Source: http://www.familylawweek.co.uk/site.aspx?i=ed190413
Timestamp: 2018-06-24 09:12:39
Document Index: 29032559

Matched Legal Cases: ['EWCA ', '§ 63', '§ 15', '§ 34', '§ 10', '§ 18', '§ 34', 'UKSC ', '§ 13', '§ 20', 'EWCA ', 'EWCA ', '§ 20', '§ 12']

Family Law Week: Varying your child maintenance: it can pay dividends!
This is a fictitious scenario, intended to offer general guidelines based upon information carefully selected in order to enable the author to highlight a point. It does not constitute legal advice. The correct course of action in any given case is fact specific and the law is frequently changing – sometimes with alarming regularity. This is a complex area of law where legal advice should be obtained from a suitably qualified lawyer.
Question: My five-year old daughter, Kayla, is missing out on child maintenance payments from her father, my ex-partner, Roger. We never married, and Kayla's birth was not planned (at least not by me). Roger now lives in a £2 million house (according to Zoopla) with his new girlfriend – Shaznay. Shaznay caused the split, to be honest – and I was devastated when I found out he had betrayed me – she's practically half his age too, and is now heavily pregnant. He drives a Lamborghini Veneno and the girlfriend drives a Bugatti. She has started wearing a diamond necklace and a fat ring, and my ex is now flashing around a Breitling diver's watch.
When we split up, Roger said he would do the decent thing and that Kayla would always be his first priority. He is a director of a company – for which I used to be company secretary. We got dividends from the company that meant we never lacked spending money! The company has been doing even better in recent years – it advises on risk management and compliance in the legal sector. There's some new rule or other (GDP something?) that has been generating a lot of work, and my ex is always off playing golf with his clients.
Here is the problem. Roger is flaky – he promises everything and delivers nothing. The Child Maintenance Options Service, when I contacted them, advised me to enter into a so-called "Family Based Arrangement" with Roger. I managed to get him to sign up to a simple agreement, but he stopped paying the child maintenance payments on time and a solicitor then told me that a Family Based Arrangement is not worth the paper it is written on! I therefore applied to the Child Maintenance Service (CMS). They have assessed him as having a gross weekly income of just £193, and I can see from the paperwork that he pays 50% of what purports to be his salary into his pension, which seems like quite a lot. I'm struggling to work out how he lives the lifestyle he lives – or pays for his Armani suits. He wears Paco Rabanne like he's Charlie Sheen! I know his real income is higher than he says it is.
I am a classroom assistant and I just can't afford to instruct a solicitor or to take him to court. My friend said her solicitor got a court order for a sort of "war-chest" of money to fight her ex-husband in court, but I'm not sure how.
Can I get legal aid to help me fund a claim for child maintenance in the family court? If not, should I just give up? I seem to be spending all my time and energy on this and I never get anywhere. He's frequently late when he collects Kayla too, and I don't understand how he always gets away with it.
The Family Court or the Child Maintenance Service?
Firstly, Emma, the power to determine how much maintenance Roger should be paying you lies exclusively with the Child Maintenance Service (the CMS)– the successor to the Child Support Agency, as opposed to the Family Court. This is because all three of you – Roger, yourself and Kayla – live in the UK (s 44(1) Child Support Act 1991). You are caught by the 2012 rules (SI 2012/2677), which have been in force since 25 November 2013. My advice to you here only applies to '2012 rules' cases (slightly different provisions apply for child maintenance claims originally made between 3 March 2003 and 25 November 2013, and for any even older claims which were issued under the original 1993 scheme).
Top-up Maintenance?
If you were able to demonstrate to the CMS that Roger's taxable income after pension contributions (I shall return to those) exceeds £3,000 per week (£156,000 pa) then you might be able to obtain a top-up order in the Family Court. However you would first have to have obtained a 'maximum assessment' in order to qualify (see Dickson v Rennie [2014] EWHC 4306 (Fam)).
