HHJ Hess. Schedule 1 application with a ‘more modest’ asset base regarding residence in a property subject to a mortgage and ‘top-up’ maintenance for a disabled child.

Background

The applicant mother was 37 years old and had paused a career in media. The respondent father was a 36-year-old who owned a well-known manufacturing business, of which he became chairman in 2022. The parties began cohabiting soon after commencing their relationship in a flat (‘the flat’) owned by the respondent. Their child, who is a child with additional needs, was born in 2017 and the subject of a child arrangements order which saw him live with the mother and spend four overnights in a fortnight with the father.

The parties’ relationship ended in 2018 but they continued to cohabit in the flat thereafter. The parties separated physically in 2020 and the applicant remained living at the flat with the child while the defendant rented elsewhere. F had married and had a child with a third party in the time that had passed. His request that M vacate the flat had led to these proceedings, although he had agreed M should remain in the flat pending resolution.

Property

The flat was held on a 999-year leasehold and was subject to an interest-only mortgage with an outstanding balance of £129,873. Net proceeds on sale would have been in the region of £370,000 and this was the ‘only real property’ owned by either party.

Other assets included 3.75% shareholding held by F in his family’s trading company. It was worth £67,510, illiquid and producing no dividends. The father was in the pool of potential beneficiaries of a number of discretionary trusts which held only shares of his family’s businesses; no distributions had been made since 2016 and the court was informed that the profits from the businesses were currently retained within the company and so there was nothing to distribute. Although this might change in the future, this was uncertain and not the case in the foreseeable future.

F also owned a 1.95% stake in a music subscription company purchased by a good part of inheritance received from a grandparent. The father was unable to sell any shares at the time of these proceedings but had done so in in 2023 when he sold 689 shares at £72.55 a share – his remaining shares at the same price would be worth in the region of £386,270 after deduction of CG and these shares were found to be a ‘a substantial and potentially valuable investment which could produce a significant sum for the father at some point’.

The father’s gross annual income was £110,000 and had modest ongoing financial support from his parents.

The mother had no assets. She was a recipient of state benefits and had not worked in recent years but expected to start doing so in the near future, foreseeing £1,000 pcm as a starting income and higher levels within a reasonable period.

Neither party had any significant savings, debts or pensions and the outcome was determined on the basis that neither party was likely to be able to purchase alternative property.

The orders sought

The applicant sought the following orders:

(i) the flat to be settled on the applicant until the child completed tertiary education;

(ii) F to pay monthly mortgage payments and other household outgoings;

(iii) the defendant to pay ‘top-up’ maintenance in addition to CMS child support in order to meet expenses such as swimming classes;

(iv) F to retain the child on his private medical care plan; and

(v) F to pay a lump sum of £17,610 to fund expenses such as a new anti-allergy carpet, iPad and car.

F sought orders that he pay a lump sum of £24,000 in order to cover 12 months’ rent, i.e. £2,000 PCM on the basis that the applicant would vacate the flat. Regarding child support, he sought to continue to pay at the rate assessed by CMS and offered to meet other expenses for the child on a voluntary basis.

Jurisdictional issues

It was argued on the father’s behalf that there was no jurisdiction to make some of the orders sought by the mother.

It was argued that the flat could not be settled on the applicant because of its mortgage, which meant the applicant was not entitled to that property entirely, which would mean that an order settling the property on the applicant would be an order that the defendant borrow sums for the purposes of funding a settlement. It was found that the court did have the power to settle the flat on the applicant despite the mortgage as this would not be an order for fresh borrowing and the defendant was in fact entitled to the property although that entitlement was subject to a mortgage.

It was also found that there could be no order for ‘top-up’ maintenance as the father’s income did not pass the CMS threshold of £156,000 p/a gross; by extension, there could be no order for him to meet the mortgage payments as this would be a ‘disguised top-up maintenance order’ – it was said, obiter, that the situation might be different if there were any capital repayments to be made.

The exemption relating to disabled children under s 8 Child Support Act 1991 did not assist in this case. (This is presumably because M was not seeking expenses relating to a disability.)

Outcome

It was found that both parties needed a home in which the child could stay with them. The child’s disabilities meant he needed the most secure housing option, which became material as there was no way to provide purchased homes to both parties.

F was in a stronger position to rent and the applicant M should remain in the flat. She was to pay the mortgage, given (i) the possibility of entering into a new fixed interest rate for a longer period, (ii) her willingness to offer an undertaking to pay the mortgage as well as indemnify F against the same and (iii) F’s willingness to undertake to facilitate an arrangement for the most advantageous rate during the settlement period.

The settlement period would be to the end of the child’s secondary education and no lump sum orders were made.

Costs

An order for costs was made to reflect that the applicant had essentially won, although the award was reduced to reflect F’s success on ‘quite a number of points’ and because M’s request for £19,660 plus VAT was hard to justify when she had been in person at each hearing and her lawyers had not executed much inter-partes correspondence. F was ordered to contribute to £12,000 of the applicant’s costs.