. The mother was accordingly awarded a housing fund of £1m, £100,000 for internal decoration and periodical payments of £70,000 per annum less state benefits.
The mother was awarded back-dated maintenance of £40,000.
Thorpe LJ felt that the father could be entitled to 'reasonably detailed accounts of expenditure' so that he could be satisfied that all of it was spent to meet the needs for which it was provided and none went to the personal or exclusive benefit of the mother. So, if acting for the paying party, consider seeking a direction that the recipient should keep detailed expenditure records for, say, a year following the order to be provided on request. Therefore if periodical payments prove too high, there is evidence for downward variation.
Legal costs?
W v J (Child: Variation Of Financial Provision) [2003] EWHC 2657 (Fam); [2004] 2 FLR 300 held that there was no jurisdiction pursuant to Sched 1 to order one parent to make a payment to the other to cover the latter's legal fees in relation to litigation covering the parties' children. This extended to the inherent jurisdiction.
Phillips v Peace again
Further litigation arose in Phillips v Peace (No 2) [2004] EWHC 318, eight years after the original order, when the mother applied under Sched 1 for, among other things, orders for a lump sum, a settlement of a new property and a transfer of property for the benefit of the child. She contended that the existing flat had become too small and a larger property was needed. The court had power under para 1 (2)(d) to make an order for settlement of property for the benefit of a child and under para 1 (2)(e) for the transfer of property for the benefit of a child. However, para 1 (5)(b) provided that the court could not make more than one order under para 1 (5)(d) or (e) against the same person in respect of the same child. The hearing dealt with which, if any, of the parts of the application should proceed. The court considered:
(1) whether it had jurisdiction to make either of the orders sought in relation to the property; and
(2) whether the mother's application for an order for a lump sum in essence to finance a larger home should be allowed to continue.
Singer J held that para 1(5)(b) precluded a transfer of property order where a settlement of property order had already been made. Transfer and settlement were to be regarded as different methods of dealing with the same one-off need for property adjustment in an appropriate case. Any further applications for an order for the settlement of further property and for an order for transfer of property would be struck out. It would be a misuse of the court's power were the mother to be able to claim a lump sum to circumvent the prohibition of a second property adjustment order created by para 1(5)(b). The essence of a lump sum was that it was paid once and for all and used to reimburse past expenditure or spent on current or future needs. The device of a lump sum subject to conditions which required, in effect, repayment in due course, or treating the money or what was acquired with it as a repayable loan, produced an effect that was very close to an order for settlement of the money or whatever it was used to purchase. Accordingly, the case would proceed on the basis that excluded the mother's attempt to seek to finance the upgrading of her accommodation by the lump sum limb of her application.
So how wide is Sched 1?
In Re S (Child: Financial Provision) [2004] EWCA Civ 1685; [2005] 2 FLR 94, the Court of Appeal noted that it was odd that the statute did not define whether it extended to children not present or habitually resident within the jurisdiction. Costs of travel to see a child in Sudan, abducted by the father, could be included in a Sched 1 order. The mother had obtained a sequestration order under the Schedule partly to enable her to pursue the legal process. Thorpe LJ distinguished W v J (above), highlighting Bennett J's words:
'In my judgment counsel'¦ is correct in her submission that a parent seeking... upfront payment of'¦ legal fees'¦ is seeking a benefit for himself and not for the child.'
The mother pursuing rights deriving from the decision of the Supreme Court of Sudan might well be considered to be for the benefit of the child as well as for the benefit of the mother.
And most recently'¦
In Walker v Jeffries and S (A Child) [2006] EWCA Civ 479, the mother appealed against an award of £800,000 made against the father whose worth was some £4m net. Thorpe J found that the trial judge had not focused on the needs of the child as being separate and distinct from those of her mother, which, indeed, he had been perfectly entitled to hold were somewhat selfish. It had been a wrong approach to take Re P (above) as a benchmark and to scale it down proportionally to reflect the case of the father. The court went on to note that this case was a neat illustration of the advantages of ensuring separate representation for a child when a claim was brought under s 15, particularly where there was intense and bitter conflict between the parties.
Tony Roe is head of the family group at Boyes Turner