Introduction

The quantum of child maintenance is an area of considerable contention, particularly in the context that there are now around 629,000 taxpayers earning more than £150,000. This is a 2.3 times increase since the statutory ceiling was introduced some 10 years ago.

This raises obvious concerns about the number of applications for financial remedy and consequently child maintenance that will fall outside of the statutory boundary, and the need to have clear guidelines when negotiating settlement or if the court determines the application.

James v Seymour represents a departure by Mostyn J from his own ‘Mostyn formula’ for top-up awards set out originally in GW v RW [2003] 611 Fam and then further defined in CB v KB [2019] EWFC 78. Mostyn J has introduced an 'Adjusted Formula Methodology (AFM)' for calculating top-up awards for paying parties with an income exceeding the statutory limit of £156,000 up to the upper limit of £650,000.

As to the facts, the Respondent Husband and Appellant Wife were married for two years from 2010-2012 and there were two children of the relationship, aged 12 and 10 years old at the time of the appeal. There was a substantial litigation history across the preceding decade, and a number of unusual and quite surprising features including the Wife’s two unsuccessful applications to relocate the children to Pakistan, and an application for capitalised spousal maintenance in circumstances where the Wife had admitted, albeit belatedly, to cohabiting with her new partner. In his judgment, Mostyn J set out the relevant background facts from [2] to [16].

Suffice to say that when the matter came before HHJ Vincent on 15 and 16 September 2022, the Wife accepted that she no longer had a claim for spousal maintenance. Her case had transformed into claiming that the existing child periodical payments were insufficient to meet their needs; that there was a disparity of lifestyle between her and the Husband, and that she had accrued substantial debt.

HHJ Vincent largely found in favour of the Husband’s position: adopting his proposal for the Husband to pay the Wife child maintenance of £1,100 per month per child; for the Husband to pay the children’s private school and extras; and, held the Wife to her indemnity given in the previous proceedings in the sum of £3,598. Whilst the Wife was not ordered to repay any spousal maintenance to the Husband as was sought by him, HHJ Vincent made a costs order against the Wife in the sum of £66,627.70, representing half of the Husband’s costs.

In James v Seymour [2023] EWHC 844 (Fam), an application for permission to appeal with an appeal to follow if granted, there were three grounds of appeal:

1. The Judge failed to follow the approach set down in leading authorities that the ‘starting point’ for a child maintenance calculation should be the figure given by the CMS formula up to incomes of £650,000.
2. The assessment of the quantum of child maintenance was too low and insufficient (or no) weight was placed on the inevitable disparity of lifestyle as a consequence.
3. The order as to costs was wrong.

Mostyn J granted permission but dismissed the appeal on the first ground, and refused permission for the second and third grounds.

The scope of this blog post does not address the comments made by Mostyn J in relation to the second or third grounds, or on the comments that were made in relation to HHJ Vincent’s decision to anonymise her decision. This article will focus solely on the new landscape for calculating top-up orders in respect of child maintenance.

The Framework for top-up awards prior to James v Seymour

From paragraphs [28] to [33] Mostyn J summarised the pre-existing framework for calculating the quantum of child support maintenance (CSM), which was to apply the CMS formula to the payor’s gross income in excess of £156,000 in order to determine the starting point for CSM (and in Mostyn J’s view, the usual finishing point).

In the present case Mostyn J maintained that he is still of the view that the statutory formula is a useful and logical starting point in a child maintenance case where:

1. The income of the payor for child support purposes is more than the statutory ceiling of £156,000 but less than £650,000; but
2. Where the application does not seek a Home Expenditure Child Support Allowance1 (HECSA) but a conventional assessment of the quantum of CSM; and
3. Where it is not a variation application.

One of the problems with approaching top-up awards by applying a flat percentage is that it leads to anomalies in cases where there are multiple children, even though the formula makes adjustments for additional children beyond the first child. This was identified by Moor J in CMX v EJX (French Marriage Contract) [2022] EWFC 136. Whilst Moor J acknowledged the attractiveness of the original ‘Mostyn formula’ and commented that 'the beauty of the decision of Mostyn J is that it makes it easy to calculate the figure, so avoiding dispute', he went on to note the significant disadvantage, using the following example:

‘There were four children in CB v KB so the Wife got £12,600 per child. Given that I have to apply section 25, it is impossible to see why the Wife in CB v KB gets £12,600 per child but this Wife receives £63,804 for one child just because the two eldest children in this case are no longer part of the calculation. If they were, the figure would reduce to £21,268 each.’

This is a problem that Mostyn J acknowledges and accepts (perhaps reluctantly) in James v Seymour. The amount that is payable under the formula where the payor’s gross income is £650,000 (assuming there is no shared care, and no other child living with him) is £60,000 rounded to the nearest £1,000 for a single child, £40,000 for each of two children, and £33,000 for each of three children. Mostyn J recognises that there will of course be economies of scale when there are multiple children in the family unit but also notes the inherent difficulty in justifying a position that raising a single child costs 80% more than raising 3 children together.

The other criticism of Mostyn J’s approach in CB v KB is that the figures generated by applying the formula to incomes up to £650,000 are considerably higher than the levels of award that are typically made by the court in conventional CSM cases (i.e. not HECSA cases). At para [38] Mostyn J acknowledges that while they are reduced to a degree by the presence of shared care, the headline figures that are suggested by a strict application of the formula are unrealistically high and are unhelpful as starting points for the court to make a top-up award. Mostyn J includes Table 1 in the Appendix which gives a full range of figures, opining that the figures produced are plainly excessive.

