Financial Remedies Update and Children Act Schedule 1 - Detecting Trends

Jacqueline Marks & Christina Morris

Coram Chambers

24.10.13

About the presenters

Jacqueline Marks Over the years Jackie has developed a strong practice in family law, focussing upon family finance and private law children disputes. Jackie sits part time as a Deputy District Judge in the Principal Registry of the Family Division and this experience gives her an ability to see the strengths and weaknesses of a case and to have a complete perspective of the issues. She has a commitment to thorough and sound preparation of all her cases and to providing realistic advice and pursuing robust advocacy.

The majority of Jackie’s professional practice is engaged in family finance. She has experience of dealing with applications for financial remedies upon marital and civil partnership breakdown and in proceedings concerning financial provision for children. She has been involved in a diverse range of cases where the assets have significant value and those where the asset base needs to be stretched to meet the needs of the parties.

Jackie has experience of all forms of section 8 Children Act proceedings and applications to remove children permanently from the jurisdiction. Her experience as a Deputy District Judge, conducting first hearing dispute resolutions in private law children matters, enhances her broad knowledge of the complex emotional issues that often underpin these cases. Jackie prides herself on her client care in supporting individuals involved in these disputes.

Christina Morris Christina is a specialist in all aspects of property and financial provision with particular expertise in the property and financial rights of unmarried couples and children, applications pursuant to s.14 Trusts of Land and Appointment of Trustees Act and Schedule 1 Children Act. She has experience at all levels of court and in all types of cases.

Christina is always thorough and well prepared in her cases and has a particular skill in working with difficult people. She excels in “hard – ball” negotiations but equally should they fail she is also ready for the fray.

Christina has delivered lectures to solicitors, and other professionals on a variety of topics including TOLATA, Stack v Dowden and the Return of the Mesher Order.

Christina is a qualified Arbitrator

Christina is a contributor to the Family Service Practical law Company (PLC) and part of this paper is reproduced from that service with the permission of the publishers. For further information visit www.practicallaw.com or call 020 7202 1200

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FINANCIAL REMEDIES - UPDATE Recent Procedural Changes Orders for payment in respect of legal services

1. Hitherto costs allowances (or A v A type orders) have been a matter

of common law. Following on from section 22 Matrimonial Causes

Act 1973, which deals with maintenance pending suit, there are now

inserted new sections 22ZA and 22ZB which were brought in to force

with effect from 1 April 2013:

. These provide a new type of order that is neither a lump sum nor

periodical payments

. Section 22ZA(1) provides that the court may make an order or

orders requiring one party to a marriage to pay to the other an

amount “for the purpose of enabling the applicant to obtain legal services for the purposes of the proceedings”

. Such orders can be made in divorce, nullity or judicial separation

proceedings (and mirror provisions have been inserted in to the

Civil Partnership Act)

. Section 22ZA(5) provides that the order may be made to provide

services for a specified period and Section 22ZA(6) provides that

this may be paid as a one off payment or in instalments (which

may be secured).

. The court is given power to vary the order where there has been

a material change in circumstance (section 22ZA(8))

2. How is the discretion to be exercised?

. matters to which the court is to have regard are to be found in

Section 22ZB and include:

(a) the income, earning capacity, property and other financial

resources which each of the applicant and the paying party has

or is likely to have in the foreseeable future

(b) their financial needs, obligations and responsibilities

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(c) the subject matter of the proceedings, including the matters in

issue

(d) whether the paying party is legally represented

(e) any steps taken by the applicant to avoid all or part of the

proceedings, whether by proposing or considering mediation or

otherwise

(f) the applicant’s conduct in relation to the proceedings

(g) any sum owed by the applicant to the paying party in respect of

costs in these or other proceedings

(h) the effect of the order upon the paying party

3. However, the following test also applies:

. Section 22ZA(3) provides that the court must not make an order

unless it is satisfied that without the amount “the applicant would not reasonably be able to obtain appropriate legal services for the purpose of the proceedings or any part….” And

. Section 22ZA(4) states that for the purpose of subsection 3 the

court must be satisfied that:

(a) the applicant is not reasonably able to secure a loan to pay for

the services and

(b) the applicant is unlikely to be able to obtain the services by

granting a charge over assets recovered in the proceedings

What does reasonably be able to secure a loan mean? What makes

it unreasonable – the rate of interest charged, the duration of the

terms of the loan? In TL v ML (2005) EWHC 2860 (Fam) Mostyn J

stated that two letters providing a negative response from a bank

would suffice.

What if you are not willing to enter in to a Sears Tooth charge but the

Respondent is able to demonstrate that another firm is?

4. Important to note that these orders are available for financial remedy

proceedings; they do not apply to Schedule 1 CA although costs

allowances can still be ordered under common law principles, no

doubt by analogy to section 22ZA

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Instruction of experts

5. Changes to Part 25 Family Procedure Rules 2010

. These have been made with effect from 31 January 2013.

. The most significant change relates to the test. Expert evidence

is now restricted to that which is necessary as opposed to the

old test of what was “reasonably required to resolve the

proceedings” – FPR 2010 r25.1

. In Re:H-L (A Child) (2013) EWCA Civ 655 a decision in

Children Act proceedings, the CA considered the definition of the

word ‘necessary’ in Part 25 and said that ‘necessary ’means

‘necessary’ but if elaboration were needed the court referred to

the dictum of Wall LJ in Re P (Children) (Placement Orders:Parental Consent) (2008) EWCA Civ 535 where it was

held that necessary lies somewhere between “indispensible” on

the one hand and “useful” and “reasonable” or “desirable” on the

other.

6. Before the changes to the rules, the practice direction comprised

simply PD25A. There are now six sections in PD25A-F as follows:

. PD25A – experts, emergencies and pre-proceedings

. PD25B – the duties of an expert, the report and arrangement to attend court

. PD25C – experts in children proceedings

. PD25D – experts in financial remedy proceedings

. PD25E – discussion between experts

. PD25F – assessors in family proceedings

7. Important procedural points to note:

. Unless the court directs otherwise parties must apply for

permission to put expert evidence before the court by no later than the first appointment – r25.6(d)

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. The court will now require a formal application by notice

(accompanied by a draft order) stating the field in which the

evidence is required, the name of the expert and the issues to

which the instruction relates – r25.7(2)

. Written questions to the expert must be put within ten days of

receipt of the report – r25.10(2) ( c).

. A party wishing to instruct an expert should give the other party a

list of names whom they consider suitable and within ten days after receipt of the list of proposed experts the other party

should indicate whether there are any objections and supply the

names of other experts whom they consider suitable – PD25D

2.2. NB this means that you must consider the issue of whether

your case requires an expert well in advance of the FDA.

. PD25D 3.10(a) and (b) provide examples of situations where the

time for requesting permission to put expert evidence before the

court may be extended – where a decision cannot be made until

replies to questionnaires have been considered, where updating

expert evidence is needed concerning the value of property

following an FDR.

. The letter of instruction must be served upon the expert within

five days of the permission hearing - PD 25D 4.1 and in the

event of disagreement as to the content, there is provision for the

parties to email the judge to determine the issue – PD25D 6.1.

Strike out and delay Strike out applications

8. The FPR 2010 r.4.4(1) has introduced a new power to strike out a

statement of case, which did not exist under the 1991 rules.

9. An example of the use of this remedy is found in the case of T v M (2013) EWHC 1585 where Coleridge J upheld a first instance

decision to strike out the husband’s application to vary a periodical

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payment order brought only four months after judgement had been

given. The wife had been cross examined for three out of the four

days of the hearing but the husband contended that his wife earned

more than she had stated in her evidence. The husband’s

application was struck out under FPR 4.4 (1) (a) on the basis that

"that the statement of case disclosed no reasonable grounds for

bringing the application".

10. In Vince v Wyatt (2013) EWCA Civ 495 the Court of Appeal ordered

the wife’s application to be struck out under r4.4(1) where her

application for a financial remedy had been brought many years after

the divorce:

Facts:

. The parties had married in 1981 and had one child together.

They adopted a new age traveller lifestyle. They separated in

1984, the husband housing himself in an old ambulance.

. They divorced in the early 1990s.

. Impecuniosity had been the experience of the wife all her adult

life.

. The husband became extremely successful in the wind power

business, which he had started by generating electricity for his

ambulance.

. The wife instructed Mischcon de Reya and issued an application

for a financial remedy in 2011 and in response the husband

applied to strike out the application. He did not succeed at first

instance, the judge deciding that the wife’s delay was potentially

explicable and excusable, and he granted an order for legal

funding of her claim. On appeal the application to strike out was

allowed.

Thorpe LJ said as follows:

“[ 32 ] … the introduction of r 4.4 was intended to ensure that the power to strike out in financial remedy proceedings mirrored the court's power to strike out in civil proceedings. As in civil proceedings the rule is complementary to the court's inherent powers of case management… It was not apt simply to ask was

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the delay inordinate and, if yes, was prejudice to the husband greater than the prejudice to the wife. He had to have regard to all relevant considerations within the history, and exercise his case management powers, not just to protect against the greater prejudice but also to the husband and the resources of the court”.

. It follows that part of the case management function of the court

is to eradicate hopeless claims.

