Article in Family Law Journal
Rebecca Tarn reminds us of the factors to establish in a successful Schedule 1 Children Act 1989 claim.
Schedule 1 of the Children Act 1989 enables a parent, guardian, special guardian or a person in whose favour a residence order has been made to apply to the court for financial provision for a child. It is primarily used to ensure adequate provision of a home for a child and/or to obtain an award of periodical payments in cases where the non resident parent has an income which exceeds the Child Support Agency maximum.
The Legislation
Paragraph 1(2) of Schedule 1 details the orders available to the court, which include the following:
- Periodical payments
- Secured periodical payments
- Lump sum
- Settlement of property
- Transfer of property
In deciding whether to make an order under paragraph 1(2) the court must, however, have regard to the checklist of factors outlined in paragraph 4(1), which can be likened to the requirements of section 25 of the Matrimonial Causes Act 1973, namely:
The income, earning capacity, property and other financial resources which each party has or is likely to have in the foreseeable future;
- The financial needs, obligations and responsibilities which each party has or is likely to have in the foreseeable future;
- The financial needs of the child;
- The income, earning capacity, property and other financial resources of the child;
- Any physical or mental disability of the child;
- The manner in which the child was being, or was expected to be, educated or trained
Perhaps surprisingly, given the date of the legislation, reported Schedule 1 cases are uncommon and the first reported Court of Appeal case of Re P (Child: Financial Provision) [2003] remains the leading authority.
The Facts
The mother was 28 and although she came from a wealthy family she had no capital of her own and little prospect of a decent earning capacity. By contrast, the father was 46 and an international businessman. He described himself as ‘fabulously wealthy’. The parties were unmarried and had never cohabited but their relationship had spanned over a period of four years at the end of which the child was born. Following separation the father’s contact with his child was infrequent and he paid the mother £1,200 per calendar month voluntary child maintenance.
First Instance
At first instance HHJ Brumming ordered the father to pay to the mother periodical payments for the child of £35,360 per annum, to be varied downwards from the child’s seventh birthday, a housing fund of £450,000 together with an additional payment of £30,000 for furnishings and provision of £20,000 for a car. The Judge also accepted the father’s undertaking to pay for the child’s private education. The mother appealed.
Court of Appeal
Thorpe LJ observed that the ‘scale of the father’s fortune and his chosen way of life’ were a dominant feature of the case. It was also accepted that the mother’s wish to live in London, where she would be close to her support network of friends, was not unreasonable. The Court of Appeal deemed an appropriate housing fund was £1,000,000 with an additional payment of £100,000 for furnishings. Periodical payments of £70,000 per annum were ordered and the provision for downwards variation was deleted.
Guidance
Despite May LJ’s observation that Re P ‘ is not a typical case and I do not anticipate that what is said in this case will necessarily apply to others’, the Court of Appeal established the following guidance for Schedule 1 claims:
- Thorpe LJ commented that the welfare of the child ‘must be not just “one of the relevant circumstances” but, in the generality of cases, a constant influence on the discretionary outcome.’
- ‘The length of the parents’ relationship and whether or not the child was planned’ are not relevant considerations, per Bodey J, following Hale J in J v C (Child: Financial Provision)[1999].
- The father’s lifestyle was relevant and the child was entitled to be raised in a manner which was not disparate to the father’s own standard of living.
- In considering the appropriate provision for housing, Thorpe LJ indicated ‘the home will ordinarily be transiently required during the child’s minority’. The court should therefore make a settlement of property order and upon the child reaching majority the property will revert to the father.
- In considering the level of periodical payments, Thorpe LJ commented ‘I believe that a more generous approach to the calculation of the mother’s allowance is not only permissible but also realistic’, although this was qualified on the basis ‘there can be no slack to enable the recipient to fund a pension or an endowment policy or put money away for a rainy day.’
- Any provision for the child is only permitted ‘during their dependency and for their education’ per Hale J in J v C (Child: Financial Provision) but not beyond that unless in exceptional circumstances.
Early Considerations
It should be established at an early stage whether the court has jurisdiction to deal with the proposed Schedule 1 application.
It is crucial to recognise that pursuant to paragraph 1(5) of Schedule 1 the court may not make more than one property settlement or property adjustment order against the same person in respect of the same child. The applicant mother in Phillips v Pearce [2005] fell foul of this statutory prohibition. She had obtained a settlement of property order for her first child some nine years previously and subsequently had a further child, to a different father who could not be located. The mother made a second application against the father of her first child to increase her housing fund by way of either a further settlement of property order, a property adjustment order or a lump sum order. The application was heard by Singer J who held that none of the orders applied for were permissible as the statute clearly prohibited more than one property adjustment or settlement of property order. Whilst the statute does not limit the powers of the court to make further orders for periodical payments, secured periodical payments or lump sum orders it should be noted that in Phillips v Pearce Singer J held that a subsequent lump sum could not be ordered as part of a housing fund as this would effectively create a further settlement of property order by another means. Besides the jurisdictional issue that paragraph 1(5) creates, it should also serve as a reminder that proper consideration should be given at the time of an application as to the appropriate housing required by the applicant and the child(ren) as the housing secured will need to satisfy their needs in the long-term. There are no second chances.
