Categories
Uncategorized

Navigating Uncharted Waters in Sch 1: DN v UD and the FU Fund

DN v UD (Sch 1 Children Act: Capital Provision) [2020] EWHC 627 (Fam)

When Parliament enacted the Children Act 1989, instead of framing new law relating to financial claims on behalf of children, it chose to consolidate earlier statutes. Section 15 of the CA 1989 explains that

“Schedule 1…consists primarily of the re-enactment with consequential amendments and minor modifications, of provisions of the Guardianship of Minors Acts 1971 and 1973, the Children Act 1975 and of sections 15 and 16 of the Family Law Reform Act 1987”.

And this shows.

If there was a contest for opaque legislative drafting, Schedule 1 would probably ‘medal’. Even basic questions are difficult to answer:

Q. ‘Can a parent bring an application when the ‘child’ is over 18?’

A. The conventional view is no, because…

  • Sch. 1, para 1(1), provides that a parent can bring a claim on behalf of a ‘child’.
  • A ‘child’ is defined at s.105 as being under the age of eighteen, although this is subject to…
  • Sch 1, para 16, which extends the definition to include someone over the age of 18 who is bringing an application for himself pursuant to paragraph 2 or 6, i.e. periodical payments and a lump sum or the variation of an existing order

A contrary view is set out in an excellent article by my colleagues, Richard Harrison QC and Millicent Benson, “Illegitimate Claims? Schedule 1 claims for periodical payments by parents of adult children” in Family Law [2019] 505 – it is argued that Schedule 1 could be interpreted in such a way as to permit such an application on behalf of an adult child, either (1) by way of a purposive interpretation of the statute (cf. Pepper v Hart), or (2) that the prohibition unlawfully discriminate between the children of unmarried couples and divorced couples (where this is possible). Until recently, this had not been tested at court.

Several other clanking provisions of Schedule 1 are difficult to understand or explain. Why does Schedule 1 contain the power for a transfer of property (Sch 1, para 1(2)(e)) where there has never (thus far) been a case where property is settled on anything other than a reversionary basis? What about the provision that an adult child cannot pursue his own application where a maintenance order had been in place prior to his 16th birthday (Sch 1, para 2(3)).

DN v UD casts a searching light into some of the more dusty corners of Schedule 1. It is a decision of Mr Justice Williams who, in terms of the precision and length of his judgments, recalls the approach of Mr Justice Charles (of the 484 paragraph judgment)

And when I say ‘long’, I mean long. The judgment in DN v UD is a little over 42,000 words. By way of comparison, The Great Gatsby is 47,000 words. If DN v UD was published, it would classify as a short novel. If there was ever any doubt that technology leads to longer judgments (where detailed chronologies and passages can be cut and paste into ever longer judgments) DN v UD helps put those doubts to rest.

The brief facts are as follows: the parties are unmarried Russian nationals who have lived in London since 2010. The claim was brought on behalf of three children aged 20, 17 and 12 at the date of application, and 22, 19 and 14 by the date of the final hearing. The father (‘UD’) was wealthy and ran the ‘millionaire’s defence‘ (i.e. I can afford any order the court might reasonably order, so need not disclose my financial position in detail). Extensive findings were made against the father at a fact finding hearing in October 2018.

The case involved judicial consideration of a number of interesting points, and several surprising and groundbreaking decisions:

  1. Could the court make orders on the mother’s application for children over the age of 18

Perhaps unexpectedly, Williams J concludes that provided the application is made before the child turns 18, the court has the power to make orders, even where at the date of the hearing the child is over that age:

[42]. The effect of Sch 1, para 3 which permits the court to backdate a periodical payments order to the date of the application and to extend it beyond the child’s 18th birthday would support the construction that an order for periodical payments can be made for the first time after the child reaches the age of 18 provided that the application was made prior to the child’s 18th birthday… It seems to me that if the court has the power to make a periodical payments order in respect of a ‘child’ who has reached the age of 18 where the application was made prior to the 18th birthday that the court would also retain the jurisdiction to make other species of order under para 1.

Accordingly, on the facts of DN, the court could make orders in favour of the parties’ middle child (17 when application was issued, 20 at trial). However, there was no power to make orders with respect to the elder child who was 20 at the date of application and 22 by final hearing:

[49] (ii). “…I do not consider that it can be read or given effect in a way which allows an application for an order in respect of an adult child“

[49] (iii) “…I am not convinced (although I am not deciding) that the absence of the right of a parent to make an application on behalf of an adult child amounts to discrimination against the child in the substantive article 8 right.”