. Jackson LJ agreed with Thorpe LJ and considered the issue of

delay. He said the following in relation to r4.4(1)(b) in relation to

power to strike out where the case is an abuse of the court’s

process:

“Let me now turn to FPR 2010 r 4.4(1)(b). The court must adopt the same broad approach to the interpretation and application of that rule as it adopts in relation to CPR r 3.4(2)(b) in the context of civil proceedings. One significant difference between (a) claims for financial relief in family cases and (b) civil claims is this. In the family cases there is no limitation period, although in practice long delay may constitute a ground for dismissing the claim. In civil cases, on the other hand, if a claim is brought too late the statutory defense of limitation is available. In the family context, there is no statutory bar to bringing a claim for financial relief 10, 20 or even 30 years after the divorce. Nevertheless, in my view, the court should not allow either party to a former marriage to be harassed by claims for financial relief which (a) are issued many years after the divorce and (b) have no real prospect of success. It must be an abuse of the court's process to bring such proceedings”.

Delay

11. T v T (2013) (Agreement not embodied in Consent Order) EWHC B3 (Fam) The parties entered in to a separation agreement in 1991 negotiated

by their respective solicitors. There was no clear reason why it was

not made in to a court order. The husband prospered and whereas

the husband had been starting out on his career at the time of the

agreement and had accepted a lump sum of £175k in return for

transferring the FMH and a second home in France to the wife, he

now had shares in a company worth £1.6m and a pension fund of

£1m. The wife issued an application for a financial remedy. The

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husband issued an application to show cause why the agreement

should not be made an order of the court.

Parker J found that both parties had been under pressure for

different reasons at the time but there was nothing to suggest that

the agreement was not fair or that the wife had not been competently

advised.

She asked the following questions:

. Had the parties reached an agreement by which they intended to

resolve their matrimonial affairs; and

. How had they conducted themselves?

The judge found that the parties had entered in to the agreement

and acted upon it and had peace of mind for over twenty years. The

agreement was regarded as being of magnetic importance.

NB Parker J found that this show cause application was a discrete

application and not as defined as a financial remedy application for

the purpose of r28.3 FPR 2010. The general principle of no order for

costs did not therefore apply.

Fairness and sharing

12. AC v DC (No.2) (2012) EWHC 2420 (Fam) The H suffered from dementia and had a short life expectancy. The

principle asset was the husband’s 84.6% shareholding in a

company, which was to sold for £62m. The marriage had lasted 12

years (plus two years cohabitation) and there were three children.

The parties had made a pre-nuptial agreement in 1998, which the

husband conceded should not be relied upon. However, there was

no professional valuation as to the value of the shares at the time of

the marriage but he had recorded the value of the shares as £4m

within the pre-nup. The parties agreed that this was a sharing not a

needs case. The wife sought half the assets. The husband argued

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that a departure from equality was justified on the basis of the pre-

marital acquest.

Bennett J accepted that it would be unfair for none of the husband’s

pre-cohabitation wealth to be excluded from the sharing principle but

against that weighed the length of the relationship and the fact that

the assets were inextricably mingled; N v F 2011 EWHC 586 (Fam).

He rejected arguments made by the husband’s counsel to rely upon

weighted averages of earnings to produce a price earnings ratio to

value the shares at £20m in 1998, which he regarded as highly

artificial and arbitrary. Instead he relied upon the pre-nup in which

the husband had stated the value of the shares to be £4m and

concluded that the husband had made his bed and must lie on it. He

allowed for some passive growth and the springboard effect as in

Jones v Jones (2011) EWCA Civ 41 and uplifted the shares to £8m,

which he deducted from the assets before sharing the remainder

equally.

13. Y v Y (Financial Orders: Inherited Wealth) 2012 EWHC 2063

(Fam) This is a case where Baron J considered the issue of pre-acquired

assets. Her judgment is a useful summary of the case law post

White that deals with inherited assets.

The husband inherited a substantial family estate worth 35.8m a

year before the marriage. The parties had five children during a 26-

year marriage and had lived a privileged life akin to landed gentry.

Baron J found that the husband’s desire to keep the estate intact “to

a degree which blinded him to the contributions of his former spouse,

and more importantly, to her future needs”. She awarded the wife a

32.5% share in the net assets which she concluded was a needs

based award that involved sharing the inherited assets which would

be invaded to meet the award and in this case needs and sharing

were essentially deemed to lead to the same outcome.

The judgement summarised the following authorities on inherited

assets:

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Miller/McFarlane 2006 UKHL 24 “the parties’ matrimonial home, even if this was brought into the marriage at the outset by one of the parties, usually has a central place in any marriage. So it should normally be treated as matrimonial property”. In NA v MA (2006) EWHC 2900 Baron J stated “I do not take that to mean that the property must be divided equally but its value and the lifestyle that it produced are relevant factors in the court’s consideration of fairness”. In Charman (No 4) 2007 EWCA 503 Sir Mark Potter said “To what property does the sharing principle apply…the principle applies to all the parties’ property but, to the extent that their property is non-matrimonial, there is likely to be better reason for departure from equality”. In Robson v Robson 2010 EWCA Civ 1171 Ward LJ gave detailed guidance to inherited wealth in big money cases: “the duration of the marriage and the duration of the time the wealth has been enjoyed by the parties will also be relevant. So too their standard of living and the extent to which it has been afforded by and enhanced by drawing down on their inherited wealth. The way the property was preserved, enhanced or depleted are factors to take in to account…the more and longer that wealth has been enjoyed, the less fair that it should be ring-fenced and excluded from distribution in such a way as to render it unavailable to meet the claimant’s financial needs generated by the relationship.” In P V P (Inherited Property) (2004) EWHC 1364 Munby J (as he then was) distinguished between different types of inherited property: “Fairness may require quite a different approach if the inheritance is a pecuniary legacy that accrues during the marriage than if the inheritance is a landed estate that has been within one spouse's family for generations and has been brought into the marriage with an expectation that it will be retained in specie for future generations”.

14. DR v GR & Five Others (Financial Remedy:Variation of Overseas Trust) (2013) EWHC 1196 This case concerned a 33-year marriage and had been a second

marriage for each of the parties. When the parties married in 1975

the H was a man of some substance. He only advanced his case

about pre-marital wealth late in the day and in a way that did not

allow any quantitative appraisal of the wealth. Mostyn J found that he

could have retrieved an affidavit of means from the court file dealing

with his first divorce, which would have quantified the extent of the

pre-marital wealth.

Mostyn J stated: “The inevitable consequence is that this factor must be treated extremely skeptically and conservatively and if an injustice is thereby meted out to the husband then he has only himself to blame.”

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The point about proving the existence and value of pre-marital

assets mirrors those made by Bennett J in AC v DC (above).

The decision also gives a useful summary of the correct approach to

joinder of parties under FPR 2010 r9.11(1)

15. Evans v Evans (2013) EWHC 506 (Fam) A case which focussed upon whether the husband had made a

special contribution in relation to the marriage by the formation of a

private company in the early years of the marriage which he had built

up from nothing in which the parties retained a 34.7% shareholding

which was now worth an estimated £32m, although the shares could

not be realised for two years.

Moylan J was unable to find that the husband had made a special

contribution. He reminded himself of the test stated by Bodey J in the

Court of Appeal decision of Lambert v Lambert [2003] Fam 103: It is

clear that for such a contribution to justify influencing the court's

determination it must be "of a wholly exceptional nature, such that it

would very obviously be inconsistent with the objective of achieving

fairness (i.e. it would create an unfair outcome) for (it) to be

ignored" and to determine the issue asked himself:

“Has there been in the present case such a disparity in the parties' respective contributions during the marriage, in that the husband has made a contribution of a wholly exceptional nature, such that fairness requires that his contribution should result in his receiving a greater share of the marital wealth? The answer to this question should not depend on any detailed analysis of contributions. It requires a striking evidential foundation which so clearly stands out that the question almost answers itself. During the course of the hearing I felt compelled to remark that it was not a defended divorce. The extent to which the case, at times, seemed in the eyes of the parties to require what Coleridge J has aptly described as "a general rummage through the attic" was unedifying. This is not required, even when a case of special contribution is being advanced”.

16. Tattersall v Tattersall 2013 EWCA Civ 774 A case where the assets were modest that reached the Court of

Appeal.

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Ten-year marriage. Child aged 3 lived with the wife. The wife’s gross

salary was £28k pa. After nursery costs were paid she had £1,760

pm net. The husband had been earning an average £4,000 pm net.

Shortly before the hearing the husband reduced his working hours at

weekends so that he could have contact with the child and his net

income reduced to £2,400 pm. The parties had five properties, which

they rented out, in different cities. The Wife lived in a rented property

in Oxford (not owned by the parties). The Husband lived in one of

the properties in Liverpool. Three of the properties were let. Both

parties had significant debts.

The Judge found that the Wife’s income would remain the same for

the next few years and that she would sell the rental properties to

fund the acquisition of a home. She found that the husband would

resume his work and career and increase his income to its

previously higher level.

The Judge ordered the husband to pay periodical payments

(including the CSA element) to the wife at £1,070 pm until the child

started secondary school and then reducing to a nominal amount.

The judge took the view that the husband’s income needs could be

met from £2,900, which he would have left if his income reverted to

£4,000 pm.

The judge divided the properties 70/30 in favour of the wife citing the

wife’s housing needs, the husband’s higher income and earning

capacity, the parties’ liabilities and inequality of pensions as the

reason to depart from equality. The husband appealed on the basis

that the judge had erred in dividing the property unequally and had

ordered him to pay too much for too long in respect of PP’s. He

contended that even if the court imposed an unequal division of

assets, there should have been a mesher order to rectify the

imbalance when the child was an adult.

