Sacrificial altars and schedule 1

Following on from last week’s slightly technical pensions blog, and the previous week’s technical explanation of the niceties of a Supreme Court judgment, we are once again bringing you a slightly technical blog. This one arises from an interesting case about how to fund litigation concerning children. As concerns about how to finance legal disputes are usually uppermost in the minds of people going through separation, we thought this was one worth flagging up.

It is a decision of one of our more high profile and flamboyant judges, Sir Nicholas Mostyn, who has a way with words, and concerns an application for financial support for a child made under Schedule 1 of the Children Act 1989.

First a brief reminder of what that is all about.

An application made under Schedule 1 allows a parent who lives with a child to obtain a lump sum, housing fund or even a transfer of property from the child’s other parent, if there is money available. It is distinct from child maintenance, but can be used to top up child maintenance where the paying parent is a very high earner. The claims are brought for the benefit of the child, not the parent. Successful applications can act to provide some parity between the homes of the child’s parents during his or her minority. Financial support will only usually last until the child reaches 18 or finishes education, after which property can revert to the non-resident parent.

Now, the case we are looking at was brought under Schedule 1, but is not about that provision specifically, but rather about costs and funding the litigation.

The case was brought by two female civil partners (referred to as JG and MG in the judgment) who had arranged to have a child with JF who had acted as sperm donor. The child is 7 years old. He lives with his mothers and had contact with his father. Unfortunately the relationship between the mothers and the father broke down and serious difficulties began to arise in contact, which then broke down entirely. Unfortunately the parents ended up in court sorting out contact arrangements and other specific issues relating to the health and education of the child.

The mothers had instructed barristers. They had increased the mortgage on their property to pay costs, but still owed fees to their barristers and to the experts who had been instructed earlier in the case. The father also used a barrister. The child had his own legal representation funded through legal aid.

The court listed a final hearing for which the mothers needed legal representation, but they had by this stage run out of available funds. They were not eligible for legal aid, so their only recourse was to seek an order that the father fund their legal costs. This was the application before the judge on this occasion.

The mothers were making an application for costs funding, not a costs order: a technical but important difference. A costs order is a punitive measure for unreasonable conduct in the litigation, whereas a costs funding allowance is more akin to an interim lump sum payment to cover legal fees. Of course, to the payer the difference may seem academic.

In this case, if legal aid for private children proceedings had not been removed, the mothers would have been entitled to legal aid. The father would not have been ordered to pay their costs, as he had not been in any way unreasonable. However no legal aid is available, and the court found that to make the mothers represent themselves would put them at a huge disadvantage when the father was represented, possibly amounting to a breach of their rights to a fair trial. The only realistic source of funding was the father.

In acknowledging that some people might say it was grossly unjust to make the father pay for the legal representation of his opponents, the judge was clear that the problem had arisen due to the Government’s decision to remove legal aid from family cases. He said: “in the field of private children law the principle of individual justice has had to be sacrificed on the altar of public debt“.

The mothers were awarded a costs allowance to cover 80% of their historic unpaid legal fees (around £20,500), and the father was also ordered to pay for 80% of the therapeutic work designed to rebuild his relationship with his son. The judge put the blame for this “sorry state of affairs” squarely at the feet of the Government.

It is likely that these sorts of applications will become more frequent. If you would like to speak to us about Schedule 1, costs, or any other aspect of family law, you can reach us on 01223 443333.

 

Pension changes and divorce

It has been a while since we have written about pensions. To many people they are simply a pot into which money is put on a regular basis in the hope and expectation (these days looking increasingly fanciful) that they will provide for you in retirement. However, pensions are one of the assets which can be transferred or shared on divorce or dissolution. In many cases they can be some of the most valuable assets belonging to the parties. So, a brief reminder of what can happen to pensions on divorce is probably timely.