2. Human Rights Act compliance

The court declined the invitation to rule that the provisions of Schedule 1 relating to the above were incompatible with Convention rights as the procedural requirements (i.e. notice to the Crown) had not been met, and full argument had not been heard.

3. Overview of the law

Between [50] and [71], Williams J conducts a comprehensive review the court’s approach to Schedule 1, with the evolution of the ‘carer’s allowance’ and the (still) leading case of Re P; and between [72] and [85] the court reviews the court’s approach to cases involving children over 18. With respect to the power to make orders that last beyond childhood (including tertiary education) the court concludes

[85] The net effect of all of the authorities is clear. Absent special or exceptional circumstances capital orders which provide a benefit beyond minority or the cessation of tertiary education should not be made. It is equally clear that what can amount to special or exceptional circumstances is restricted. Matters relating to changing societal attitudes, the wealth of a parent, or the like will not suffice. Disability creating an ongoing need for support might. The absence of a parent playing any supporting role for their child might. The appellate courts have recently eschewed glosses upon statutory language. In this case the identification of exceptional or special circumstances warranting the making of outright capital orders for the benefit of children does not seem to me to amount to a gloss but rather is an application of the statutory powers based on principles which emerge from case law. The power to make outright capital transfers exists but will only be deployed in limited circumstances and where the evidence justifies it. It seems to me that what one is focusing on is the child and whether there is something about this child or this child’s situation in particular vis-à-vis that parent that creates a situation which exceptionally (i.e. as an exception to the usual rule) generates a need for the child to be provided with capital which will be of benefit to them as an adult possibly for many years

4. Provision for the adult children: the FU Fund

In its judgment, the court made a series of factual findings that the father’s behaviour, in terms of abusive and financially controlling actions, such as had left the children vulnerable. It should not be overlooked that this was an exceptional case. The court’s solution to this is the innovation of an ‘FU Fund’ which (some readers may be disappointed to find out) does not stand for what one might think, but in fact stands for ‘Financial Ultimatum’:

[162] … It therefore seems to me more probable than not that when the children do reach adulthood and do not willingly return to his fold that they are likely to face some sort of financial ultimatum from their father. At that point they will be peculiarly vulnerable as the maintenance will have come to an end and they will have lost their long-term home in the London Apartment. At that point they will be at their most vulnerable to the exertion of financial control whether directly or indirectly via the mother who will also be vulnerable at that point. I therefore consider that their vulnerability or potential dependency upon their father results in a clear need for financial and emotional protection. This protection can only be provided by giving them a sufficient degree of financial independence from the father to allow them to withstand the sort of pressure that is likely to be brought to bear upon them through some sort of financial ultimatum and which the emotional abuse they have sustained makes them so vulnerable to. That, I am satisfied, amounts to an exceptional circumstance which justifies the making of a capital award which will endure beyond their minority, beyond their dependency whilst in education and into an indeterminate future. Only by giving them the means to say no to their father’s exertion of financial control can they be properly protected and provided for in the future. I’m quite satisfied that this is a legitimate use of the Sch 1 provisions…

I ask myself rhetorically, if this situation does not amount to an exceptional circumstance justifying their deployment what, other than physical disability or clear lack of capacity, would? Thus I consider that they need and that their welfare justifies the provision of a ‘financial ultimatum’ (FU) fund to enable them to deal with this probable scenario.”

The court made no determination as to how this would be drafted (whether as a settlement, lump sum or property adjustment order) but provided that the two younger child should receive an interest in the London apartment (valued at £10m) worth c. £650,000 each. This would match the value of a property earlier gifted by the father to the elder child.

It will be fascinating to see if Williams J’s innovation of the ‘FU fund’ (or indeed the conclusion as to the court’s jurisdiction) proceed to appeal, and if so, herald the extension of the court’s exercise of Schedule 1 powers (albeit in exceptional cases).

Alexander Chandler, 19 June 2020

Categories
Uncategorized

A Short Explanation

This website is meant to be two things.

  • Firstly, an online library of the articles I’ve written over the years. These can be found in the menu.
  • Secondly, as a legal blog for financial remedy work. Let’s see how that goes.