The Court of Appeal held that the Judge’s approach to the division of

capital had been within her discretion and she had appropriately

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started with the needs of the wife and child. The judge had been

entitled to conclude that justice could and should be done between

the parties without imposing a mesher order. Some judges might

have made such an order but it could not be said that it was plainly

wrong not to do so in the instant case. The quantum and term of

maintenance were upheld.

17. CR v SR 2013 EWHC 1155 This is a case on application for permission to appeal a final order in

financial remedy proceedings. Moylan J confirmed that rule 30.3(&0

FPR 2010 provides that permission to appeal may only be given

where either the court considers that a) the appeal would have a real

prospect of success or b) there is some other compelling reason why

the appeal should be heard. Real means realistic rather than fanciful:

Tanfern Ltd v Cameron McDonald and Anor (2000) 1 WLR 1311.

Sixteen-year marriage and three children. W received outright

transfer of FMH with equity of £330k and joint lives PPs. The

husband was left with net income of £1,200 pm and the wife with net

income of £2,700 pm. Husband appealed on the basis it was unfair

for the wife to get all the capital, leaving him with the debts (£39k)

and the home should have either been sold to discharge the debts,

and the balance paid to the wife, or made subject to a mesher order.

He also argued that the quantum of the wife’s maintenance

payments was too high and resulted in a significant income disparity

in favour of the wife.

In considering the merits of the appeal Moylan J accepted that the

husband had a real prospect of establishing that the current orders,

in combination, were outside the bracket of reasonable orders, since

they did not reach a balanced outcome. It was important to have

regard to the needs of both of the parties.

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Periodical payments – quantum and term

18. B v S (Financial Remedy: Marital Property Regime) 2012 EWHC 265 (Fam) Mostyn J considered whether fairness or needs should dictate the

quantification of spousal PPs. He concluded that PPs should be

calculated by reference to needs alone, save in the exceptional case

where compensation was relevant. Having considered the authorities

Mostyn J summarised his view as follows:

“In my judgment simplicity and clarity are just as much needed in this part of the field as in the part designated ‘division of capital'. Simple and fair guidance is needed so that the majority of cases can be settled. Settlement is almost always better than adjudication for a divorcing couple. And the functioning of the family justice system depends on a high rate of settlement of these cases. Save in the exceptional kind of case exemplified by Miller v Miller; McFarlane v McFarlane a periodical payments claim (whether determined originally or on variation) should in my opinion be adjudged (or settled), generally speaking, by reference to the principle of need alone. Of course needs are elastic in concept and there is much room for the exercise of discretion in their assessment. But to allow consideration of the concept of sharing to intrude in the assessment of a periodical payments award seems to me to be based on a doubtful principle, and is replete with problems of quantification by any sure standard. The sharing principle in relation to matrimonial property is simple enough: it is usually 50/50, because in the division of the marital acquest equity (or fairness) is (usually) equality. But if the concept of sharing is going to uplift above the assessment of need a periodical payments award which will be paid from post-separation earnings, how does a judge set about doing it? Is it a third? Or 40%? Or 20%? There are not even any signposts along the road to a fair award”. Mostyn J noted the comments of Thorpe LJ in Hvorostovsky v

Hvorostovssky 2009 3 FCR 650 in which he commended the

comments from Sir Mark Potter P in VB v JP [2008] EWHC 112

Fam,

‘Second, on the exit from the marriage, the partnership ends and in ordinary circumstances a wife has no right or expectation of continuing economic parity (“sharing”) unless and to the extent that consideration of her needs, or compensation for relationship-generated disadvantage so require.'

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19. G v G (Financial Remedies: Short Marriage: Trust Assets) 2012 EWHC 167 Charles J emphasized the importance of needs in quantifying

periodical payments and that the marital partnership does not

survive as a basis for the sharing of future resources (earned or

unearned) but he emphasized a number of important “buts”:

(i) The lifestyle enjoyed by the parties during the marriage sets a

benchmark that is relevant to the assessment of the lifestyles to

be enjoyed by the parties

(ii) The length of the marriage is relevant to determining the period

for which the payee is entitled to enjoy the lifestyle and if there is

to be a transition to a lower standard of living for the payee, the

period over which the transition should take place

(iii) If the marriage is short the award should be directed to provide a

transition over an appropriate period to the payee for a lower

long-term standard of living or to one where the other spouse is

no longer contributing

(iv) The choices made by the parties during the marriage may have

generated needs or disadvantages in attaining and funding

independence

(v) The most common source of relationship generated need or

disadvantage is the birth of a child

(vi) The choices made by the parties as to the care of their children

is an important factor in the funding of two households

(vii) The provisions of section 25A must be taken in to account

Variation of lump sum orders

20. Hamilton v Hamilton 2013 EWCA Civ 13 The Court of Appeal considered the difference between an order for

a lump sum in installments and an order providing for a series of

lump sums.

. Under s23(1) (c ) MCA 1973 the court can order the payment of

a lump sum or sums . Under s23(3)(c ) an order for the payment of a lump sum may

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provide for that payment to be by installments. . S31(2) MCA 1973 lists the orders of the court which are capable

of variation; it makes reference to an order for lump sum by installments, but makes no reference to an order for lump sums.

This was an appeal by the husband against the variation of an order

made by consent, which had been held to be an order for the

payment of a lump sum in instalments.

Facts

On separation, the parties' two children remained in the wife's

primary care. The assets were the matrimonial home and the wife's

recruitment agency, valued at around £1.5 million and expected to

flourish. The ancillary relief consent order made in January 2008

provided for the wife to pay to the husband 'the following lump sums'

consisting of five sums on five different dates amounting in total to

£450,000. On payment of the first lump sum, the husband was to

transfer his share of the matrimonial home to the wife, and there

would be a full clean break in life and death.

The wife paid the first lump sum but only part of the second, and

following the economic downturn in 2008 sought permission to

appeal the terms of the consent order. Despite being unsuccessful

(and ordered to bear the costs of the application), no further payment

was made to the husband. The husband took enforcement

proceedings and served a statutory demand on the wife. The wife

countered by issuing proceedings under s 31 of the Matrimonial

Causes Act 1973, claiming that, despite the wording of the order, it

amounted to a 'lump sum payable by instalments' within s 23(3)(c) of

the 1973 Act and thus variable under s 31(2)(d). She sought the

extinguishment of her obligation to pay any of the outstanding sums

amounting to £210,000.

First instance

Parker J at first instance found that an order for payment of money

over a period of time could only ever be an order for a lump sum

payable by instalments and could always be varied. The order in

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this case was therefore variable. She did not accede to the wife's

request to remove the obligation to pay the remaining sums but,

given the wife's current financial circumstances, she varied the order

by deferring the payment of the remaining sums whilst adding

interest to preserve the value of the money to be received by the

husband.

The husband appealed to the Court of Appeal, contending that this

order was an order for the payment of lump sums and therefore not

variable, and that Parker J had been wrong in law to find that any

order for the payment of lump sums over time must be a lump sum

payable by instalments (and therefore variable). In the alternative,

the husband challenged the judge's exercise of her discretion to

vary.

Appeal

In its judgment, the Court agreed with the husband on the law. They

held that it is equally open to the parties and the court, in making an

order for the payment of money over time, to make an order for the

payment of lump sums under s 23(1)(c) which would not be variable,

as it is to make an instalment order under s 23(3)(c).

Nevertheless, the Court of Appeal held that the original order had

been an instalments order, holding that where there is disagreement

as to whether the terms of the order are correct, the court should not

restrict its consideration to the wording of the order, but instead,

"assess what the parties agreed against the objective factual matrix

of what occurred during the relevant period"[41].

Here the court held that Parker J had been entitled to find that the

parties had agreed a lump sum of £450,000 to be paid in instalments

over time, and so she had been right to say this was an instalments

order. The court rejected any challenge to the exercise of the

discretion to vary.

Baron J concluded her judgment with the following useful advice:

“Finally, in future, parties may consider that a recital at the beginning

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of an order which sets out the basis of the agreement in terms of a potential variation would put disputes of this type beyond doubt”.

Barder appeals

21. Cart v Cart 2013 EWCA 1006 The Court of Appeal held that a subsequent substantial upwards

variation of a CSA assessment did not constitute a Barder event. At

the time of the hearing the husband had been assessed to pay £83

per week. The subsequent assessment increased the amount to

£500 pw and arrears of £54k on the basis of substantial dividends

received by the husband.

The Court of Appeal held that the arrears of CSA maintenance were

not an unforeseen or unforeseeable event. That was coupled with

the long delay (23 months) in the husband bringing the appeal. It had

clearly been in the contemplation of the husband and his

representatives that the wife may apply for a variation.

Set aside

22. S v S (Non Disclosure) EWHC 991 (Fam) An agreement was reached five days in to a ten-day hearing. It was

recorded in a detailed minute of consent order and approved by the

judge. The order was lodged for sealing in August. By chance the

wife read in the press that the husband was planning an IPO of his

company in spite of the fact that he had given evidence at the

hearing that there was no chance of an IPO within three years. In

fact the very next day after the consent order the husband had

arranged to meet three investment banks for a “bake off” to select a

bank to act on the IPO for floatation, which was planned for 2013.

The company would be worth between $750 - $1bn that was vastly

higher than the valuation evidence before the court.

The wife’s counsel emailed the judge asking him not to seal the

order and it was pulled out of the orders awaiting sealing. The judge

(Bennett J) found that the husband had misled the court and the wife

and that he had the power to suspend or vary the order right up to

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the moment of sealing.

