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The limits of ‘special circumstances’: UD v DN (Schedule 1, Children Act 1989; Capital Provision) [2021] EWCA Civ 1947

6th January 2022

INTRODUCTION

In this case the Court of Appeal (King, Moylan, Newey LLJ) heard an appeal from a decision of Williams J dated 7 July 2020, by which the appellant father (‘F’) was required to settle a property in London in trust for the benefit of the parties’ two younger children, then aged 19 and 20.

The impugned order provided that the trust in question was to terminate on the first to occur of a number of events, including the date on which the youngest child turned 18 or 6 months after the children completed full time tertiary education. Finally, at the end of the trust period 6.5% of the gross sale price or market value of the property would be held on trust for the benefit of the children absolutely.

F sought permission to appeal in respect of a number of provisions of the order of Williams J. Moylan LJ granted permission to appeal only in respect of this settlement of property order. The three grounds of appeal were that:

  1. There was no jurisdiction for the order in respect of the 19-year-old, since the court lacks the power to make an order under para 1 of Schedule 1 of CA 1989 once a child has reached the age of 18.
  2. The court did not have the power to make a property transfer order or a lump sum order who is a child at the date of the order, but who will be aged over 18 when that transfer or payment actually took place.
  3. The judge was wrong to make an order for capital provision when the children were adults, since no “special circumstances” applied.

Moylan LJ (‘the judge’) (who gave the leading judgment with which King and Newey LLJ agreed) allowed F’s appeal on the third ground.

BACKGROUND

The parties were in a relationship from 1996 to 2017/18 and had three children. By the time of the final hearing the eldest was 22 and the younger two were 19 and 14. The mother (‘M’) moved to England in 2010 with the children and lived in the London property referred to above, which was valued at c. £10 million. In late 2017 F had given the 22-year-old c. £600,000 for him to buy a property.

In February 2018 M issued proceedings under Schedule 1, when the children were 20, 17 and 12. By the time of the judgment and later order handed down by Williams J the middle child was 19.

In addition to the property settled on trust under appeal, F was also ordered to pay c. £200,000 to M for the purchase of a car and for other expenses. Periodical payments were ordered at £200,000 pa, decreasing to £160,000 once the middle child finished tertiary education and then ending on the youngest turning 18 or completing the same.

M had argued for outright capital provision for the two younger children. Her argument was that - given F had already given the eldest son the money to purchase a property - the likelihood was that he would have done the same for the younger children, but for the legal proceedings. M claimed that F’s behaviour towards her and the children had forced her to seek “protective orders against F”, which would yield the result that F would no longer meet his parental responsibilities towards the children and would no longer give them money to purchase their own properties. Therefore, M asked that the children would be provided with this capital provision which they had been effectively deprived of.

M submitted that such provision did not require any special circumstances, but that if it did, it was justified by the level of abuse and trauma suffered by the children.

During the hearing Williams J had raised the issue of whether, once the children were adults, there would be any risk of F using his ‘financial muscle’ to subject them to coercive behaviour, and whether he could make an order for capital provision to protect them from this possibility.

JUDGMENT BELOW

Williams J considered whether capital provision could be made for the children, noting that M’s open offer had been for the family home to be settled on a ‘conventional Schedule 1 trust’ basis, after the term of which the two children would receive £950,000 outright as housing funds, from the sale of the property.

F had argued that there was no jurisdiction for such an order since the middle child was over 18 and any application for his benefit would have to be made by him in his own right under Schedule 1, para 2. M argued that, on application under Schedule 1, the power to make one of the ‘menu’ of orders was triggered, and both of the younger children had been under 18 at the time of application.

The judge agreed with M for a number of reasons:

  1. The use of the word ‘is’ in paragraph 3(2)(a) supports the construction that an order can be made when the child is 18, including other orders under para 1.
  2. Para 3 deals with duration of orders rather than the jurisdiction of the court to make orders.
  3. Parliament cannot have intended that a claim could fall simply whilst legal proceedings were ongoing simply by a 17-year-old turning 18, due to procedural delay.
  4. If this was wrong, then the court could simply deem an application to have been made by the 18+ year-old, albeit with a smaller menu of orders available.

Williams J then considered Chamberlain v Chamberlain [1975] 1 WLR, J v C (Child: Financial Provision) [1999] 1 FLR 152 and Re N (A Child) (Financial Provision: Dependency) [2009] 1 WLR 1621. He held that the ‘net effect’ of these authorities was that what amounted to ‘special or exceptional circumstances’ was restricted. No gloss was required on statute, and that the making of outright capital orders for the benefit of the children was a power which could be deployed in limited circumstances.

As one of these circumstances, he held that they could exist where “there is something about this child or this child’s situation vis-à-vis the parents that creates a situation which exceptionally … generates a need for the child to be provided with capital …”

Williams J decided that capital could be provided outright where some ‘continuing dependency’ of child on parent could be identified. He defined ‘dependency’ broadly, being some form of vulnerability or need continuing from childhood into adulthood which could be remedied by capital provision. Williams J held that the younger two children in this case had just such a dependency and vulnerability.

In coming to this decision, the judge took into account F’s previous behaviour. F had threatened to slit the children’s throats and had told them he would throw them out of the house. F had also encouraged his older children from a different relationship to join his business in Russia. Williams J was of the opinion that F would attempt to bring pressure to bear on his youngest children to do the same and that “the children would be vulnerable to the father imposing a financial ultimatum on them”. Williams J was clear that his assessment of the children’s special circumstances was not based on medical evidence, but on the entirety of the evidence before him.

Williams J then held that the appropriate capital sum would be c. £650,000 (broadly equivalent to what the eldest son received), equating to c. 6.5% of the value of the family home.