The Solution

The proposed solution in James v Seymour, to maintain a formula based starting point and therefore maintain the 'beauty' identified by Moor J, is to make an adjustment to the way in which the formula is applied to paying parties with incomes falling in the £156,001–£650,000 range. Mostyn J describes this as an Adjusted Formula Methodology (AFM) to give a Child Support Starting Point (CSSP).

The adapted formula is set out in the Appendix.

In order to calculate the CSSP, the first step is to calculate the paying party’s exigible income. The ‘exigible’ sum, or the paying party’ gross income that can be properly subject to child maintenance payments is as follows:

Gross earned income subtract a reduction for other children living in the paying party’s household (11% for one child, 14% for two children and 16% for 3 or more), then subtract the paying party’s relievable annualised pension contributions, then subtract the grossed-up school fees.

Or algebraically: E = (G x (1-Z)) – P – (S/0.55)

Where:

• E = exigible income
• G = Gross income per P60 or tax return
• Z = the reducing factor referable to the number of children living in the paying party’s household
• P = the amount of pension payments currently being paid
• S = the amount of school fees and extras currently being paid.

This exigible sum is then subject to an adjusted formula. The adjusted formula is calculated by taking the results from the original formula at E = £156,000 in respect of 1, 2 and 3 children and applying a tariff of 2.4% for a single child and 3% for two or more children. The product is reduced to take into account any shared care, as set out in Mostyn J’s Table 2 in order to provide the CSSP in any given case.

In theory, the court, advocates, or even litigants in person would be able to work out the CSSP in any given case by reading across Mostyn J’s Table 2, assuming that they are able to calculate the paying party’s exigible income. This starting point can then be subject to an analysis of budgets in the usual way, and may be a helpful tool at FDR stage.

Problems with the AFM

Whilst the new regime is attractive in that it addresses the original problems, being the per capita disparities and the disparities between the sums proposed by the unadjusted formula and the sums awarded by the court in most cases, it does pose its own difficulties.

The main difference between the AFM and the statutory formula is that the AFM takes into account school fees, which the statutory formula does not. As highlighted by Mostyn J at para [14] of his Appendix, this presents a discrepancy between the payor who has his maintenance obligations calculated by the SoS and the payor who has his maintenance obligations determined under the AFM. Mostyn J gives the following example:

1. A payor earning £156,000 and paying £20,000 in school fees for two children will have no reduction taking into account the school fees and therefore will have a global liability of £40,400.
2. A payor earning £157,000 and paying £20,000 in school fees will be assessed under the AFM and will have a global liability of £36,000.

In the opinion of the writer, it is right in principle that the AFM takes into account school fees, as it seems inherently unfair for a paying party to have their maintenance obligations calculated against income that they are already utilising in favour of the children. However, on the current formation of the adjusted formula, in the above example this results in the ‘higher’ earner having a lower overall maintenance liability.

There is also the further problem that arises where a paying party’s amount of shared care, as calculated by the number of nights that the child spends with them annually, falls close to one of the boundaries set out in the Appendix. Mostyn J gives the example of a payor whose exigible income is £500,000 p.a. whose two children spend 175 nights a year with them and will have a liability of £11,700 per child whereas, were they to instead spend one additional night with the paying party, the liability would reduce to £9,500 per child.

Mostyn J makes the obvious point that the line has to be drawn somewhere at paragraphs [17]–[19] of the Appendix and that for the overwhelming majority of cases there are substantial differences between the majority of members of each ‘cohort’. Whilst that is the case and regimes that draw distinctions between categories of people are always likely to be accused of a certain level of arbitrary delineation, that is likely to come as little solace to those individuals who do fall near the borderlines of any two cohorts.

Conclusion

It is suggested that following James v Seymour the CSSP in non-HECSA cases is easily identifiable:

1. Where the application is the original application and the payor’s exigible income is no more than £156,000 then the CSSP is the unadjusted formula result, less any reduction for shared care.
2. Where the application is the original application and the payor’s exigible income is more than £156,000 but less than £650,000 then the CSSP is the figure derived from Mostyn J’s Table 2 using the cohort that corresponds to the level of shared care and exigible income being derived as explained above.

Mostyn J suggests that the AFM should be a helpful tool used to help settle the growing number of child support cases however, he recognises that even in its revised form it is unsuitable to be used in the following cases:

1. Where there are 4 or more children for whom CSM is to be paid; or
2. The exigible income of the paying party is greater than £650,000; or
3. The paying party’s income is largely unearned; or
4. The paying party lives on capital; or
5. The application is for variation of an existing child maintenance order(in which case the value of the original order adjusted by inflation should normally be used as the CSSP).

In the circumstances above, CSM should be calculated without reference to any CSSP but instead by reference to the statutory provisions under s.25(3) MCA 1973/para 4(1) Schedule 1 ChA 1989 (or in variation cases by reference to the original award adjusted for inflation). Mostyn J gave the example of the Moor J case CMX v EJX (French Marriage contract) in which the Husband’s earned income in the calendar year was $3 million and therefore no CSSP would have applied in that case.

While the solution proposed by Mostyn J addresses the inherent problems with applying the unadjusted formula to cases that exceed the statutory limit, as set out above, it is not without its own limitations.

At paragraph [43] Mostyn J emphasised that the AFM produces a loose starting point which a decision-maker can summarily choose to accept or reject without the fear of appellate review. The judicial uptake on this new formula remains to be seen.

Given the extent of reported litigation in this area in recent years, guidance from the Court of Appeal would be highly welcome but, until then, the latest approach from Mostyn J does at least seem to have clarified the landscape in non-HECSA top-up cases if not necessarily simplifying it.