Avoid the CSA: consider a contractual solution
May 20, 2011 46 comments
All parents have a right to apply to the Child Support Agency for the assessment of child maintenance, but our clients often ask us about the interplay between the jurisdiction of the court and that of the CSA.
For example, what if parents reach a private agreement for child maintenance in the context of an overall financial settlement, which is likely better than that which the CSA would award to the receiving parent? Recently a client of mine was startled to discover that even though a generous private agreement had been proposed by the other party, it would be invalidated after 12 months if that party decided to apply to the CSA in a bid to reduce child maintenance payments.
If you have children and are going through divorce or considering it, I recommend that you acquaint yourself with the following rules:
1. When a court order has been made before 5 April 1993: the court retains jurisdiction. The CSA will only have jurisdiction if the parent with care claims income support.
2. When a court order has been made between 5 April 1993 and 6 April 2002: the court retains jurisdiction unless the parent with care claims income support, or the court discharges the order.
3. When a court order has been made after 6 April 2002: the court has jurisdiction for agreements reached between the parties. Once the order has been in place for more than 12 months, however, either party can apply to the CSA after giving two months’ notice to the other party. The CSA will then take over and assess child maintenance. The parts of the court order relating to child maintenance “fall away” and will never be reinstated, even if those parts of the court order had provided for child maintenance beyond the CSA statutory provision.
4. When there is no court order: in those circumstances, there would be no Court jurisdiction unless the parties agree or the CSA does not have jurisdiction, for example step parents. The CSA has jurisdiction.
As an example of the third and largest category, let’s take a couple who, upon divorce, settle their financial arrangements. The parent with care secures capital, pension, income or agrees to a clean break on favourable child maintenance terms (in excess of the CSA formula, perhaps, or ignoring any overnight staying contact for the purposes of deduction of child maintenance). All is well.
Twelve months later, the parent who pays child maintenance applies to the CSA to undertake an assessment. To the horror of the parent with care, the child maintenance payments are reduced. All the good intentions and the work done to achieve the global settlement are completely undone.
Can the parent with care do anything to prevent this from happening?
Any agreement that seeks to exclude a parent’s rights to apply to the CSA is void. However, as my client was delighted to discover, there is an often overlooked way for those looking to create an arrangement to minimise the impact of the CSA…
A solution in contract
The parties can “protect” themselves from the CSA if they set up payments by means of a contractual agreement. To put such an arrangement in place will usually require all of the following:
1. A recital in the preamble of the order setting out the party’s intention
2. Provision for child maintenance in the order itself
3. A separate child maintenance agreement (“the contract”) setting out the obligation to pay.
The contract is designed to create a “compensatory debt”, to equal any advantage secured by either party on application to the CSA.
The contract can also be used to provide for a minimum child maintenance payment (for example if a substantial lump sum has been paid instead, or in situations where one party is concerned that the work or income of the payer is likely to be reduced or purposely depressed).
With a contractual agreement, parties can reach child maintenance agreements, safe in the knowledge that they have contractual claims against their former spouse if the CSA becomes involved and assessment of maintenance falls below the original agreement.
If necessary, the same remedies are available as for breach of contract, including damages, judgment summons and potentially even bankruptcy.
In one case in which I was recently involved, we went one better. We secured provision in the order so that if the payer defaults, the final order can then be set aside in full, thereby reopening the receiving party’s matrimonial claims in their entirety.
If you are struggling with the conflicting and often contradictory jurisdictions of the court and the Child Support Agency, and you want to make provision to minimise the impact and uncertainty of the CSA, I suggest that you consider a contractual solution. It won’t work for everyone – but it may work for you.
James Thornton is a lawyer mediator at Stowe Family Law Settlements and a partner at Stowe Family Law’s Harrogate office. With 15 years’ experience, James’ specialisms include dealing with the financial issues arising from divorce, particularly when substantial personal, business or pension assets are involved. His expertise also extends to cases involving children. A former member of the Law Society’s Family Panel, James is an Accredited Specialist member of lawyers’ organisation Resolution, sits on the North and West Yorkshire Resolution committee and is a member of the West Yorkshire Family Justice Council.
May 20, 2011