Your solicitor is right: Family Based Arrangements are only enforceable if converted into a maintenance order, and even that has to be agreed (see s 8 (5) CSA 1991). Such an order would, once made, hold the position for 12 months (see s 4 (10) CSA 1991). However, the Child Support Act 1991 makes it very clear that,
• firstly, the existence of a maintenance agreement shall not in itself prevent either of you from applying to the CMS for a maintenance assessment, and,
• secondly, any provision in a maintenance agreement purporting to restrict the right of either of you to apply to the CMS is void (s 9 CSA 1991).
[It is respectfully submitted that paragraphs 18.98 and 18.132 of Issue 6 of Rayden & Jackson on Relationship Breakdown, Finances and Children which state that a maintenance agreement prevents an application to the CMS for 12 months, are incorrect.]
The CMS and its predecessors have seemingly struggled to process the volume of applications with which they are presented (see e.g. this article), and, as a result, an application to the CMS is something that you need actively to pursue and to engage with: remember the truism that, if you want something done properly, do it yourself! You know your ex-partner better than the CMS does, and you can point the CMS in the right direction: for example you know about the historical dividend payments. It is also worth checking on the Companies House website in order to find the latest set of company accounts (although these may be in an abridged form if it is a small company, or, also, simply not present / late). Any enforcement has to be carried out by the CMS, not by you (as Mrs Kehoe was told in no uncertain terms by the European Court of Human Rights in Kehoe v UK (App No 2010/06), and therefore you still have to channel your energies through, and focus your forensic skills on, the documentary requirements of the CMS itself when pursuing child maintenance.
Roger's ostensible wealth and lifestyle
It used to be the case under the 2003 rules that the statutory rate of return of 8% was applied to the value of certain property worth (in total) more than £65,000. This is no longer the case. Unfortunately, neither is it any longer the case that you can ask for a variation on the grounds that Roger's lifestyle is inconsistent with his declared income (originally provided for in reg. 20 (1) and (2) of the Child Support (Variations) Regulations 2000).
Consequently, it is not possible to argue that a variation should be made simply by virtue of Roger's ownership of an expensive car, a Breitling watch, a £2 million property, ostentatious jewellery or indeed the Bugatti (which in any event may not be Roger's, as Shaznay drives it).
Variation – Stage 1
If you don't accept the CMS calculation, then your first port of call is to apply for what is called a 'variation'. Somewhat unusually this has the effect of widening the pool of income to include 'unearned income' – which your ex (perfectly lawfully) was not required to declare at the outset.
Unearned income includes income from rental properties, savings / investment and miscellaneous income, together exceeding £2,500 per annum (see s 69 Child Support Maintenance Calculation Regulations 2012 "CSMCR 2012").
Crucially, 'unearned income' catches dividend payments. In SSWP v Wincott [2009] EWCA Civ 113 (R(CS) 4/09) a dividend which predated the variation application was held by the Court of Appeal to have been incorrectly excluded from the income calculation of the Child Support Commissioner (albeit under a previous set of rules).
Diversion of income / ability to control income
However, if there have been no dividends paid to Roger, then you may be able to argue that a variation should be made because Roger has the ability to control – whether directly or indirectly – the amount of income that he receives, or that is taken into account as his gross weekly income. You would also have to satisfy the CMS that the resulting reduction in income (or indeed dividends) was unreasonable.
A director may have the ability effectively to control company decisions, and in particular decisions affecting his remuneration. The upper tribunal was satisfied that this was the case in RC v CMEC [2009] UKUT 62 ([2011] AACR 38) at § 63 (this ended up in the Supreme Court on a separate issue). This judgment was approved (with certain caveats) in PS v SSWP & KH [2015] UKUT 0183 (AAC) at § 15 - 16.
The following are examples from the case-law as to diversion of income: -
i) A company car being a benefit in kind R (CS) 6/05 (§ 34);
ii) A decision by a company to retain profits as opposed to distribute them as income TB v SSWP & SB [2014] UKUT 0301;
iii) Repaying a director's loan instead of distributing the money as income EH v SSWP [2015] UKUT 0621 (AAC) (at § 10)
iv) Making excessive pension contributions – affirmed as a potential ground in JM v SSWP [2015] UKUT 323 (AAC) (§ 18) approving judgment of Judge Williams in DW v CMEC [2010] UKUT 196 (AAC) (at § 34(b)).
