Both Sides Now: DN v UD

Published: 06/07/2022 07:06


UD v DN (Schedule 1, Children Act 1989; Capital Provision) [2021] EWCA Civ 1947 is one of only a handful of cases under Schedule 1 to the Children Act 1989 (Schedule 1) to have made it to the Court of Appeal since Re P (Child: Financial Provision) [2003] EWCA Civ 837, and it is of great significance both in terms of the legal principles it analyses and the practical impact it will have for family practitioners specialising in this area.

Laura Moys was junior counsel for the mother (M) (led by Charles Howard QC) and Katherine Kelsey was junior counsel for the father (F) (led by Christopher Pocock QC). The first instance decision is reported as DN v UD (Sch 1 Children Act: Capital Provision) [2020] EWHC 627 (Fam). What follows is an analysis of the case from the unique perspective of counsel appearing on each side.

Joint case summary

In a nutshell …

UD v DN is principally concerned with two issues arising under Schedule 1.

  1. First, the Court of Appeal concluded that on an application by a parent for financial provision for a child, the court retained jurisdiction to make an order in respect of a child who was over 18 years of age by the time of its order, provided that the application for the order had been made before they reached that age.
  2. Secondly, the Court of Appeal considered the circumstances in which outright capital provision could or should be made for a child. It concluded that special circumstances required to be shown, and that those circumstances had to relate to the child in question and to a consequent continuing financial need into adulthood. The court allowed F’s appeal against an order that he provide funds outright for the purchase of homes for two children once they reached adulthood, made on the basis that he might otherwise use his financial muscle to impose some form of ‘financial ultimatum’ on them.

What does this mean for practitioners?

Schedule 1 permits (at paragraph 2) adult children to apply for provision for themselves, but the relief available on such application is more restricted than on an application made by a parent on the child’s behalf (paragraph 1). Most applications by unmarried parents for financial provision are made when the child or children are young. Here, the relevant children were aged 17 and 12 when M made her application, and 19 and 14, respectively, when that application was determined. However, the full range of provision remains available on a parent’s application provided it is issued before the relevant child’s 18th birthday. It is therefore important for applicant parents to ensure that their application is issued while the relevant child remains a minor if they wish to be sure that the broader relief is available.

However, the court confirmed that even on a parent’s application, outright provision or provision otherwise enduring into adulthood after completion of education can only be justified if there are: (1) exceptional circumstances; which (2) relate to the children themselves; and (3) create a continuing financial need. It is not to be made in order to protect children, for instance, from a future decision by F not to make provision for them as adults, nor even to use his financial strength to attempt to put pressure on them as adults.

At first instance …

It was a significant feature of the case that in earlier child arrangements proceedings significant findings of fact had been made against F. M sought both the standard provision of a home and income for the children during their minority and education, but also outright capital provision for the parties’ two younger children once they left education on the basis that: (1) but for F’s conduct and M’s decision to seek orders to protect the children, F would have purchased homes for each child equivalent to that bought for their older sibling; (2) F’s conduct meant that he would not meet his parental responsibilities, making it appropriate for there to be an order to enable them to purchase a first home; and (3) there was no requirement for special circumstances but, if there was, this was such a case given the level of abuse suffered by the children.

At first instance, Williams J raised the issue of whether, once the children became adults or ceased their education, they would be vulnerable to the financial muscle and coercive behaviour of F, so that the only way to protect them was to give them a level of financial independence. F was ordered to pay lump sums to M for the purchase of a car and for other expenses, and substantial periodical payments during the children’s minority or until the end of full-time tertiary education. The family home in London was settled on trust as a home for the benefit of the two younger children during their minority, but at the end of that period rather than reverting in its entirety to F, the judge ordered that 6.5% of its value should become the absolute property of each of those two children themselves.

On appeal …

The Court of Appeal first concluded that the court has power to make an order under Schedule 1, paragraph 1 (i.e. on a parent’s application) notwithstanding the relevant child having attained the age of 18 between the date of the application and its determination. This point had not been considered by the courts before (possibly because the factual matrix rarely arises). To conclude otherwise would mean that a parent’s right to the determination of their application for an order for their child, which right accrued on the making of the application, might be defeated by the effluxion of time. It would also cause parties and the court real practical problems if the jurisdiction were not tied to the ‘clear cut-off’ of date of the application. A similar point was addressed in Jones v Jones [2001] Fam 96 in the context of an application by a former spouse for the extension of the term of a periodical payments order. In that case the Court of Appeal concluded that the power endured after the term had expired provided that the application was issued before that expiry. The same considerations applied in this case.

Note that the court did not deal with whether the court might have the power to make orders on the application of a parent if the application were made after the child attained the age of 18.