Interestingly, a previous financial remedy order under the Matrimonial Causes Act 1973, which includes a property adjustment order or a lump sum order intended for housing, does not present the same bar under paragraph 1(5). Moor J in PK v BC (Financial Remedies: Schedule 1) [2012] accepted the court retains jurisdiction to make a settlement of property order under Schedule 1 even where there has been a clean break in financial remedy proceedings under the Matrimonial Causes Act 1973, although the circumstances would have to be ‘exceptional.’
Early identification of whether the court has jurisdiction to make an order for periodical payments is also important. The Child Support Act 1991 confers jurisdiction on the Child Support Agency to deal with periodical payments and the court cannot override this jurisdiction unless the Child Support Agency has already made a maximum assessment (section 8(3) CSA 1991). It should not, however, be assumed that the paying party’s income exceeds the maximum as the absence of such an assessment will prohibit the court from making any order for periodical payments, except by consent. If this is anticipated to be an issue in dispute an application to the Child Support Agency should be made promptly.
The ‘What Ifs’
What if the respondent has modest resources?
This is not in itself a bar to a successful Schedule 1 claim. In DE v AB (Financial Provision for Child) [2011] the applicant mother had significant mortgage arrears and debts totaling c£177,000. The father’s capital was limited to the equity in his house of £364,000 and his earning capacity was assessed at £100,000 per annum gross, despite the fact his business was being wound up. At first instance a lump sum order of £335,000 was awarded to the mother, which was comprised of £250,000 for a housing fund and £85,000 towards her debts. The father appealed. Baron J allowed the appeal in part. She considered the housing fund of £250,000 was ‘absolutely justified’ despite the fact the father would have to sell his home to raise the funds, however, she considered it was unfair to leave the father with almost no capital and reduced the lump sum to £40,000.
What if the applicant has her own income and/or capital?
In F v G [2005] the applicant mother worked full time and employed a nanny to assist with childcare. The court was required to determine the extent to which the mother’s own earnings should be taken into account when deciding the level of periodical payments to be made by the father. Singer J indicated there was no easy balance to strike but notionally deducted the cost of the nanny from the mother’s income and ordered the father to pay the balance of the child’s and mother’s income needs. The mother was free to spend the remainder of her own income, not used to meet the cost of the nanny, as she saw fit. Singer J considered ‘if she chooses to use this money, in whole or in part, to make provision for her own future security, then I do not find that offensive to any sustainable principle’, thereby reconciling his decision with that of Thorpe J in Re P regarding the creation of savings. The mother’s own capital was treated in the same way in Morgan v Hill [2007]. In this case, amongst other issues to be determined on appeal, was the treatment of the mother’s small flat in Paris, which she rented out at a loss. The father argued that the rental income did not cover the mortgage instalments and therefore the mother was using the periodical payments ordered to subsidise her ownership of the flat. He also argued against payment of a lump sum order to cover the mother’s debts in part, on the basis that she should sell the flat to reduce her debts. The court held there is ‘no rule or principle which obliges the mother to contribute her own capital.’ The mother’s flat was her only asset and her only financial security for the future.
There appears to be some recognition that given the provision for the child only lasts during their dependency at which time any property adjustment or settlement will revert to the respondent, the applicant should not be prohibited from making some provision for her own future.
Conclusion
Despite the reported decline in marriages and the rise of the cohabitant couple, it is perhaps surprising that Schedule 1 applications remain relatively uncommon. It is, however, important that we remind ourselves of the correct approach upon making a claim given the award sought will potentially have long term implications.
The approach of the court to a Schedule 1 claim was neatly summarised by Thorpe LJ in Re P. The court will first determine the appropriate housing and then the lump sum required to fund that housing, together with the cost of furnishings. Finally the court will look at the level of periodical payments that are required to meet the mother’s expenditure.
It is vital to consider at an early stage the level of the respondent’s income and the necessity of an application to the Child Support Agency. Careful consideration should also be given to the long-term housing needs of mother and child as although there is no limit on the number of orders that can be made under Schedule 1 for periodical payments, secured periodical payments or lump sum orders, an application will not succeed for a further lump sum order for housing where a property adjustment or settlement order has previously been made using the legislation.
Rebecca Tarn is a solicitor at Major Family Law, the Divorce and Family Law Specialists.
Tel: 01661 824582 – rebeccatarn@majorfamilylaw.co.uk