In the recent High Court case of FG v MBW ([2011] EWHC 1729 (Fam) child maintenance payments were ordered to be made out of a non-resident father’s capital.

So does this then set a precedent for similar orders where an absent parent fails to pay a fair level of child maintenance from his or her income? Or is the ruling highly specific to the details of this case?

The circumstances of this case are particularly complex and worth considering in some detail.

Top-up maintenance

The relationship between mother and father had lasted 4 years and they had a child in 2002, named Luc, but remained unmarried. They separated shortly after Luc’s birth and the father then had a further son after marrying and then later divorcing. At the time of this judgment he resided with a new partner and had fathered a third child.

He made maintenance payments to Luc in accordance with an order made under Schedule 1 of the Children Act 1989. Maintenance payments had not been subject to a Child Support Agency (CSA) assessment because the father earned in excess of the £2,000 per week maximum level of CSA assessable income.  Therefore the case concerned a higher“top-up” maintenance payment, based on the lifestyle the mother had enjoyed during their relationship and their future expectations for Luc as they had been at that time.

Under an order made in 2005, the father paid £1,886 in child maintenance each month. This was based upon the couple’s salaries, which amounted to £130,000 per year in total. They had a comfortable lifestyle and were paying for Luc to be privately educated.

During the father’s divorce proceedings, Luc’s mother learnt that shares in one of the companies he had owned appeared to still belong to him, whereasduring the 2005 maintenance proceedings he had alleged these were in his wife’s name.

The mother obtained disclosure of the husband’s financial position as he had been presenting it during divorce proceedings.   It was shown that he hadclaimed that the shares belonged to him and had been put into his wife’s name to “ensure they were protected from a litigious ex-girlfriend”.

Giving evidence during the 2011 proceedings, the father claimed that he had only made that statement because he wanted the shares to be included in the pot of family assets for the purposes of the divorce.

The father’s earnings had also increased consistently over the years since the original maintenance order, which had been based on a projected future salary of £150,000. In addition, it was thought that he could expect significant capital growth in the future. He failed to disclose these facts to the mother and, although he had made some small voluntary increases in child maintenance, these were not proportional to his increase in income and capital.

The mother had been unemployed for some time after sustaining injuries in a car accident. She was in receipt of state benefits and her long-term prognosis and capacity to work were uncertain.

A decision born of uncertainty

There are two distinct features of this case:

• It is a “top-up” case in which maintenance is to be higher than the level at which the CSA administrates;
• Non-disclosure was alleged by the mother and the application was for an upward variation of maintenance payments. It was not a case of non-payment, but of under payment.

It is only in top-up cases,or where an agreement has been reached between the parents as to child maintenance arrangements,that the court has the jurisdiction to make a maintenance order under Schedule 1 of the Children Act 1989.  However where an agreement is reached, a party may apply to the CSA for an assessment after 12 months have passed.  This may result in the sum of the original child maintenance agreement, which may have been relatively generous, being reduced and maintenance arrangements falling outside of the jurisdiction of the court.

It may be possible for a “Christmas” order to be agreed between parties,which would have the effect of ensuring that the maintenance agreement was never more than 12 months old and therefore could not be subject to CSA assessment.

It is likely that where relations between parties are acrimonious, no agreement will be reached. Where there is no substantial wealth on the part of the absent parent and no agreement, the CSA will have the jurisdiction to deal with the matter. Unfortunately this excludes the vast majority of cases from the court’s jurisdiction.

In delivering his judgment in this case Mr Justice Charles found that there had been inconsistences in the father’s account of his ownership of the company shares.  The father’s financial position was described as being “in a state of transition” and his future income therefore uncertain.  His current disclosed income indicated that he would have to meet maintenance payments by using his capital reserves.

So why were payments ordered out of the father’s available capital of £130,000? This was largely due to the uncertainty of the financial positions of both parties and the fact that there would only be clarity as to their positions in the long-term. In the meantime, even though an increased maintenance order would mean the father eating into his capital, this was considered preferable to reducingpayments to Luc: the interests of the child were paramount.   In this instance the issue of maintenance will be subject to future review in light of any future capital gains or increase in income.

Balance of fairness

I believe that the most crucial point to emerge from this judgment is the alteration of the balance of fairness between the parents. The balance had previously been tipped in favour of the father, insofar as he was able to conceal income and assets and the onus was on the mother to uncover any facts that would entitle her to a higher level of maintenance for their son.

As a result of this decision, the balance of fairness seems to have been equalised, as in order for the father to make any application for a reduction in maintenance payments he must provide financial details showing that he cannot afford the current payments  He therefore must disclose information for his own benefit.

The advantage gained by the mother is that she is at the very least able to maintain the higher level of payment awarded in the case. Combined with the order made by the judge for further, regular disclosure in the future by the husband, her son is in a much more certain and strong position as to his future financial wellbeing.