Having decided that he was not functus and retained jurisdiction to

reconsider his order, the wife sought a hearing on the basis of the

husband’s material non-disclosure. Despite the fact that the judge

found the husband’s evidence at the trial to have been “seriously

misleading” and “can only be categorized as dishonest” the judge

refused to set aside the unperfected order because by the time the

set aside hearing was heard it had become clear that no IPO had

taken place and there was no imminent prospect of an IPO and “the

court cannot now say that the absence of full and frank disclosure

has led the court to make an order ‘which is substantially different

from the order it would have made if such disclosure had taken

place” per Lord Brandon in Livesey v Jenkins at p830”.

The terms of the draft order gave the wife a flat 30% whenever the

husband realized his shares; any order made if proper disclosure

had taken place would not have been substantially different from that

arrived at in the heads of agreement and thus the non disclosure

was not material.

The Judge criticized the fact that the husband had fought the wife’s

application to set aside tooth and nail but the implications in costs for

the husband are unfortunately not dealt with in the judgment.

Add backs

23. The bar has been set high to succeed on add back arguments since

the decision in Vaughan v Vaughan 2007 EWCA Civ 1985. It is

necessary to show “clear evidence of dissipation” and a “wanton”

element.

In BP v KP and NI (Financial Remedy Proceedings: Res Judicata) 2012 EWHC 2995 (Fam) Mostyn J emphasized that the

court would only allow add back arguments “very sparingly indeed

and only where the dissipation is deliberately wanton”.

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In Evans v Evans 2013 EWHC 506 (Fam) Moylan J considered add

back arguments pursued by the wife in respect of her husband’s

excessive spending of $1.5m from joint funds post-separation which

had been funded largely out of capital.

Moylan J acknowledged that were it not for add back arguments

“parties would have little incentive to behave reasonably but rather

would have an incentive to spend what they could pending

resolution. However, in addition, reattribution must be justified in the

context of the case. It is a form of conduct and as such it must be

inequitable to disregard it”.

He emphasized that there are two elements to succeed on add back:

“There is, therefore, an evidential element – is there clear evidence

of wanton dissipation – and a legal/discretionary element – would it

be inequitable to disregard it or, to put it another way, is notional

reattribution required in order to achieve an outcome which is fair?”

On the facts he decided that the wife had only partly established the

evidential foundation for a notional reattribution: both parties had

been spending at a prodigious rate and it was not possible to carry

out a comparison to decide whether the husband’s spending was

wanton. Given the assets in the case, the notional reattribution,

which amounted to half of ½% of the total, was not required to

achieve a fair outcome.

Injunctions

24. UL v BK (Freezing Orders: Safeguards: Standard Examples) 2013 EWHC 1735 (Fam) The wife had applied for the continuation of a without notice freezing

order relating to the husband. It prevented the husband dealing with

assets with a combined value of £20m, including a foreign property.

The husband argued that he had no legal or beneficial interest in the

property and the wife had violated almost every known principle

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governing freezing applications. In her statement in support the wife

had failed to acknowledge that some of her information had been

derived from accessing the husband’s safe; her statements that the

husband had threatened to leave her destitute were unparticularised

and she had failed to explain the “exceptional urgency”. In truth she

had simply sought a pre-emptive strike at the husband at a time best

suited to her.

In refusing the application, Mostyn J examined and gave guidance

as to the elementary principles to be applied to freezing orders in the

hope that the approach adopted in the instant case would never re-

occur. Standard examples for such orders are appended to the

judgment (and to these notes).

. The court has a general power to preserve specific tangible assets

which are the subject matter of the claim; such applications do not

necessarily require the same safeguards as a freezing order - FPR

2010 rule 20.1(c)(i) which empowers the court to make an order for

the detention, custody or preservation of relevant property.

. Where a freezing order is capable of covering all the Respondent's

assets it is essential that all principles and safeguards be applied.

. In all applications for freezing orders the Applicant must show clear

evidence of unjustified dealing with assets giving rise to the

conclusion that there is a solid risk of dissipation of the assets to the

Applicant's prejudice.

. The evidence must set out clear facts and their source/basis – FRP

2010 PD 22A

. Ex parte application must be confined to cases of exceptional

urgency. The Respondent must give short, informal notice unless it

is essential he is not made aware of the application – FPR PD 20A.

. Ex parte or short notice applications impose on the Applicant a high

duty of candor. Breach of that duty will likely lead to the discharge of

the order.

. All the safeguards must be applied on short/no notice applications.

The Applicant must draw the court's attention to any variation of the

safeguards and justify them.

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Piercing the corporate veil 25 Prest v Petrodel Resources Ltd (2013) UKSC 34

The wife appealed against the earlier decision of the Court of Appeal

that an order at first instance transferring to her certain properties held

by the Respondent group of companies, which were operated and

controlled by her former husband, could not be made because there

were no grounds for piercing the corporate veil.

The company was the legal owner of seven residential properties. The

judge at first instance had decided that the husband was entitled to

possession or reversion of them within the meaning of section 24(1)

MCA 1973 and had ordered that they be transferred to the wife.

The question on appeal was whether the court had the power to order

the transfer of those properties to the wife given that they legally

belonged to the husband’s companies and not to the husband.

The Supreme Court considered three possible bases on which the

assets of the company could be available to satisfy a lump sum order

made against the company:

(a) Where the court could disregard (pierce) the corporate veil – the

court held that in very limited circumstances it is possible to pierce

the corporate veil when a person is under a legal obligation or

liability which he was deliberately evading or frustrating by putting

assets under the control of a company. In the present case, although

the husband had acted improperly in many ways, his actions had not

frustrated or evaded any legal obligation to the wife and piercing the

corporate veil could not be justified by reference to the general

principles set out in Ben Hasham v Ali Shayif (2008) EWHC 2380

(Fam)

(b) The scope of section 24(1) and whether this conferred a power to

disregard the corporate veil in matrimonial cases – the court held

that no broader principle applied in matrimonial proceedings that

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enabled the trial judge to cut across the statutory schemes of

company and insolvency law by virtue of the meaning of section

24(1)(a).

(c) Whether the companies held the properties on trust for the

husband, not as shareholder, but in his own right – the court inferred

from the husband’s failure to conceal facts about the properties that

the properties were held on resulting trust by the company for the

husband and as there was no reliable evidence to rebut the

presumption, the seven disputed properties were transferred to the

wife and the appeal was allowed on that basis alone.

JACQUELINE MARKS CORAM CHAMBERS 24 October 2013

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Freezing Order

In the [name of court] No:

The Matrimonial Causes Act 1973

The Civil Partnership Act 2004

The Matrimonial and Family Proceedings Act 1984

The Senior Courts Act 1981

(delete as appropriate)

The Marriage/Civil Partnership of XX and YY

After hearing [name the advocates(s) who appeared]….

After reading the statements and hearing the witnesses specified in the recitals below

FREEZING ORDER MADE BY [NAME OF JUDGE] ON [DATE] SITTING IN PRIVATE

TO [YY] OF [address]

WARNING: IF YOU YY DISOBEY THIS ORDER YOU MAY BE HELD TO BE IN CONTEMPT OF COURT AND MAY BE IMPRISONED, FINED OR HAVE YOUR ASSETS SEIZED

ANY OTHER PERSON WHO KNOWS OF THIS ORDER AND DOES ANYTHING WHICH HELPS OR PERMITS YY TO BREACH THE TERMS OF THIS ORDER MAY BE HELD TO BE IN CONTEMPT OF COURT AND MAY BE IMPRISONED, FINED OR HAVE THEIR ASSETS SEIZED

The Parties

1. The applicant is XX The respondent is YY [The second respondent is ZZ]

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[specify if any party acts by a litigation friend]

2. Unless otherwise stated, a reference in this order to 'the respondent' means all of the respondents.

3. This order is effective against any respondent on whom it is served or who is given notice of it.

Definitions and interpretation

4. A respondent who is an individual who is ordered not to do something must not do it himself or in any other way. He must not do it through others acting on his behalf or on his instructions or with his encouragement.

5. A respondent which is not an individual which is ordered not to do something must not do it itself or by its directors, officers, partners, employees or agents or in any other way.

Recitals

6. This is a freezing injunction made against the respondent YY on [date] by [name of judge] on the application of the applicant XX.

7. The Judge read the following affidavits/witness statements [set out] and heard oral testimony from [name].

8. This order was made at a hearing [without notice]/[on short informal notice] to the respondent. The reason why the order was made [without notice]/[on short informal notice] to the respondent was [set out]. The respondent has the right to apply to the court to vary or discharge the order – see "The right to seek variation or discharge of this order" below.

9. There will be a further hearing in respect of this order on [ ] ('the return date').Undertakings given to the court by the applicant XX

10. If the court later finds that this order has caused loss to the respondent [and to a third party] and

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decides that the respondent [and the third party] should be compensated for that loss, the applicant shall comply with any order the court may make.

11. By [time and date] the applicant shall issue and serve an application notice [in the form of the draft produced to the court] [claiming the appropriate relief].

12. The applicant shall [swear and file an affidavit] [cause an affidavit to be sworn and filed] [substantially in the terms of the draft affidavit produced to the court] [confirming the substance of what was said to the court by the applicant's counsel/solicitors].