If the CMS finds that income has been diverted then it will add the full weekly amount of diverted income to the gross weekly income when calculating the appropriate child maintenance (reg 71 (2) CSMCR 2012).
You may be able to persuade the CMS therefore that Roger's contributing 50% of his income to a pension fund is a diversion of that income: the tribunal will determine that on the available evidence.
Roger's Special Expenses
Bear in mind that Roger can also cross-apply to vary the calculation downwards if he wishes the CMS to take into account special expenses he incurs (caught by para CSA 1991 Schedule 4B para 2(2)), such as: -
i) the costs of contact (e.g. travel) with Kayla,
ii) any expenses necessarily incurred on account of long-term illness or disability of a relevant other child (e.g. Shaznay's baby-to-be);
iii) repayments of various debts of the relationship;
iv) the maintenance (as opposed to tuition) element of boarding school fees;
v) certain payments made to a mortgagee, lender, insurer or to you yourself with respect to a previously-shared home in which Roger now has no legal or equitable interest, so long as the two of you lived in it (with or without Kayla) as a couple and so long as you continue to live in it with Kayla (see s 67 CSMCR 2012);
provided, in the case of i), ii), iii), and v), that they exceed £10 per week.
Variation: Stage 2 - Just and Equitable?
Imagine that you establish that there is a diversion of income or that there is unearned income which should be taken into account, the second stage is that the CMS has to be satisfied that it is just and equitable to make the variation (s 28F (1) CSA 1991). No specific factors are set out in the rules, but the authors of the Child Poverty Action Group's Child Support Handbook (2016 – 2017) suggest that the following would be considered:
i) The welfare of any children likely to be affected;
ii) Whether implementation of a variation would lead to either parent giving up employment;
iii) Whether Roger has any liability to pay under an earlier agreement (or court order – which is not applicable in your case)
iv) If Roger applies for a variation to permit payment of his special expenses, whether he would be able to meet these in any event from money spent on non-essentials.
What you cannot rely on
The following would not be considered valid grounds for a variation (s 28 F (2) (b) CSA 1991 and reg. 60 CSMCR 2010)
v) the fact that Kayla's conception was unplanned;
vi) that Roger was responsible for the breakdown of the relationship;
vii) Roger's formation of a new relationship;
viii) the existence of, and Roger's apparent inability to adhere to, child arrangements with respect to Kayla;
ix) Shaznay's income or assets;
x) Roger's failure to make payments under either the original agreement or (if it is the case) the assessment itself;
xi) Representations made by anyone other than yourself and Roger.
Evidence for a variation application
The CMS may request further documentary information from either of you if it is of the view that it does not have enough evidence. If that evidence is not forthcoming, it may proceed in any event to determine the application, drawing appropriate inferences (see s 58 CSMCR 2012).
If variation application fails
If, having raised the arguments above the CMS is still against you, and you remain of the view that more maintenance should be being paid, then you would have to appeal to the First Tier Tribunal. Before doing so you would have to first request that the CMS revise its decision within 30 days of receipt of the written notice of the decision (known as a 'mandatory reconsideration').
Do bear in mind that, unfortunately, the tribunal has no power to make an order for costs (Rule 10, Tribunal Procedure (First-tier Tribunal) (Social Entitlement Chamber) Rules 2008).
You state that you are on a low salary. You may derive little comfort from the words of Lady Hale in R (Cart) v UT & Ors [2011] UKSC 28 where her ladyship states at § 13 that
"these tribunal systems … were set up by statute to administer complex and rapidly changing areas of the law. Their judges were expected to know this law without having to have lawyers for the parties to explain it to them …"
"the original expectation in most tribunals was that people would not need representation, or could be helped by specialist non-lawyer representatives".
There is unfortunately no legal aid available for the First Tier Tribunal (Social Entitlement Chamber) or indeed for correspondence with the CMS. As Mostyn J commented in a slightly different context (private children proceedings) in MG and JG v JF [2015] EWHC 564 (Fam)
"in the field of private children law the principle of individual justice has had to be sacrificed on the altar of the public debt" (§ 20).