But is this an example of maintenance payment enforcement in the long-term, or an example of a short-term arrangement designed to secure payment just for the time being?

It is clearly not intended that the father carry on making payments out of his capital. However, now that the balance of fairness has been adjusted between the parties the likelihood of being able to enforce maintenance at an appropriate level in the future does seem to be stronger.

The court expecting an absent parent to pay maintenance from capital reserves could be a crucial development. But the circumstances of this case are very particular. It will prove difficult to extend this principle to CSA-assessed cases where the court does not have jurisdiction.So only time will tell as to whether this ruling sets a precedent, or is merely an inventive solution to individual circumstances.

 Lindsey Randall studied at Trinity College, University of Cambridge, for an MA in English before deciding to pursue a career in law. She attended The College of Law in York before going on to study for the Bar at BPP Law School in Leeds. She is a barrister member of the Middle Temple, having been called to the Bar in 2010.Following a brief career in Banking Litigation Lindsey has decided to pursue a career in family law. She has now joined Stowe Family Law LLP .

The judgment in the latest installment of the never-ending divorce saga that is McFarlane  v McFarlane, (2009 EWHC 891) landed on my desk yesterday morning. A judgment from Mr. Justice Charles, it is characteristically lengthy. Thirty-five pages in length, it takes a long time to read . It takes even longer to consider the meaning and impact, this judgment being his Lordship’s interpretation of what the House of Lords may have had in mind (but never expressly stated) by a “deferred clean break”, payable at some stage in the future, by Mr McFarlane to his former wife.

I was in two minds whether to write about the latest twist; after all, what relevance does any of it have to those of us who live relatively modestly in the real world? However, this case has wider implications. It reminds me of a seesaw. On one end: the stay-at-home wife and her children. On the other: the working wife and her children. In the middle, sliding from one end to the other: the husband. Does English family law substantially favour the stay-at-home wife, at the working wife’s expense? Does it curtail a second wife’s freedom to leave her job and become a stay-at-home mum?

Let me explain. The McFarlanes litigated themselves all the way to the House of Lords in their original divorce. They split their capital roughly 50:50. Both came away with about £1.7 million. Both purchased substantial properties for more than £2.5milllion apiece.

In Europe the wife’s claims would have ended there. In England and Wales, however, Mrs McFarlane’s income needs still had to be met – and at the time there was insufficient capital to provide a clean break divorce. (NB. If any case shows how important it can be for a husband to try and obtain a clean break settlement in his divorce, it is this one!)

The divorce was dragged through four courts, yielding various decisions about the ongoing maintenance to which Mrs McFarlane was entitled. Her actual needs were estimated at £150,000 – £180,000 per annum. However the final arbiter, the House of Lords held that, as she had given up her career as a solicitor to care for the couple’s three children, she should receive more in recognition of her lost earning capacity. The House of Lords confirmed a higher award of £250,000 per annum, substantially in excess of her needs – with no cut-off point.

The words “relationship-generated disadvantage” became a buzz-phrase, until Mr Justice Coleridge pointed out that the phrase did not actually exist in statute. This prompted the President of the Family Division to issue a clarification in which he made it clear that in big money cases, the issue of “relationship-generated disadvantage” would arise simply as a strand or element of fairness. Precisely!

Mr McFarlane has remarried, to a partner at his accountancy firm. They have a son, who is now three years of age. Mr McFarlane’s career has continued to flourish. In 2007, one year after the House of Lords’ judgment, his former wife issued an application to the court for increased maintenance for the children, who are now aged between 13 and 20. She subsequently applied for an increase for herself and capitalisation of her maintenance claims. Last week the judgment was handed down…

The court has a duty to consider if a clean break is possible; if so it can, if it wishes, order payment over a term of years after which a clean break will occur. That is what Mr Justice Charles did, but he made an order to fund an eight-year, deferred clean break, all payable out of the former husband’s post-divorce income – to which his second wife contributes, and his first wife does not.

From 25 June 2007 (when Mrs McFarlane issued her original application for an increase), Mr McFarlane must now pay his former wife:

40% of his net income up to £750,000

20% of his net income up to £1 million

10% of his net income thereafter, until 31 May 2015 when maintenance stops and Mr McFarlane retires.

The judge calculated that this would give Mrs. McFarlane an unearned tax free income just shy of £350,000. As he backdated the award by two years, there will be the differentials to pay for those two years as well. In eight years’ time she could have received around £2.5 million.

What a whopping award! It makes you wonder why Mr McFarlane doesn’t just throw in the towel and live off his second wife’s income. It also makes you wonder how hard it is to earn this kind of money – and if this is sufficiently appreciated by the court. It certainly doesn’t grow on trees if all those professionals I represent or see on trains and planes, sweating profusely, banging on laptops, e-mailing and making non-stop mobile calls on a 24/7 basis are anything to go by!