F’s SUBMISSIONS

F submitted that the jurisdiction under Schedule 1, para 1 only allowed an order to be made when the child ‘is’ under the age of 18. The legislation refers repeatedly to ‘child’, which is defined in s.105 CA 1989 as ‘subject to paragraph 16 of Schedule 1, a person under the age of eighteen’. Para 16 of Schedule 1 defines a child, for the purposes of Schedule 1, as including ‘in any case where an application is made under paragraph 2’, the person making the application.

F then submitted that, for the same reason, the court had no jurisdiction to make a property transfer order or lump sum order which would take effect when the child was over 18. H added that no ‘special circumstances’ applied in this case, and that there was subsequently no justification for the judge having awarded capital outright. In terms of the ‘dependency’ relied on as establishing ‘special circumstances’ by Williams J, F noted that no evidence had been heard on this matter; it had simply been something alighted upon by the judge in closing submissions.

As a result, that ‘dependency’ was not explored in submissions and had not formed part of M’s case. M had been arguing in fact that capital provision should be provided not because of some vulnerability in her children, but because she felt that displeasure at the legal proceedings would lead F to not provide outright capital to the two younger children as he had for the elder one. The evidence from Cafcass, provided in different proceedings, did not establish any mental health issues on the part of the children, for instance. Further, F noted that ‘conduct’ was not one of the factors mentioned in para 3 of Schedule 1.

M submitted that the court did have jurisdiction to make orders for the benefit of a child who was younger than 18 at the time of application; the date of the judgment or order did not alter this. M also noted the problems which would arise if one parent could effectively nullify a claim simply by delaying proceedings.

M said of F’s second ground that it was a new issue not raised below, but that there was clearly jurisdiction for judges to make capital orders. Rather, the issue was the exercise of discretion to make the relevant order and, although the judicial trend was against making such orders, it was clear that they could be useful in certain scenarios, such as when the paying parent wants nothing further to do with the child.

M then dealt with the judge’s decision on ‘special circumstances’, which M submitted were a broad category which judges, including Munby J in Re N, had emphasised should not be strictly limited. The judge had been entitled to find such circumstances in this case, and that there had been a wealth of evidence that the children were vulnerable to the continuing risk of F using his financial power to control them.

LEGAL FRAMEWORK

Moylan LJ then set out the legal framework, including the relevant passages of Schedule 1 and the Law Commission reports of 1982 and 1986 on which Schedule 1 was based.

Moylan LJ concentrated on the words of Scarman LJ in Chamberlain v Chamberlain. It had been suggested that Scarman LJ had indicated that capital provision for children directly would not be required so long as “the parents meet their responsibilities to their children”. At first blush this seemed to further M’s case that, conversely, where parents were not going to meet those responsibilities, capital provision would be needed. However, Moylan LJ emphasised the rest of Scarman LJ’s sentence, being “… as long as the children are dependent on them’, which Moylan LJ held referred to the minority of those children. Scarman LJ was not thereby justifying capital provision to over-18s where a parent had decided not to continue to support them financially into their majority.

Moylan LJ also noted from J v C and Re N that the tenor of the authorities was clearly that ‘dependency’ ended at 18 for the purposes of Schedule 1, absent special circumstances or further education.

DETERMINATION

Moylan LJ first dealt with the issue of whether the court could lose jurisdiction to make orders in respect of a child who turned 18 between application and order. He noted that this was a novel argument, having never seemingly been raised before, and that it would have the surprising effect, if true, of meaning an application could be defeated by ‘the effluxion of time’. Moylan LJ was not convinced by F’s argument that the child in question could simply make an application in their own right, because this would still mean that the applicant parent would lose out, particularly if the child did not want to make an application.

Moylan LJ echoed the words of Thorpe LJ in Jones v Jones [2001] Fam 96 (in the context of periodical payments under the MCA 1973) that this was a straightforward point without much scope for elaboration. The legislation included no clear, express provision to the effect that the parent could be deprived of the underdetermined right to financial provision in such a way [64]. If an application was made when the child was below 18, the court would continue to have jurisdiction to make all of the Schedule 1 orders [68].

Moylan LJ dealt briefly with the second ground of appeal that the court did not have jurisdiction to make an order to make a property transfer or lump sum order to or for the benefit of a person who would be 18 when it took effect or would be paid. The judge noted that he regarded the order as a settlement of property rather than a transfer of property and that the settlement was made at the date of the order, even if the children’s contingent interest would allow them to later receive the 6.5%. The consequence of F’s submissions on this point would be that the court would have jurisdiction to order periodical payments beyond a child’s 18th birthday based on special circumstances or full-time education, but not capital provision. The judge dismissed this ground too [74].

The judge then dealt with the third ground, being the judge’s decision to award the children a deferred, absolute interest in the family home. Moylan LJ considered that the necessary special circumstances needed to be exceptional and must also relate to the children, such as a physical or mental disability. The judge was clear that no such circumstances existed in this case [77].

Moylan LJ observed that the Williams J had focussed on a view that F would not continue to provide for the children as other wealthy fathers would, and that he might seek to manipulate the children. Moylan LJ did not consider this to come within the bounds of ‘special circumstances’ [80]. Williams J’s attempt to connect this with the children having a ‘vulnerability’ was understandable but not permissible, as shown by the fact that their potential need for therapy was not claimed as a financial need [81]. In addition, M was not able to point to any evidence which suggested that the children would be susceptible to manipulation by F.

Moylan LJ therefore decided that the third ground of appeal should succeed and that the long-term capital provision made by Williams J should be set aside [86].

Henry Pritchard, Barrister at 1 Hare Court