There are three main ways in which pensions can be dealt with on divorce. The first is known as “offsetting” and is where one spouse keeps all or part of the pension pot in return for the other spouse having a larger share of other assets, often the house. The second option is to “attach” for the other spouse part of the cash lump sum and/or monthly payments the pension holder will receive on retirement. Pension attachment is done only rarely, and indeed there can be problems with both of these options, particularly in longer marriages, or where the pension assets are complex. The third, most commonly used option is “pension sharing”. This works by splitting a pension between the spouses in whichever proportions are agreed or ordered. A specified percentage is carved out from one pension, and the recipient can then either form a new pension with it or add it to their existing pension fund, depending on the terms of the scheme.

In a pension sharing order, calculating the appropriate percentage split can be tricky. This is particularly true where some of the fund may have been built up prior to the marriage, or come from non-marital sources, or where the couple are older and the pension is already in payment. Where pensions are in payment, they may still have a value and be shared as a capital asset, or they can be treated as an income stream on which a maintenance order in favour of the other spouse could be imposed.

Of course, the usual family financial principles apply to pensions as they do to other assets: a solution agreed or imposed between those divorcing needs to take into account fairness, a check against equality, meeting needs, sharing, and in some limited cases compensation.

A recent case considered how best to deal with the pension assets of a couple divorcing now after 43 years of marriage, in their 70s, and has thrown up some new guidance. The couple were married in 1969 and had four children, all adult at the time of the hearing.

The couple were well-off pensioners: the husband had pension investments worth £1,865,430, and the wife had pension investments of £753,000. The wife wanted a pension sharing order to provide her and the husband with equal pension income for the rest of their lives. Due to the way pension fund values are calculated, including the longer life expectancy of women, equality of income for the wife in this case (as she was younger at age 70 than her 73-year-old husband) would have meant she would have had a greater than 50% share of the combined pension fund values. This kind of solution has found some favour with judges in recent years.

Here though, the judge said that such an approach was “unfair and anachronistic in a case where the assets exceed the parties’ needs.” He went on to point out that the recent changes to pension regulations, removing the obligation to purchase an annuity with a pension fund at retirement, has meant that pension investments can be treated almost as bank accounts for people aged over 55 (subject to tax charges). As the flexibility of these assets has changed as a result of the government’s changes to the regulations, the courts’ approach to them will also need to change. He said that giving a wife more than her husband on account of her age or gender would be unacceptable discrimination, unless the case was governed solely by the needs of the parties. Here, as there was more than enough to go round, it was not.

The judge argued that if one spouse, or civil partner, received more of a pension fund simply on the basis that they were likely to live longer, now the nature of pension assets has changed that approach would logically have to extend to all capital assets being divided on divorce. This could not be right. When cases are not governed solely by needs, it would be incorrect to distribute a pension fund on the basis of equality of income for the future, which would necessitate unequal division.

The judge then went on to split the pension funds equally by reference to their values. This had been a long marriage where both parties agreed that the sharing principle applied – i.e. there was enough to meet the future needs of both of them, and have money left over to share. In other cases where marriages have been of shorter duration, or where there is not enough to meet needs, pension funds may be split unequally. However the important point to come out of this case is that dividing pensions by reference to future income streams may no longer be appropriate due to the change in the nature of pension funds on retirement.

Pensions are complex things, and the law relating to them on divorce is no less complex. If you have any questions arising from the above, or about pensions or finance on divorce generally do get in touch with us to make an appointment on 01223 443333.

Delay is no bar to a money claim after divorce

The Supreme Court has just released its decision in the case of Wyatt v Vince. We thought we’d get in early with a blog, as we suspect that there may be headlines in tomorrow’s papers about ‘the door being left open for greedy wives to claim millions many years after divorce’, when in fact that’s not quite the full story.

Let’s start with reminder about the background to the case: Dale Vince and Kathleen Wyatt married in 1981. At the time Ms Wyatt had a daughter from a previous relationship who they treated as a child of their family, and they went on to have a son together. During their relationship they had a “hippy” lifestyle and had no assets of significance. They separated in 1984, and both followed a new age traveller lifestyle for many years – Mr Vince lived in an old ambulance, and eventually started making his own electricity using a home-made turbine, which ultimately led to his fortune.