The outcome …

In this case, however, the outright capital orders made by the judge could not stand. The court reviewed the authorities on making orders for provision for children enduring into adulthood – as any outright capital order would do. It concluded that those authorities are clear, and correct. Before orders are made for adult children who have completed their education, there must be ‘special’ or ‘exceptional’ circumstances – see in particular Chamberlain v Chamberlain [1973] 1 WLR 1557, Lilford (Lord) v Glynn [1979] 1 WLR 78, Kiely v Kiely [1988] 1 FLR 248, J v C (Child: Financial Provision) [1999] 1 FLR 152 and Re N (Payments for Benefit of Child) [2009] EWHC 11 (Fam), [2009] 1 FLR 1442. Scarman LJ’s ‘proviso’ in Chamberlain that parents should have met ‘their responsibilities to their children’ referred to parents meeting those responsibilities ‘while the children are dependent’. Moreover, the ‘special circumstances’ must relate to the children, and must be circumstances which create a financial need in adulthood, such as physical or mental disability.

The protection of children, once adults, from financial pressure or manipulation by their father ‘does not begin to come within the scope’ of the circumstances required to justify outright provision. On the contrary, far from being a circumstance relating to the children giving rise to a continuing need for financial provision (the cost of therapy might qualify – but there was no evidence in this case to support such a need), the judge’s order was based on F’s prospective behaviour and the judge’s concern that he would not make financial provision for these children (in the way in which he had for their older sibling), in light of the judge’s views: (1) of F himself; and (2) that most wealthy fathers would or should make provision for their adult children. This could not amount to a ‘special’ circumstance relating to the children which justified an award in their favour as adults.

Laura’s analysis

Importantly, whilst the award of outright capital for the children was set aside in this case (the court declined to interfere with housing provision or the carer’s allowance of c.£120k p.a.), the Court of Appeal agreed that courts do have the power, under Schedule 1, to make orders of outright capital for the benefit of a child. The difficulty is in defining (and evidencing) ‘special circumstances’; a judicial ‘gloss’ that does not feature anywhere in the language of Schedule 1, paragraph 1.

In our case, the children had suffered significant physical and emotional abuse and were undergoing therapy. It might have been thought fairly obvious that the level and nature of the abuse they had experienced would have an enduring impact on their lives well into adulthood (M had been able to rely on a number of factual findings made in parallel proceedings under section 8 of the Children Act 1989, including that F coerced one of the children into assaulting their sibling and then – when they would not go through with it – threatened to kill the sibling and M, leading to the child experiencing suicidal ideation). However, the upshot of the Court of Appeal’s decision is that in future cases in which it is alleged that children have suffered in such a way that will have a financial impact on them into adulthood (e.g. affecting their education/career prospects or requiring long-term therapy), there will likely be a need to instruct an expert at an early stage in the proceedings to attempt to substantiate and quantify that impact.

The obvious downside to this is the increased cost associated with pursuing these arguments, as well as the costs risk to applicants if they are not successful; a danger that is particularly off-putting in a Schedule 1 claim where the applicant is often the financially weaker party and where the claim is being brought on behalf of the children and not for the applicant’s own benefit.

I wonder whether, in more extreme cases, children who have been the victims of abuse (whether physical and/or psychological) might consider whether they have grounds to bring a personal injury claim against the parent perpetrator. At the least, it may be sensible to obtain advice from practitioners specialising in personal injury litigation to consider whether the value of the claim justifies separate civil proceedings being explored.

I also think that it may well be easier to satisfy the ‘special circumstances’ test in a case involving a disabled child where there is evidence that the nature of the disability is such that the child will never be independent or fully independent. If, for example, a child requires a specially adapted home, it might be argued that the child requires the indefinite use of that property rather than it reverting to the parent once the child is an adult. My concern for future cases like these is the risk that first instance judges will simply not feel sufficiently emboldened – following the Court of Appeal’s decision – to make outright capital orders even in cases where, arguably, ‘special circumstances’ do exist.

It is also a curious feature of the judicial interpretation of Schedule 1 that courts routinely make what are, in fact, ‘outright capital’ orders where the ‘capital’ concerned is of relatively low value. For example, no one has to return a laptop or a car to the other parent when a child turns 18, and courts do not require low value capital items like these to be settled on trust. The difficulty arises when the ‘capital’ is a large sum to provide housing, at which point (absent ‘special circumstances’) the convention continues to be that the property that is purchased will be settled on trust for the child’s minority/completion of education only. There seems to me to be no logical explanation for this inconsistency; indeed, in certain ultra-high net worth cases the cost of buying a flat for a child might make actually no more significant a dent in the finances of the paying parent than a laptop or a car.

I wonder – rhetorically of course – whether the true ‘mischief’ behind the difference in treatment for laptops and houses is not so much the value of the respective claims, but the historic ‘concern’ that the outright purchase of a home might end up accidentally benefiting an unmarried applicant as it was/is assumed children will allow their mother to continue to live in the house for the remainder of her life. This theory brings into sharper focus the need for reform of the law relating to cohabitants more generally, as Schedule 1 remains a poor substitute for the relief available to divorcing applicants under the Matrimonial Causes Act 1973.