13. The applicant shall serve upon the respondent [together with this order] by [time and date]:

(a) copies of the affidavits and exhibits containing the evidence relied upon by the applicant, and any other documents provided to the court on the making of the application; and (b) the application. (c) a note [prepared by [his]/[her] solicitor] recording the substance of the dialogue with the court at the hearing and the reasons given by the court for making the order, which note shall include (but not be limited to) any allegation of fact made orally to the court where such allegation is not contained in the affidavits or draft affidavits read by the judge.

14. Anyone notified of this order shall be given a copy of it by the applicant's legal representatives.

15. The applicant shall pay the reasonable costs of anyone other than the respondent which have been incurred as a result of this order including the costs of finding out whether that person holds any of the respondent's assets and if the court later finds that this order has caused such person loss, and decides that such person should be compensated for that loss, the applicant shall comply with any order the court may make.

16. If this order ceases to have effect (for example, if

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the respondent provides security) the applicant shall immediately take all reasonable steps to inform in writing anyone to whom he has given notice of this order, or who he has reasonable grounds for supposing may act upon this order, that it has ceased to have effect.

17. The applicant shall not without the permission of the court use any information obtained as a result of this order for the purpose of any civil or criminal proceedings, either in England and Wales or in any other jurisdiction, other than this claim.

18. [The applicant shall not without the permission of the court seek to enforce this order in any country outside England and Wales [or seek an order of a similar nature including orders conferring a charge or other security against the respondent or the respondent's assets].]

IT IS ORDERED THAT:

[For injunction limited to assets in England and Wales]

19. Until the return date or further order of the court, the respondent must not remove from England and Wales or in any way dispose of, deal with or diminish the value of the following assets which are in England and Wales, namely:- [specify in detail]

20. If the total value free of charges or other securities ('unencumbered value') of the respondent's assets in England and Wales restrained by the preceding paragraph exceeds £ , the respondent may remove any of those assets from England and Wales or may dispose of or deal with them so long as the total unencumbered value of the assets restrained by the preceding paragraph remains above £ .

[For worldwide injunction]

21. Until the return date or further order of the court, the respondent must not in any way dispose of, deal with or diminish the value of the following assets

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whether they are in or outside England and Wales, namely:- [set out]

22. If the total value free of charges or other securities ('unencumbered value') of the respondent's assets restrained by the preceding paragraph exceeds £ , the respondent may dispose of or deal with those assets so long as the total unencumbered value of all his assets restrained by the preceding paragraph whether in or outside England and Wales remains above £ .

[For either form of injunction]

23. This order applies to assets (whether or not specifically listed) which are in the respondent's own name and whether they are solely or jointly owned. For the purpose of this order the respondent's assets include any asset which he has the power, directly or indirectly, to dispose of or deal with as if it were his own. The respondent is to be regarded as having such power if a third party holds or controls the asset in accordance with his direct or indirect instructions.

Provision of Information

24. Unless the following paragraph applies, the respondent shall within 7 days of service of this order and to the best of his ability inform the applicant's solicitors of all his assets [in England and Wales] [worldwide] [exceeding £ in value] whether in his own name or not and whether solely or jointly owned, giving the value, location and details of all such assets.

25. If the provision of any of this information is likely to incriminate the respondent, he may be entitled to refuse to provide it, but is recommended to take legal advice before refusing to provide the information. Wrongful refusal to provide the information is contempt of court and may render the respondent liable to be imprisoned, fined or have his assets seized.

26. Within 14 days of being served with this order, the

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respondent shall make and serve on the applicant's solicitors an [affidavit]/[witness statement] setting out the above information.

Exceptions to this Order

27. This order does not prohibit the respondent from spending £ a week towards his ordinary living expenses and also £ [or a reasonable sum] on legal advice and representation. The respondent may agree with the applicant's legal representatives that the above spending limits should be increased or that this order should be varied in any other respect, but any agreement must be in writing.

28. [This order does not prohibit the respondent from dealing with or disposing of any of his assets in the ordinary and proper course of business.

Provision of security

29 The order will cease to have effect if the respondent –

(a) provides security by paying the sum of £ into court, to be held to the order of the court; or (b) makes provision for security in that sum by another method agreed with the applicant's legal representatives.

Costs

30. The costs of this application are reserved to the judge hearing the application on the return date.

The right to seek variation or discharge of this order

31. Anyone served with or notified of this order may apply to the court at any time to vary or discharge this order (or so much of it as affects that person), but they must first inform the applicant's solicitors. If any evidence is to be relied upon in support of the application, the substance of it must be communicated in writing to the applicant's solicitors in advance.

29

Parties other than the applicant and respondent

32. Effect of this order

It is a contempt of court for any person notified of this order knowingly to assist in or permit a breach of this order. Any person doing so may be imprisoned, fined or have their assets seized.

33. Set off by banks

This injunction does not prevent any bank from exercising any right of set off it may have in respect of any facility which it gave to the respondent before it was notified of this order.

34. Withdrawals by the respondent

No bank need enquire as to the application or proposed application of any money withdrawn by the respondent if the withdrawal appears to be permitted by this order.

[For worldwide injunction]

Persons outside England and Wales

35. Except as provided in the following paragraph, the terms of this order do not affect or concern anyone outside the jurisdiction of this court.

36. The terms of this order will affect the following persons in a country or state outside the jurisdiction of this court –

(a) the respondent or his officer or agent appointed by power of attorney;(b) any person who –

(i) is subject to the jurisdiction of this court; (ii) has been given written notice of this order at his residence or place of business within the jurisdiction of this court; and(iii) is able to prevent acts or omissions outside the jurisdiction of this court which constitute or assist in a breach of the terms of this order; and

(c) any other person, only to the extent that this

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order is declared enforceable by or is enforced by a court in that country or state.

[For worldwide injunction]

Assets located outside England and Wales

37. Nothing in this order shall, in respect of assets located outside England and Wales, prevent any third party from complying with –

(a) what it reasonably believes to be its obligations, contractual or otherwise, under the laws and obligations of the country or state in which those assets are situated or under the proper law of any contract between itself and the respondent; and (b) any orders of the courts of that country or state, provided that reasonable notice of any application for such an order is given to the applicant's solicitors.

Dated

Notice pursuant to PD 33A para 1.4

You XX, the applicant, may be sent to prison for contempt of court if you break the promises that have been given to the court

Statement pursuant to PD 33A para 1.5

I understand the undertakings that I have given, and that if I break any of my promises to the court I may be sent to prison for contempt of court

Signed

………XX [date]

Communications with the court

All communications to the court about this order should be sent to –

[Insert the address and telephone number of the appropriate Court Office]

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If the order is made at the Royal Courts of Justice, communications should be addressed as follows:

The Clerk of the Rules, Queen's Building, Royal Courts of Justice, Strand, London WC2A 2LL quoting the case number.

The telephone number is 020 7947 6543.

The offices are open between 10 a.m. and 4.30 p.m. Monday to Friday.

Name and address of applicant's legal representatives

The applicant's legal representatives are –

[Name, address, reference, fax and telephone numbers both in and out of office hours and e-mail]

1

Children Act Schedule 1 –Detecting Trends

Some Basics

Schedule 1 to the Children Act 1989 is short being made up of 16 Paragraphs, it essentially sets out: -

• Who can apply? • For what? • In what circumstances?

1 Who can apply?

Those who can apply for a financial order is set out in Para 1 (1), they are:

• Parent • Guardian • Special guardian • Person who has a Residence Order in respect to a child

Note : Adult children

The right to apply is extended at Para 2, to an adult child, that is a child who has reached the age of 18 and is in, or will be in, education or training or where special circumstances exist, for example a disability. An adult child can only apply, however, for a periodical payments and /or a lump sum, not a settlement or transfer of property order. Further the adult child can make an application against either parent but only if the parents are not living together.

One other point to note is that an adult child has no right to apply if, immediately before their 16th birthday, a periodical payments order in their favour was in force. This limitation creates a lacuna in those cases where the periodical payments order in favour of a child ceases at the age of 17 or full time secondary education, whichever is the earlier, and then the child goes on to tertiary education. The best advice would be to ensure that the wording of the original order extends the child’s periodical payments to the age of 17 or ceasing full time tertiary education to first degree, whichever is the later, or further order.

2

2 For what?

The range of financial orders is set out in Para 1 (2) (a) – (e)

• Periodical payments • Secured periodical payments • Lump sum • Settlement of property • Transfer of property

Periodical payment and secured periodical payment orders

An order can be made for periodical payments or secured periodical payments and they will generally commence on the date of making the application or any later date and will cease on:

(i) the child’s 17th birthday, unless the court thinks it right in the circumstances of the case to specify a later date, which shall not in any event be beyond the child’s 18th birthday (Para 3 (1) (a)-(b))

(ii) the court has the power to make an order which continues beyond the child’s 18th birthday if the child is or will be or would be in full time education or undergoing training for a trade profession vocation (Para 3 (2) (a))

(iii) the court also has the power to make an order which continues beyond the child’s 18th birthday if there are “special circumstances” (Para 3 (2) (b)

Other events where the order will cease include, the death of the person liable to pay (Para 3 (3)) and where the person liable to pay and the person to whom the payment is made live together for a period of more than 6 months (Para 3 (4)).

An order for periodical payments and secured periodical payments can be varied or discharged (Para 1 (4)) and there can be any number of applications for periodical payments and secured periodical payments (Para 1 (5) (a))

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Note : Restrictions on making periodical payments

• Of course the Child Support Act 1991 s.8 (CSA) and the application of that Act by the Child Maintenance Enforcement Commission (“CMEC”, replacing the Child Support Agency), means that in the vast number of cases an application for periodical payments and secured periodical payments cannot be made to the Court as it does not have jurisdiction to deal with such applications.