Some years after they separated, there were divorce proceedings in the County Court (as the family court was back then). They had no assets and were both receiving state benefits at the time. The only surviving document from those proceedings was the decree absolute of divorce, made on 26th October 1992. Mr Vince claimed that at that time Ms Wyatt made a court application for ancillary relief (i.e. a financial settlement on divorce) which was dismissed, but there was no evidence of this as the court file seems to have been lost. Ms Wyatt raised her children without any financial support from Mr Vince.

In 1995, ten years after the couple had separated, Mr Vince founded Ecotricity, the world’s first green energy company which has since grown into a very successful business, worth around £57m.

Ms Wyatt started a new relationship in 1995 and had two further children by her new partner. The parties’ son went to live with Mr Vince in 2001. Mr Vince remarried in 2006 and had a child with his new wife.

In the absence of evidence that Mr Vince and Ms Wyatt’s financial claims against each other on divorce were dismissed, they still exist and so Ms Wyatt was still able technically to make a claim for some money from Mr Vince. She made her claim in May 2011 when she applied to court for a financial remedies order as well as a costs allowance of £125,000 to finance her claim. The application went to the High Court where Mr Vince cross-applied to strike out Ms Wyatt’s claim as an abuse of process because it was so long since the divorce. The High Court declined to do so, and ordered that Mr Vince furnish Ms Wyatt with a fighting fund to bring the claim against him.

Subsequently Mr Vince appealed successfully to the Court of Appeal who ordered that Ms Wyatt’s claim for a housing fund and capitalized lifetime maintenance should be struck out. It said the jurisdiction of the family court to strike out cases which were hopeless (as Ms Wyatt’s was considered to be as it was brought too late and all his wealth had been generated well after they were divorced) should operate in the same way as the jurisdiction in the civil courts. This is a technical point, but is the crux of this case.

In a decision which is no doubt correct on a strict legal point, but will seem unfair to many, the Supreme Court has allowed Ms Wyatt’s appeal against her claim being struck out.  The judgment and a press summary are here.

The Supreme Court has decided that Ms Wyatt is able to make a financial claim against her former husband because there is no evidence that, at the time of the divorce, any financial orders were sought or made. She has not remarried so her claims for maintenance remain ‘live’. This alone acts as a warning to anyone who does not sort out the financial aspects of their separation at the time that they can come back to bite many years later.

Secondly, when looking at whether Ms Wyatt’s case could or should be struck out, the Supreme Court has explained that whilst the family court can strike out a “statement of case” – a claim form or supporting documents – it cannot make a summary judgment dismissing someone’s claims altogether if there is a legal basis for them, i.e. in this case that no financial order was made at the time of divorce and she had not remarried. That power does not exist in the family court. When faced with a claim for financial provision following divorce or dissolution the court has a statutory duty under section 25 of the Matrimonial Causes Act 1973 to determine that application having regard to all the circumstances, including the factors set out in section 25. If the court were able summarily to dismiss a claim through the summary judgment procedure they would be failing in their statutory duty.

So, the Supreme Court held that the Court of Appeal was wrong to have given its quick dismissal of Ms Wyatt’s claims. Her claim was not an abuse of process as it was legally recognisable, so should have been able to proceed to trial. The effect of the judgment is that her case will now proceed to be heard in the Family Division of the High Court. What it doesn’t mean is that she will necessarily receive a large sum of money, or indeed any sum at all.

The Supreme Court judges pointed out that Ms Wyatt faces formidable difficulties in seeking to establish that a financial order should be made in her favour, including the short duration of the marriage and the long delay since separation. The judges observed that her needs now are not clearly referable to her marriage to Mr Vince, although she has made a greater contribution to the care of the children which might “justify a financial order for a comparatively modest sum”. It seems clear from the judgment that the judges feel she should be given a chance to put her case, but that any award may not be a significant sum (although, that said, it may still be significant to Ms Wyatt).