A fighting fund?
However, it may be possible to persuade a court to exercise its discretion under s 15 and Schedule 1 to the Children Act 1989 to make a costs allowance that would cover the costs of tribunal representation, and, perhaps, the costs of instructing a solicitor to run your variation application via the CMS. You would have to show that it was for the 'benefit of the child' (which may not be too difficult if you can show that Kayla benefits from the maintenance payments you seek). In Re S (child financial provision) [2004] EWCA Civ 1685 [2005] 2 FLR 94, the Court of Appeal accepted that the costs of a mother travelling to pursue her rights deriving from a decision of the Supreme Court in Sudan were for the benefit of the child: i.e. the costs allowance was not for the English Schedule 1 proceedings. In G v G (Child Maintenance: Interim Costs Provision) [2009] EWHC 2080 (Fam), [2010] 2 FLR 1264 Moylan J (as he then was) commented on the broad jurisdiction of the court when he awarded the mother a costs allowance as part of the interim periodical payments she was seeking. Furthermore, provision has recently been made, for example, for a costs allowance to enable a parent to fund contentious child arrangements proceedings (R v F (Schedule One: child maintenance: mother's costs of contact proceedings) [2011 2 FLR 991].
In running such an argument, the guidance from Currey v Currey (No. 2) [2006] EWCA Civ 1338 [2007] 1 FLR 946 (esp. § 20 – 21), G v G (above) and the Schedule 1 jurisprudence which has followed, would need to be adhered to: i.e. in particular you must show that: -
• you cannot reasonably procure legal advice and representation (at a level of expertise apt to the proceedings) by any other means;
• the subject matter of your application justifies the costs allowance;
• your stance in the proceedings is reasonable / your case has merit.
The court has given guidance in MG and JG v JF [2015] EWHC 564 (Fam) that, in determining whether you would reasonably be able to obtain funding from another source, the court would be unlikely to expect you to sell or to remortgage your home or to deplete a modest savings pot.
Furthermore, in the same case the court approved of the comments of Charles J in CF v KM [2010] EWHC 1754 [2011] 1 FLR 208 that there were
"generally recognised advantages flowing from competent representation, and there being an 'equality of arms' in an investigatory as well as in an adversarial process."
When making this application you would need to be able to quantify how much money you need, and the Family Court (to whom you would make the application) would likely be assisted by a quotation from the lawyers you intend to use.
Bear in mind that you may not be able to persuade a court to award you a fighting fund if the money sought would be an unfair burden on Roger, particularly if it was unlikely to be recouped. The mother in N v C [2013] EWHC 399 (Fam) was entirely unsuccessful, and the court commented that she had only
"been able to pursue her claim in the manner that she has because the father has already provided for her costs of doing so" (§ 12).
Other potential Schedule 1 claims
In making such an application under Schedule 1, you may wish to consider whether you need any lump sum for the benefit of Kayla (and if so what for) and whether it would be appropriate for there to be a settlement of property for the benefit of Kayla: you have not at present provided any information about Kayla's current home. The point is that such applications may be made on the same form. What you cannot do, unless you have a maximum assessment from the CMS, is apply to the Family Court for maintenance payments!
Child maintenance disputes can be highly technical given the panoply of statutory instruments and hard-to-find Upper Tribunal decisions which inform the powers of the CMS and of the First Tier Tribunal. Despite what may have been the best intentions of the founders of the CMS and the tribunal system, these disputes are best handled with expert legal assistance. That assistance will not be cheap, but it may well be worth its weight in gold if it provides a pathway to accessing significant further resources for the benefit of your child.
As for the continuing difficulties you have with timings of child arrangements, you might want to consider applying to the Family Court for a child arrangements order under s 8 Children Act 1989 in order to clarify the arrangements. Your case will be heard in the first instance by magistrates (lay justices) for whom (s 1 Children Act 1989) Kayla's welfare will be paramount.
In short, you must begin by applying to the CMS for a variation, and speak to a lawyer in order to obtain a quotation for legal advice and support.
©Gwyn Evans