• Where CMEC would have jurisdiction to make a child maintenance assessment the court does, however, retain jurisdiction to make an order where the parties have made a written agreement and the court order is in the same terms. With, of course the proviso that after a period of 12 months either one of the parties can apply to CMEC for a maintenance assessment (CSA s. 8.(5))

Note : If there is a maintenance assessment in place the court can still make an order where:

• The payer’s income exceeds £104,000 p.a, the court can then make a periodical payments order to “top-up” the maintenance assessment CSA s.8 (6). Generally the assessment has to be a maximum assessment in order for there to be a top up, but the case of CF v KM [2010] EWHC 1754 suggests that even if the assessment isn’t a maximum one the court would be able to act on the basis of its’ own assessment that the payers’ income will be at this level. However, this suggestion is made obiter, the point wasn’t argued, and it does run counter to the scheme which intended for the Agency to have jurisdiction where there income was below £104k. So as things stand if the assessment reduces below the maximum the court would not have the power to make a top up order unless the Judge can be persuaded to make “new law” following the suggestion made in CF v KM.

• the child’s educational expenses need to be met ie school fees order , CSA s.8 (7)

• the child is in receipt of Disability Living Allowance or where the child is disabled , then the court can make an order for periodical payments to

4

meet some or all of the expenses attributable to the child’s disability CSA s 8 (8). Disability is defined at CSA s 8(9)as being blind, deaf, substantially and permanently handicapped by illness, injury, mental disorder, congenital deformity or such other disability as may be prescribed

• Where the non-resident parent is habitually resident outside the UK then the person with care can then make an application to the Court as CMEC does not have jurisdiction to make a maintenance assessment (CSA s 44)

• As the definition of parent in the CSA s54 includes an adoptive parent but not a step parent then, in the event that an application is being made by or against a step parent, that application will have to be pursued in the Court.

Lump Sum Orders

An Applicant can apply to the court at any time and on any number of occasions for a lump sum (Para 1 (2) (c)). Whilst Para 1 contains the general provision for a lump sum, Para 5 sets out some specifics relating to lump sums they are:

• a lump sum order can be made of the purpose of enabling any liabilities or expenses incurred in connection with the birth of the child

• or in maintaining the child • and the expenses were reasonably incurred before the making of the

order

If the Applicant is applying to the Magistrates Court for a lump sum then the maximum sum that can be claimed is £1,000 (Para 1 (1) (a)-(b))

As stated above the court has the power to vary or discharge an order for periodical payments or secured periodical payments and in that event that court has power to make a lump sum (Para 5 (3)). It would appear at first blush that this provision would enable the court to capitalise the Applicant’s claims for periodical payments, however, there are no authorities to that effect

5

and it would seem unlikely that there could be such capitalisation of a child’s maintenance.

A lump sum order can be ordered to be made in instalments (Para 5 (5)), those instalments are capable of variation in terms of the number of instalments, the amount of any instalment the date on which any instalment becomes payable (Para (5) (6)).

Settlement and Transfer of Property

Para 1 (2) (d) – (e) gives the court the power to make an order requiring a settlement or transfer of property to be made for the benefit of the child, this includes the power to transfer a joint tenancy (see K v K Minors: Property Transfer) [1992] 2 FLR 220)

Although the early reported cases suggest that there was some uncertainty as to whether a property could be settled or transferred for a period longer than the child’s dependency (and indeed it was argued by some that the Schedule allowed for an outright transfer of property see A v A [1994] 1 FLR 657 Ward J) it became clear that was not the case. Indeed Ward J in A v A observed that Para 2 gives an adult child the ability to only apply for a periodical payment order and/or a lump sum not a settlement or transfer of property, he goes on to say “That restriction serves to confirm that property adjustment orders should not ordinarily be made to provide benefits for the child after he has attained his independence.” (p661)

Once it is decided that there should be some provision under this part ie for there to be a settling or transfer of property and the amount that is needed then the only other matter up for discussion are the terms of the order. The duration of a capital order was considered in the case of Re N (Payments for Benefit of Child) [2009] 1 FLR 1442 where Munby J found that the first instance judge had erred in principle in directing that the property should be settled until the child reached the age of 21. The correct interpretation of Schedule 1 was that apart from special or exceptional circumstances dependency terminated upon the child attaining the age of 18 or completing full time tertiary education although he also held that it would be appropriate

6

for there to be provision for a gap year either before or after the completion of the first degree course.

Other considerations in making a settlement or transfer of property order would include such things as:

• the ability for the person with care to purchase an alternative property to provide them with some flexibility as to their housing (ie changing location)

• to purchase at open market price • not to have to sell on her cohabitation and remarriage • provision of insurance costs and upkeep

Unlike lump sum orders, property orders can only be made once against the same person when using Schedule 1. However, where there have been divorce proceedings the housing situation can be looked at again, as in the case of MB v KB [2007] 2 FLR 586 Baron J. In this case the Father and Mother had come to financial terms in their divorce; at that time the father had no direct financial assets (he had very wealthy parents) the terms they reached included the Mother’s right had right to occupy a property under a short hold tenancy, there was no other capital provision. Following the divorce the father’s position changed and he then had substantial financial resources.

The Mother applied under Schedule 1 for a settlement of property. The Father sought to strike out her application on the basis that it had already been effectively decided in the divorce case (issue estoppell) but his application was dismissed. Baron J held that, in respect of housing for the child, no compromise can oust the jurisdiction of the court. As the child’s needs had changed and the circumstances had changed, the court had the power to look at the housing issue.

The situation was different, however, in the case of PK v BC (Financial Remedies: Schedule 1) [2012] Moor J where the mother had received a lump sum of £950,000 from the father on a clean-break basis in financial proceedings in divorce. The mother went on to buy a mortgage free property but when the fathers situation changed (for the worse) the mother then made

7

an application pursuant to schedule 1 for a further sum for housing. Moor J held that whilst the court had the jurisdiction to make an order no order should be made because the mother was clearly appropriately housed.

3 In what circumstances - in deciding what order to make the court will take into account all the circumstances of the case, including those set out in the Schedule at Para 4 (1) a-f they include:

a) the income, earning capacity, property and other financial resources which each person mentioned in sub-paragraph (4) has or is likely to have in the foreseeable future;

b) the financial needs, obligations and responsibilities which each person mentioned in sub-paragraph (4) has or is likely to have in the foreseeable future;

c) the financial needs of the child; d) the income, earning capacity (if any), property and other financial

resources of the child; e) any physical or mental disability of the child; f) the manner in which the child was being, or was expected to be,

educated or trained.

Additionally if the court is considering making an order against a person who is not the mother or father (ie a step parent) it will also consider those factors set out at Para 4 (2) a-c

a) whether that person had assumed responsibility for the maintenance of the child, and, if so, the extent to which and basis on which he assumed that responsibility and the length of the period during which he met that responsibility;

b) whether he did so knowing that the child was not his child; c) the liability of any other person to maintain the child.

As can be seen there is no express reference to contributions, or to standard of living, or to the duration of the relationship. The early cases have mostly dealt with these factors, or lack of them.

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The cases – the trends

1. substantive 2. parsimonious orders 3. the gap 4. opening the flood gates 5. closing the flood gates 6. broadening the issues 7. Provision for costs 8. But not a free ticket to ride

1. The Substantive

The early days of Schedule 1 the cases were much more about the substantive law:

• One of the early issues was the duration of any order and whether an order for periodical payment or property transfer/settlement could run beyond the child’s minority or education or training with reversion thereafter to the paying parent – this issue was decided in the cases of T v S (Financial Provision for Children) [1994] 2FLR 883 and A V A (A Minor : Financial Provision) [1994]1FLR 657

• Another early issue in the authorities was the requirement to focus on the needs of the child and not the parent either directly or indirectly, so any provision in budgets for pension contributions, endowment premiums or savings or any surplus at the end of each year would be disallowed, see Thorpe LJ in Re P (Child: Financial Provision) [2003] 2 FLR 865

• However, what is accepted in the early authorities is that in providing for a child there must also be an element for the carer – the carer’s allowance. That line of authority started with a pre Children Act case - Haroutunian v Jennings [1980] 1 FLR 62 and over time the Court has

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approached the carer’s allowance in a more generous with a broader brush, again see Re P

• There is no over-arching welfare test nor is there any provision in Schedule 1 for the first consideration being given to the child as there is in s.25 MCA. The early cases have dealt with this issue by finding that although welfare isn’t in the Schedule it is a relevant circumstance and moreover “a constant influence on the discretionary outcome..” see J v C (Child: Financial Provision) 1 FLR 152 and Re C (Financial Provision) [2007] 2 FLR 13

• The length and nature of the parents relationship has no bearing whatsoever on the welfare issue and so is invariably of no relevance to the outcome see Re P

• Standard of living, another factor not mentioned in Schedule 1, again the authorities have explored this and have generally concluded that there will be some entitlement for the child to be brought up in circumstances which bear some sort of relationship to the paying party again Hale J in the case of J v C (Child: Financial Provision) [1999] 1 FLR 152 observed that whilst this was not a factor set out in the Act it is right that the child should be brought up in circumstances which bear some relationship to the Father’s. This was confirmed by Singer J F v G (Child: Financial Provision) [2005] 1 FLR 261 when he held that the lifestyle which the child had become accustomed to could impact on the child’s needs.