Much of the first instance legal analysis of Williams J relating to the jurisdiction to make orders survived the appeal. Both judgments are lengthy, so I provide some (hopefully) helpful takeaway points below:

  • As noted above, as long as the application was made by the parent when the child was under 18 the court can still make the order if the child subsequently turns 18 during the course of the proceedings. To interpret the provision otherwise could lead to all sorts of problems: delay outside the parties’ control (such as delay in listing hearings) could cause the court to ‘lose’ jurisdiction; a party could thwart the court’s powers by deliberately prevaricating; the court might have to separately join an adult child midway through; the applicant would lose the power to claim backdated periodical payments.
  • This jurisdictional approach applies in theory in respect of capital orders and property transfer/settlement orders as much as periodical payments orders and is also consistent with rights under the European Convention for the Protection of Human Rights and Fundamental Freedoms because it means the children of unmarried parents are in the same jurisdictional position as those of married parents where the application is brought under the Matrimonial Causes Act 1973.
  • The Court of Appeal also agreed with M that in this case the order that Williams J had made was a settlement of property order, and that the nature of such an order is that it takes effect immediately even if the beneficial interest is contingent (in the sense that the children have to outlive the ‘trigger’ events and would both be adults by the time those trigger events happened).
  • The Court of Appeal has not resolved the issue of whether an applicant parent can bring an application under Schedule 1, paragraph 1 on behalf of a child who is already 18 at the date of the application (rather than the adult child making their own application under paragraph 2). This is for another day. There are potentially very good reasons why a parent might want to be the one making the application such as where the parent has spent (or will spend) money on the adult child’s behalf but the adult child does not want to make an application, or where the child lacks capacity to make their own application and would have to be represented by a litigation friend.

Katherine’s analysis

The award of outright property for the children was the standout feature of the decision at first instance. I remember it having a certain gasp factor and sending shockwaves through the profession. Various solicitors raised with me their concern as to what they should or should not be advising their clients. The Court of Appeal’s decision has provided some much-needed clarity in this area:

  • The Court of Appeal made clear the limited circumstances in which the court may legitimately make financial provision for children with the intention of benefitting them after they have reached the age of 18. I think one of the most helpful aspects of the judgment is the Court of Appeal’s analysis of what the court will consider constitutes a ‘special circumstance’ justifying an award under Schedule 1, benefitting a child into their adulthood.
  • The distinction between vulnerability and dependency is an important one. While vulnerability and dependency are very likely to overlap, they are not one and the same, with the former encompassing a much broader category than the latter. Vulnerability is a broad spectrum on which many people fall, but not everyone with a vulnerability is ‘dependent’ in the sense of requiring financial support. The parameters of Schedule 1 would potentially be stretched too far if every adult with a vulnerability could make a claim under Schedule 1 against their parents.
  • Also, in contrast to the Matrimonial Causes Act 1973, conduct of the parties is not a factor included within the statutory checklist under Schedule 1. The case law suggests that ‘special’ or ‘exceptional circumstances’ should not include consideration of the conduct of the parent, but rather the circumstances of the child and any need/dependency of that child. The conduct of a parent is only relevant if it has created circumstances for the child which have led to a dependency (e.g. physical abuse that has led to a physical disability), but it should not be factored in as a way of punishing a parent through Schedule 1.
  • I think these principles will translate into everyday practice and be particularly important in the smaller/medium asset Schedule 1 cases which rarely (if ever) get reported. Practitioners are now much better placed to assess from a case management (and costs) perspective whether/when expert evidence will be necessary and whether/when disclosure of historic/concurrent fact-finding proceedings will be required.
  • During the course of the hearing, I remember King LJ (in particular) making the point that Schedule 1 principles are equally applicable to litigants of much more modest means. This was particularly important when considering arguments about what (if any) ongoing financial support can or should be made available by parents to their adult children.
  • While the Court of Appeal accepted that many wealthy fathers choose to make generous provision for their children, their choice of whether or not to do so is entirely a matter for their discretion, and having rich parents should certainly not constitute special circumstances for the purposes of the statute. Schedule 1 does not exist to enable adults from wealthy families to make financial claims against their wealthy parents (see also the judgment of Sir James Munby in FS v RS [2020] EWFC 62) for the provision of housing:
    • wealth will inevitably be a factor of consideration when making awards for children (under 18) under Schedule 1, as ‘income, earning capacity, property and other financial resources’ of the parties is a specified factor under paragraph 4(1);
    • the parties’ standard(s) of living is also to be factored into the discretionary exercise (Re P (Child: Financial Provision) [2003] EWCA Civ 837, [2003] 2 FLR 865).
    • But, while these principles are central to the making of standard awards for dependent children under Schedule 1, they do not have a place in establishing exceptional circumstances to justify a special award for adult children. Different rules should not apply to adult children from wealthy families.
  • My final thought is that there were issues raised at first instance and in F’s application for permission to appeal which were not dealt with (at all) by the Court of Appeal – and which are perhaps even more relevant to our day-to-day practices in this area when trying to calibrate and ultimately predict likely outcomes for our clients:
    • level of housing need: M was allowed to remain living with the children in a property valued at c. £10m;
    • quantum of ‘carer’s allowance’: M received a carer’s allowance of £120k per annum (on top of child maintenance of £40k per annum per child);
    • provision of a home: by way of a trust rather than a lease, notwithstanding the potential tax implications for F;
    • refurbishment of/repairs to second home: M received £80k towards the same.

As Laura identifies, there are still many questions left to be answered!

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