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Family Law Update

Date: 05 Mar 2012

Citywealth

Experts from Penningtons Solicitors look at some recent developments in family law:

Response to the Family Justice Review – fathers and shared parenting

The Family Justice Review (FJR), led by David Norgrove and published in November 2011, made proposals for significant changes to the way in which family cases are dealt with in this country. The Government has now responded, indicating its proposed next steps, and here we take a look at the issue of post-separation parenting.

The FJR emphasised the importance of both parents sharing responsibility for their children’s upbringing and considered how that should be achieved, looking at issues of education and encouraging agreements outside of court for many families. One of the most contentious issues relating to shared care was whether there should be a statement in law which either recommended that there should be shared care wherever possible, or that there should be a presumption of shared care in all cases, unless proved to be inappropriate.

Fathers’ groups and others had argued that although the current law appeared to treat both parents equally with the same rights and parental responsibilities, the reality was that fathers often had to fight to resist the suggestion that their contribution to children’s care would be secondary. They argued that in the majority of cases following separation, care of the children was often given to the mother on the assumption that this would be in the best interests of the children and that involved fathers face an uphill struggle for recognition.

The FJR decided not to recommend a major change to the law to include a presumption of shared care in the legislation, in part because of concerns that any such principle would conflict with the major principle in the Children Act 1989 that children’s welfare is paramount in any decision being made. The Review Panel looked at the Australian experience of amending the law in this way, which seemed to show that the presumption had led to many more contested cases, with some fathers interpreting shared care as always meaning equal time, leading to arguments over this interpretation.

Ken Clarke has now announced, however, that the Government intends to reject these recommendations of the FJR. Proposals will be brought forward to amend the Children Act 1989 so that the law could make clear that children could enjoy ‘an ongoing relationship with both parents’ and states the intention that any such change would not be seen as a ‘right’ for parents, but as something which ‘in most cases will contribute to the child’s welfare’.

Ken Clarke stated that “We want to put back confidence that the courts will have proper regard to the position of fathers and the right of the child to have contact with the father.” He also signalled a desire to address complaints from grandparents’ groups that their needs are often ignored when children’s futures are being discussed.

This year will see further proposals and consultation on how the principle that a child should have a meaningful relationship with both parents would be brought into effect.

The Child Support Agency – proposals for change

Political waves up and down the country in various stakeholder groups have been caused, not just by the Government proposals over shared parenting issues (see above), but by proposals for changes to child maintenance arrangements. In the past few months the Child Maintenance Enforcement Commission has consulted on a number of proposed changes. The most significant change will be the introduction of the ‘gross scheme’ rules in October 2012 which will result in child support being calculated on the basis of a non-resident parent’s gross income, reducing arguments about the level of expenses, tax, allowable benefits and pension contributions which should be deducted.

Under the gross scheme, child maintenance will now be charged as follows:

For the first ¬£800 of the non-resident parent’s gross weekly income the rates will be:

– 12% for one child
– 16% for two children
– 19% for three or more children

Where the income exceeds £800 a week, the following rates will apply:

– 9% for one child
– 12% for two children
– 15% for three or more children

Other key changes and proposals that have attracted political commentary are:

Рa charge of £20 for an application to the Child Support Agency

– a potential monthly ‘tax’ for so called ‘collection charges’ of up to 32% each month in addition to child maintenance payments. For example, for an assessment of ¬£100 per month, the non-resident parent may need to pay ¬£120, but the person with care would only receive ¬£88. Gingerbread, on behalf of mothers, has argued that the non-resident parent – generally the father – should pay all of these charges, without deduction to the receiving parent. This has been fiercely challenged by
Families need Fathers and other fathers’ organisations.

– the inclusion of any foreign income into the qualifying income. This would mean that a person habitually resident in the UK, but earning money in another country would now have this income included in a calculation for child support. However, it is not clear how successful this would be in practice, as only earnings disclosed to HMRC would be caught.

– an improved Child Maintenance Options service so that parents are provided with impartial advice and encouraged to enter into Family Based Arrangements.

– a service that will provide parents with immediate information about the other parent’s annual income as declared to HMRC through P60s or tax returns. For a fee of around ¬£25, a person with care will be able to obtain this information over the phone, which the Government hopes will encourage openness and more private agreements without the need for state intervention. However, concerns have been expressed about disclosure of information issues.

Melanie Barnes has been involved through the Resolution Child Maintenance Committee in proposing the introduction of enforceable maintenance agreements. In line with moves towards recognition of privately negotiated agreements in other areas of law, there is now increased interest in the approach in this area. The committee will be discussing this approach with CMEC and Maria Miller, the Minister for the Department of Work and Pensions. Research has shown that an agreement reached through private negotiations is generally complied with and leads to greater compliance, so this is a mechanism whose introduction could see a reduction in difficulties in at least some cases in the future.

The EU Maintenance Regulation 4/2009 – harmony in Europe?

The free movement of families within the European Union has brought the need for ways of enforcing maintenance payments across international borders sharply into focus. The EU aims to provide an efficient system for enforcement of maintenance obligations in all 27 member states by providing that they are directly enforceable in Family Proceedings Courts through the introduction of Maintenance Regulation 04/2009.