• The court will not generally consider the conduct of the parties as a relevant factor, for example in the case of Av A [1994] 1 FLR 657 Ward J the Mother had misled the father as to the true parentage of her 2 other children, and the father argued that as the 2 other children were not his there should be a reduction in the maintenance. Ward J held that there should be no such deduction. Further in the case of J v C Hale J held that no great weight should be attached to the length and/ or the quality of

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the parent’s relationship or the fact of whether or not the child was wanted.

2. The parsimonious orders

The orders made in the early cases were also, generally (and relatively) on the mean side see Phillips v Peace [1996] 2 FLR Johnson J

• father worth 2.6m, he had 3 cars worth in total £160k • he ran a property company and showed no income so there was a nil

CSA assessment • mother sought £350k to rehouse – she got £90k

The Mother obtained a lump sum order for furnishings (£15k) medical, nursing and hospital costs (£14k) and further clothing and baby equipment (£9k). The Judge thought that some of her claims were extravagant but also found that she shouldn’t have limited the furnishing schedule to just those rooms the child would use or occupy and he refers to the schedule she produced as being “quantitatively deficient” (p.238).

3. The gap

There were no reported cases between 1996 to 2003 when Re P was decided other than the “lottery winner” case of J v C (Child : Financial Provision) [1999] 1 FLR 152 Hale J

• father was a lottery winner • mother received £70k to rehouse (father had a house worth £180k) • she also had a lump sum for a family car (second hand Ford Mondeo

£9,000), the judge allowed this sum but as mother had not passed her driving test the sum was conditional on her passing

• past expenditure and items immediately needed, her schedules were closely scrutinised in the evidence and some items were deemed to be of a recurring/ day to day nature expenses (eg nappies, baby food ) and they were disallowed as they should have come out of income

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• furnishings for the new property mother provided quotations for things such as soft furnishings, carpets furniture, kitchen equipment, TV total £18,435, again these schedules were closely scrutinised, the Judge found that she had not gone to extravagant places to get quotes but he did find that some of the items were not directly referable to the child’s need (but other children in the mother’s household) and so removed or discounted those items

• the mother also sought (but did not pursue) a lump sum to cover nursery fees whilst she retrained so she could return to work fulltime, however, It was felt this was a revenue expense and so could not be part of a capital claim.

• The mother also sought a maintenance fund of 30k to be held in trust, her plan was to use the income to cover the upkeep on the property and the capital would revert to the father. In the alternative the mother argued that the capital sum could be used to replace her car in future. The Judge did not allow this and found that if such money was needed in the future then she could make a further application for lump sum. It should be noted that such a maintenance fund was allowed in the case of A v A [1994] 1 FLR 657 but the distinguishing feature of that case was that the father lived abroad and his involvement with the property was more removed.

4. Opening the “floodgates”

Then after years of dearth and parsimony came the case of Re P (Child : Financial Provision) [2003] 2 FLR 865 Thorpe LJ

• father fabulously wealthy • mother wanted £1.2m to rehouse , she got £1m • she wanted £170k as lump sum, she got £100k

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Note : the lump sum

At first instance mother was awarded a lump sum of £30k for decoration and furnishings, on appeal that was increased to £100k (to cover finishing, furnishing and equipping), on the basis that her housing fund was also increased. To support her claim for a lump sum the mother had obtained estimates from a “top- end” store and the father had countered with estimates from John Lewis. It was argued by the mother that the judge’s original allowance “would only furnish a shoebox”.

The mother also obtained a lump sum order of 20k for a car and for it to be replaced by father every 4 years

Thorpe LJ did , however, want the mother to give full details to the father as to how the money was going to be spent he said “Of course father is entitled to proof that the whole sum has been spent on the making of L’s home and none of it has gone into the mother’s pocket.” Para 52

Note: the carer’s allowance

• A further important theme dealt with in Re P was that of the carers allowance when considering the level of periodical payments. Thorpe LJ endorsed the much earlier (pre Children Act) case of Harantounian v Jennings [1980] 1 FLR 62 which first proposed that a child’s maintenance order could include an element of a carer’s allowance. Thorpe LJ observed that in previous cases there had been a restrictive approach to the carers allowance he, however, allowed a more “generous approach” Thorpe LJ also held, however, that while the mother should have control over her own budget she must also spend what she receives within the year for which it is provided, so that there can be no slack for the mother to save or put away on a rainy day.

• The Mother had argued on appeal that she should get just over £100k periodical payments of which £34,500 represented the mother’s carer’s allowance. Thorpe LJ referred to the balance that had to be struck between two conflicting points that is that the Applicant has no personal entitlement and secondly she is entitled to an allowance as the child’s

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primary carer. The Court must recognise the responsibility and often the sacrifice of the unmarried parent who is the primary carer.

In the case of F v G (Child : Financial Provision) [2005] 1FLR 261 Singer J the Father offered to pay for the nanny at a cost of £24,000p.a, school fees at £10,000 p.a and maintenance for the child at £20,000 p.a , so £54k in total. However, he wanted to pay the nanny direct rather than pay the mother this figure. Singer J held that

• the Mother should be in control of the payments to the nanny so that she can decide to what extent a nanny is used and to what extent she works, so he ordered that the father pay her the sum to cover the cost.

• once the mother had paid for childcare, then her own earned income should be hers to use as she thought best. The Mother’s earned income was 37k and if she paid £24,000 for the nanny that would leave her with a balance of 13k left over which she can then use as she wants, maybe for her future financial security. Singer J distinguishes this case from Re P, where Thorpe LJ had said there should be no slack to save; on the basis that this is the mother’s own income from which she is saving.

In assessing the evidence for either the carer’s allowance or indeed in support of a lump sum it is clear from the authorities that the mother is expected to keep good records with receipts on what she spends. This was a practice encouraged in the case of Re P by Thorpe LJ and followed in Re N (Payments for Benefit of Child) [2009] 1 FLR 1442 Munby J where the Judge held that the mother was to account to the father in respect of a lump sum of £20,000, in particular the father was entitled to receipts for all items costing more than £20.00.

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5. Closing “the floodgates”

The floodgates weren’t flung as open as the mother would have wished in Phillips v Peace [2005] 2 FLR 1212 Singer J) when she returned to court seeking a further property order and in the alternative a substantial lump sum for rehousing, both claims were roundly dismissed. Further the mother sought a lump sum of £50,000 for work that needed to be done at her present property; however, she did not provide a breakdown of that work. After her property claims were dismissed the amount left in respect of her lump sum claim was about £70k, which included £30k for a new car.

6. Broadening the issues

The courts were (are), however, taking more account of the mother’s /father’s overall financial position including their indebtedness:

Morgan v Hill [2006] 1 FLR 1480 Thorpe LJ

• The background to the claim for the lump sum was that following an earlier agreement the mother had decided to move to a larger property and she took on a large mortgage which drove her into debt (97k at the time of the first trial). The mother sought a lump sum in order to clear her debts and at first instance the Judge ordered a lump sum of £100k and a further sum of £35k for her to buy a new car.

• On appeal Thorpe LJ reduced the lump sum to £50k on the basis that as the larger home was partly needed to house her other child as well (the mother had had another child) so there was no justification for this father to be responsible for the whole of the indebtedness.

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• The Father also argued that the mother had a flat in Paris which could be sold and the equity put to reducing her debts

Thorpe LJ says:

“Whilst in principle any order under (Schedule 1) should not include a benefit for the recipient otherwise than qua mother, there is no rule or principle which obliges the mother to contribute her own capital. The disparity between her present and likely fortune and the appellants is so great as to be almost incalculable.” (p. 1492 para 51)

DE v AB (Financial Provision for Child) [2012] “FLR 1396 Baron J

• At first instance the Mother was awarded a lump sum of £85k to pay towards her debts of £129k but the lump sum was reduced to £40k on appeal.

• Baron J found that although the court had a broad discretion and it did not have to specify precise amounts for each category of claim, there has to be some form of analysis not least as to the net effect of such an order on the father. In this case the lump sum of £85k left the father without enough to rehouse himself.

• The Father also argued that the mother’s debt of £129k included some revenue costs such as mortgage interest and therefore there was an element of double accounting as they should have been covered by the CSA maintenance assessment. Baron J found that the Father was only paying a nominal sum through the CSA and so there was inadequate provision for running costs in those circumstances the court is entitled to supplement such expenditure by way of capital provision.

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7. Provision for Costs

It is well known that Schedule 1 was being used, more or less exclusively, by the wealthy, and there was little guidance from the authorities as to how to weigh up and balance the competing factors in Schedule 1 in modest and middle money cases. The cases seem to suggest an “opening up” in respect of the issues being litigated and a factor which is likely to have contributed to this is the ability for costs to be provided for at the outset or at least at an early stage in the proceedings.

• If you think your client does have a good case, but no way of funding it then the case law has developed in such a way as to make it clear that you can make an application against the Respondent for provision for costs at an early stage.

• The prospect of being able to apply for provision for costs was flagged up in the case of Re S (Child: financial provision) [2005] 2 FLR 94 when Thorpe LJ said that the term “for the benefit of the child” should be given a wide construction and could (in limited circumstances) include a parents’ legal fees.

• Then in the case MT v T [2006] EWHC 2494 (Fam) it was held that the court has jurisdiction to make an interim payment by way of a lump sum to cover the applicant’s legal costs.

However, it is not until the more recent case of G v G (Child Maintenance: Interim costs provision) [2010] 2 FLR 1264 that the Court has set out the test to be met in cases where there is an application for provision of costs. G v G dealt with the jurisdiction to make an order for provision of costs within a periodical payments order.