Aside from some rather technical procedural points, this case is a clarion call for finalising the financial arrangements arising from a separation at the time. Who wants to be litigating over finances thirty years after separating from a spouse?

If you have would like to talk about claims many years after divorce, do give us a call on 01223 443333 to make an appointment.

No politics please, we’re British

Religion and politics can be very emotive subjects. Especially when parents hold differing religious or political affiliations and cannot agree on how their children should be involved in religious or political activities. With the general election looming, the issue of politics is at the forefront of many people’s minds, and we were particularly interested to read about a case dealing with the involvement of young children in the political party of one of their parents.

The case, Re A and B (Prohibited Steps Order at Dispute Resolution Appointment) 2015 saw a judge banning a UKIP Parliamentary candidate from bringing his children to election rallies, and then the decision being overturned on appeal.

The parents had five children. The eldest two lived with their father (the UKIP parliamentary candidate), and the youngest three lived with the mother, who held different political views. There had been ongoing litigation between the parents for some years but at a recent hearing, the mother had expressed concern about the effect on the children of the father involving them in his political campaigning. The judge made an order which said in its preamble (the non-legally binding background to the order) that the court held the view that it is “inappropriate for young children to be actively engaged in political activities as they may be emotionally damaged by potentially hostile reactions from members of the public.” The judge went on to order that neither parent was to involve the two youngest children (both under the age of 10) actively in any political activity.

The father appealed, arguing that the judge was plainly wrong when she made the order in relation to political activity, and was procedurally wrong in the way she dealt with the issue.

It is worth pointing out that a court does have power to set conditions about the time a child spends with a parent (known as contact conditions), and can also make a Prohibited Steps Order by which a parent is prevented from doing a specified activity with a child. A court will only make those orders if they are necessary and proportionate, and if it is better for the child concerned that the order is made rather than not being made, but there doesn’t have to be a specific application in relation to the particular issue for the court to take action – it can do so of its own motion, if in the interests of the children to do so.

The judge who made the original order in this case had expressed concern about the reactions of members of the public to UKIP campaigning when the children were present. The children had been taken out campaigning previously: one of them had had eggs thrown at him, and another had had a UKIP poster ripped up in her face. The judge considered this would be emotionally damaging for the young children so made what she thought would be a “ neutral” order, preventing both parents from directly involving children in political activities.

The appeal court found that the father had not been given notice of the mother’s intention to ask a judge to prevent him from involving the children in his political activities, so he had not had a chance to prepare his evidence dealing with this issue. This effectively rendered the judge’s decision unfair. There were also difficulties with the way the order had been drafted – no consequences of breaching the prohibition on political activity were included, and the banned political activities were not properly defined. Therefore the father succeeded in his appeal and the matter of involving children in political activity is to be reheard by a different judge, who will have the opportunity of making a fresh decision on all the evidence. It may go the father’s way, or the end result may be the same; we shall have to wait and see.

In another recent case Darlington Borough Council were strongly criticised by the President of the Family Division for having removed a young child from the care of his father because the father had connections with the far right political group the English Defence League (EDL). Social workers at the council considered the politics of the EDL to be immoral, and believed the child should not be exposed to those views. The President of the family court (‘top judge’) Sir James Munby was clear that local councils are not moral guardians, and that provided there are no welfare concerns the child should be looked after by his father. You can read the Guardian’s article about this case here: or the judgment here.

As politics rise to the forefront of many people’s minds this year, what do these decisions tell us? The Human Rights Act 1998 (which enacts the European Convention on Human Rights) protects the right to family life, which can only be interfered with when proportionate and necessary. The courts seem to be making it clear that political views which some may find distasteful are not grounds to interfere with family life unless there is a risk to the welfare of the children involved. Furthermore, if such issues are raised in litigation they must be fully explored in evidence before a decision is made.

If you would like to talk about any of the issues raised above, you can contact us on 01223 443333.