Previously, an order of a court needed to be formally registered in order to be enforced, but from 18 June 2011, a creditor who is owed maintenance can enforce an ‘authentic instrument’ (such as a nuptial agreement), agency decision or court order directly. Such direct enforcement can be either through the Family Proceedings Courts or the REMO (Reciprocal Enforcement of Maintenance Orders) Unit of the Office of the Official Solicitor and Public Trustee and can be achieved whether or not the family obligation or agreement would be legally enforceable in this jurisdiction. Maintenance may relate to child or spousal maintenance for periodical payments, lump sums or property transfers, obligations between family members or even perhaps pension benefits or financial provision from an estate. The Maintenance Regulation will, therefore, have far-reaching effects to procedure in relation to family and private client matters. An assessment of the Child Support Agency is also considered to be an enforceable decision so any arrears of child support in this country can also be enforced against a defendant living abroad in another member state.

However, problems of interpretation are bound to arise under the Maintenance Regulation, as maintenance has been defined autonomously and relates to need. In contrast, when reaching a decision following divorce, the English court uses a wide discretion in dividing assets under the Matrimonial Causes Act 1973 which involves principles of need, sharing and compensation. This has already presented problems for other member states and in a recent German case, the order was not enforced as it was held to be a case of ‘asset division’, rather than maintenance for the support of the wife.

In dealing with cases where the parties live in one member state, but have assets or investments in another, it is worth making early enquiries about whether there have ever been any previous agreements dealing with these assets, and to consider how these may impact on any future separation or proceedings. The Maintenance Regulations will be relevant in respect of immigration, financial planning and family law so it is essential they are kept in mind when dealing with clients who may have prior agreements or assets abroad.

Most importantly, time is often of the essence in international cases so the advice of an expert should be sought where there appear to be issues that may involve a potential separation or divorce.

‘Carer’s allowance’ – spousal maintenance for unmarried parents

Where monthly payments of maintenance are to be made for a child by one parent to the other, it is the Child Support Agency that deals with the calculation and enforcement of payments in most cases. However, the court retains jurisdiction to make orders by consent upon divorce and can also make orders for the benefit of a child under Schedule 1 of Children Act 1989, whether or not the parents were married. Those orders are:

– periodical payments and secured periodical payments for step-children
– ‘top-up’ orders following a CSA calculation where the non-resident parent earns more than net
£104,000 per annum
– lump sum orders
– settlement or transfer of property

This means that an unmarried parent can make an application for financial support on behalf of a child and that financial support can look, in some ways, similar to that which could be obtained by a divorcing spouse. There are, however, significant differences. There is no limit to the number of lump sum orders that can be made throughout a child’s life and where a property is provided to give the child a home, the property will revert to the paying parent at the end of the child’s minority. It has been an important principle that the unmarried parent with whom the child lives is not entitled to the same kind of provision as a divorcing spouse; they will not benefit permanently from any property and will not receive maintenance for themselves. So whilst the equivalent of ‘spousal maintenance’ is not provided for in legislation, precedent cases have allowed for a ‘carer’s allowance’ to be included in provision for child maintenance which in some cases constitutes a significant income, effectively for the parent.

Schedule 1 orders are more common where the non-resident parent is wealthier than the person with care, and are more often brought where property and high level of maintenance is sought. In the case of FG v MBW (2011) EWHC 1729 (Fam) Charles J had particular regard to an earlier case of Re P (Child Financial Provision) (2003). In this case it was held that the welfare of the child is a constant influence on the exercise of the broad judicial discretion and that the award for the benefit of the child can include an allowance for the primary carer in recognition of the commitment, responsibility and often, the sacrifice of that person.

Carer’s allowance was also referred to in H v C (2009) EWHC 1527 which involved a mother’s application for two children aged 17 and 14 in a case where the assets of the father were estimated in the region of ¬£58m – ¬£123m. This is relevant as it is more likely that a carer’s allowance will be awarded where the non-resident parent is extremely wealthy. In this case the judge commented that a carer’s allowance component can vary from time to time to reflect the realities and changes in the child’s life and may, in particular, fall for reconsideration if and when that child goes to university. It was said that caring in a real practical sense, as opposed to ‘mere’ emotional care, does not cease merely because a child is at university or college. The order therefore made provision for an order that ¬£10,000 per annum be paid directly to the child, and ¬£4,000 be paid to the mother in addition to the tuition fees. Maintenance would then increase to ¬£71,000 per annum for the younger child as the mother would still require a carer’s allowance.

An order for periodical payments will not continue beyond the child’s 17th birthday but there is discretion to extend the order for an additional year where the child continues in education or there are special circumstances such as a disability. As university fees have now significantly increased, it will be interesting to see if the court will be willing to extend responsibility for children, not only where a property order is made but for periodical payments. In the case of N (A Child) [2009], Munby reviewed much of the case law to date and referred to section 1(1) of the Family Law Reform Act 1969 where Parliament reduced the age of majority from 21 to 18. He concluded that ‘special’ or ‘exceptional’ cases apart, any capital settlement under Schedule 1 should be expressed as terminating upon the child attaining the age of eighteen or completing tertiary education.

In that case, Baker J referred to ‘the increasing modern phenomenon of adult children who refuse to fly the parental nest, what have been called KIPPERS (kids in parents’ pockets eroding retirement savings)’ but this may perhaps be a little unfair given the recent increase in the cost of university and economic climate that estimates most students will leave tertiary education with an average debt of ¬£53,000.

Whatever the court or Parliament decides in relation to ongoing claims of maintenance, it is worth bearing in mind that there are serious financial consequences to having a child, whether the birth was planned or by accident!

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