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The test set out by Moylan J

• Is public funding available

• Does the applicant have assets or other means ie borrowing from family/ friends

• Can the applicant borrow money by way of raising a commercial loan

• Can the Applicant offer a charge on any property

Then in the case of CF v KM (Financial Provision for child: costs of legal proceedings) [2011] 1 FLR 208 the Court held that it has jurisdiction to make an order for periodical payments or a lump sum which includes a provision for costs.

So the door is now firmly open for the Applicant to apply for provision for costs to be paid by way of interim lump sum or maintenance, as long as it is a “top-up” case.

8. Not a free ticket to ride

However, Charles J (in CF v KM) is at pains to ensure that the open door does not become an open floodgate and sets out some further elements to the test in G v G . Charles J says that costs provision should only be made in limited circumstances having regard to such matters as:

• would such an order be unfair to the paying parent

• is there any real prospect of a substantive award being made against the Respondent at the final hearing

• what are the prospects of recouping from the award made in favour of the Applicant

Sometimes, however, merits can be difficult to assess at an early stage as in the case of N v C [2013] EWHC 399 (Fam) and where the Mother lost pretty comprehensively at the final hearing it was said that she “..has been able to

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pursue her claim in the manner that she has because the father has already provided for her costs of doing so.”

However if the Applicant has got it completely wrong or even partly wrong and they have not got what they ask for at the final hearing then the Court has also made it clear that they will not hesitate to make a costs order against an Applicant, as in the very recent case of KS v ND [2013] EWHC 464 when Mostyn J made an order that an successful applicant should pay the Respondent costs.

So the risks of pursuing litigation are significant, but at least if the client has a good case and the Respondent enough money then funding the application should not be a problem.

Christina Morris

Coram Chambers

15th October 2013

1

year case Income p.a School fees

Housing Other capital Costs order Comment

1980 Haroutunian v Jennings [1980] 1 FLR 62

Not wrong in principle for maintenance for child to include an allowance for the mother

1992 K v K (Minors: Property Transfer) [1992]2 FLR 220

Transfer of council tenancy

Application brought under Guardianship of Minors Act 1971

1994 T v S (Financial Provision for Children) [1994] 2FLR 883

N/A N/A £36,000 £29,000 to discharge arrears of school bills

Unknown Property to be held on trust for father until youngest child 21 or completed full time tertiary education if later

1994 A V A (A Minor : Financial Provision) [1994]1FLR 657

£20,000 including £8000 as element of carers allowance (Norland nannies)

Yes M to retain current home on trust

N/A

Unknown Trust to continue until 6 months after the child attained 18 or finishes full time education including tertiary And father ordered to keep property in good repair and to equip house and keep it equipped with furniture and “the usual appliances”

1996 Phillips v Peace 2FLR 230 N/A although the father was wealthy there was a nil CSA assessment

N/A £90,000 £15,000 for furniture and just over £14,000 for costs relating to the birth

F to pay 2/3rds of M’s costs because M had pitched case too high

Trust to continue until end of tertiary education and to include a gap year

1998 C v F (Disabled Child:Maintenace Orders) [1998] 2 FLR 1

Court has power to make maintenance order beyond 18th birthday if there are “special circumstances”

2

year case Income p.a School

fees Housing Other capital Costs order Comment

2003 Re P (Child: Financial Provision) [2003] 2 FLR 865

£70,000

Yes

£1m

£100,000

F to pay M’s costs

Father was “fabulously wealthy” Order of the lower court was significantly lower in every respect On appeal a more “generous approach to the calculation of the mothers allowance.”

2004 W v W (Joinder of Trusts of Land Act and Children Act Applications) [2004] 2 FLR 321

ToLATA and Sch 1 applications should be conjoined and the Sch 1 Application should take the lead

2005 Re S (Child: financial provision) [2005] 2 FLR 94

The term “for the benefit of the child” should be given a wide construction and could (in limited circumstances) include a parents’ legal fees

2005 F v G (Child: Financial Provision) [2005] 1FLR 261

£60,000 Yes £900,000 N/A Unknown Court considered the fact the mother was working and the parties respective standards of living

2005 Phillips v Peace 1 FLR 1212 N/A Yes Refused Refused M to pay F’s costs

Essentially court can only order a housing fund on one occasion under Schedule 1

2005 A v M [2005] EWHC 1721 (Fam)

£4,500 N/A £175,000 N/A Unknown Not a big money case. On appeal HC didn’t interfere with housing award but did reduce maintenance order on the basis that F had obligations to 3 older children

2006 Re S (Unmarried parents: financial provision) [2006] 2 FLR 950

N/A N/A £800,000 N/A Unknown Re P not a “benchmark” case

3

year case Income p.a School

fees Housing Other capital Costs order Comment

2007 Morgan v Hill [2007] 1 FLR 1480

£60,000 Yes £700,000 £50,000 Unknown Only 1 order for settlement for property order. Consider separate representation for children.

2007 Re C (Financial Provision) [2007] 2 FLR 13

£72,000 Yes £2m £39,000 No Order DJ Million comments on the need to spend the budget within a year and the records that need to be kept

2007 MB v KB [2007] 2 FLR 1480 F’s application to strike out a Sch 1 application on the basis that there had been an order under MCA s.25. Court found concept of issue estoppel not appropriate especially when dealing with the developing needs of the child.

2008 MT v OT [2008] 2 FLR 1311 £78,000 Yes £875,000 £100,000 F to pay 2/3rds of M’s costs

2008 W and S (Children [2008] EWCA Civ 1207

A simple change in property values is not sufficient grounds to vary a lump sum or property adjustment order.

4

year case Income p.a School

fees Housing Other capital Costs order Comment

2009 Re N (Payments for Benefit of child) [2009] 1FLR 1442

2 litigants in person asked court various questions which Munby J answers. One answer he give is that property order should go to 18 or completing full time tertiary education plus gap year either before or after university course.

2009 H v C 2 FLR 1540 £90,000 N/A N/A N/A Unknown Very wealthy non-disclosing father. Comments on backdating

2009 B V R [2009] EWHC 2026 (Fam)

Out of Jurisdiction issue dealt with

2010 G v G (Child Maintenance: Interim costs provision) [2010] 2 FLR 1264

Court has jurisdiction to make an order for periodical payments which include provision for costs Test set out

2011 DE v AB [2011]EWHC 3792 N/A N/A £40,000 N/A No order The order made took into account M’s Debts

2011 CF v KM (Financial Provision for child: costs of legal proceedings) [2011] 1 FLR 208

Court has jurisdiction to make an order for periodical payments or a lump sum which includes a provision for costs

2011 FG v MBW 2011 EWHC 1729 (Fam)

M allowed to adjourn her application for housing until F’s situation improved. Carer’s allowance considered

5

year case Income p.a School

fees Housing Other capital Costs order Comment

2012 C v N [2012] EWCA Civ 168 £120,000 N/A £2.5m N/A N/A Biggest award so far

2012 PG v TW (Child: Financial provision: legal funding) [2012] EWHC 1892 (Fam)

F initially paid £35,000 (by agreement) towards M’s legal costs M made an application for further provision

2012 PG v TW (No 2) £57,850 Yes £95,000 (for housing in African country)

£50,000 F to pay M’s costs on an indemnity basis

2013 N v C [2013] EWHC 399 (Fam)

Refused N/A Refused N/A No order No order but F had provided for m’s costs by way of interim payments M to pay F’s costs of appeal at £13,000

2013 KS v ND [2013] EWHC 464 £18,000 plus 20% of F’s annual bonus

Yes but capped at £24,000

N/A N/A M to pay F’s costs of appeal at £13,000

No order as to costs of original trial

Financial Remedies Update and Children Act Schedule 1 – Detecting

Trends

Schedule 1 – Detecting Trends

Christina Morris Coram Chambers

Who can apply

• Parent • Guardian • Special guardian • Person who has Residence Order in respect

of child

For what

• Periodical Payments • CF v KM [2011] 1 FLR

208 • “the curve ball”

For what

• Property orders • Re N (Payments for Benefit of

Child) [2009] 1 FLR 1442 • K.I.P.P.E.R.S That is Kids In Parent’s Pockets Eroding Retirement Savings

In what circumstances

Schedule 1 para 4 (1) a-f a) Income, earning capacity, property, other

financial resources b) Financial needs, obligations, responsibilities c) Financial needs of the child d) Income and earning capacity, property,

financial resources of child e) Physical or mental disability of child f) Education of child

Detecting the trends

Substantive

Parsimonious

Phillips v Peace [1996] 2 FLR

The gap

J v C (Child: Financial Provision [1999]

Lottery Winner

Chaplins v John Lewis aka Re: P

Second bite of the cherry

Phillips v Peace [2005] 2 FLR 1212

Still no house with swimming pool for

mother

Getting rid of debt

Morgan v Hill [2006] 1 FLR 1480

DE v AB (Financial Provision for Child) [2012] 2 FLR 1396

Provision for costs

Periodical payments: G v G (Child Maintenance: Interim Costs Provision)

[2010] 2 FLR 1264

Lump sum: CF v KM (financial

provision for child: costs of legal proceedings) [2011] 1

FLR 208

Losers

N v C [2013] EWHC 399 (Fam)

KS v ND [2013] EWHC 464

Fantasy Football

PG v TW (No 1) (Child: financial provision: legal funding) [2012] EWHC

1892 [2013]

PG v TW (No 2) (Child: financial provision)