From now on, the first Mrs McFarlane must have one of the highest unearned, tax-free incomes in the country. It amounts to £200,000 more than her needs as found by the Court.

So I ask myself the question: is the carve-up of Mr McFarlane’s income truly representative of “fairness”? Is this what the House of Lords intended? I ask this because in the same case, the High Court and the Court of Appeal were far less generous to Julia McFarlane. I must say, I find it hard to see why there should have been an adjustment in the current payments.  The wife’s compensation claim is one strand in the element of fairness.

Turning back to the seesaw: we must not forget the very substantial contribution of the second wife to Mr McFarlane’s post-divorce income, running the home and – as the judge acknowledged – taking on the brunt of the couple’s childcare while holding down her top-flight job as a senior partner at Deloitte.

I am certain that many first wives will rejoice at the huge financial success of one of their number. No doubt there is considerable sympathy for a wife who has been abandoned with children, and relatively little sympathy for the second wife. But several years ago the first Mrs McFarlane came out of the marriage very well, financially. She has now done even better, long after the divorce. One may feel that by now, she could – and should – be providing far more appropriately for her own future, off her own bat.

Second wives are frequently castigated by the first family, and are frequently left to bear the brunt of the marital breakdown alone. The husband sits helplessly in the middle of the seesaw. Second wives have complained to me that their husbands never overcome the guilt of leaving their first wives. Instead, these men allow themselves to be turned into tireless “dogsbodies”, to try and demonstrate to the world that they are nice guys after all. Meanwhile, first wives complain that these men are under the thumbs of their second wives and do not pay as much as they should to them and their children.

In many cases, the second family’s standard of living slips. The pressure to keep earning, to keep two families living well on one income means that a second wife can have no choice but to keep working. Her desire to stay at home and look after children can be thwarted by the large monthly payout to the other household. The resulting bitterness, pressures and remonstrations – “why is she doing nothing with her life, when I’m working like this to keep them in luxury?” – can destabilise even the strongest second marriages.

I wouldn’t dream of denying Mrs McFarlane her fair share. However from a personal perspective as a working wife and mother, who has always contributed to the family budget, overall I believe that Julia McFarlane’s latest award is excessive. I also believe that it pays scant regard to the impact of this award, in a number of ways, upon Mr McFarlane and his second family.

Image credit: rachelvoorhees.

 You may remember that I recently looked at the case of a Mr and Mrs Bokor-Ingram. I examined the Mesher order to which the wife had agreed; at the time, she did not know that Mr Bokor-Ingram’s finances were a lot healthier than she had been led to believe. After discovering that her husband had been negotiating a better-paid job at the time of the split, Mrs Bokor-Ingram took her husband back to court. She argued that if she had known the truth, she would never have agreed to the Mesher arrangement in relation to the couple’s former marital home. The case went as far as the Court of Appeal; Mrs Bokor-Ingram finally settled out of court, with the BBC reporting that the ownership of the house would be transferred to her in full.

Although that case is now closed, there has now been a further development. It’s an interesting one and, since my post about Mesher and Martin orders has become one of this blog’s most popular pages, I’d like to share it with you and find out what you think.

When I first wrote about this case, I focused upon the Mesher order because I was not happy that the husband had, in effect, been allowed to get away with his non-disclosure. When the case was heard in the High Court the judge, Mr Justice Charles, found that its outcome was not prejudiced by the husband’s failure to disclose that he had a lucrative employment contract in the offing. He appears to have concluded that because the proposed contract was unsigned, it should not have been disclosed.

The Court of Appeal has now taken the unusual step of giving Mr Justice Charles’ judgment a red light, even though this case had settled before they heard it. This public judgment was published on 26 May. I view it as a robust and salutary reminder to practitioners and clients, that full and frank disclosure must always be made. Read it, and you will see that they make no bones about this.

Judgment is rarely given by the Court of Appeal when a case is settled. However, as Lord Justice Thorpe put it, the “learned in the extreme discussion and explanation” given by Mr. Justice Charles was “causing or was likely to cause difficulty for specialist practitioners and judges in this field of ancillary relief.”

(Not to me it wasn’t. I think it has been evident from my blog posts that, as a practitioner, I know the tricks that people can play – and do play – even by staying silent and hoping they can get away with it.)

Just in case practitioners and clients, unintentionally or otherwise, still don’t get it and carry on dishing out the silent treatment to the other side, Mr Justice Thorpe added: “the duty of disclosure is not only that it should be full and frank but also clear.” He quoted the words of Lord Justice Sachs in the case of J-v-J in 1955, commenting that the standard he set has never varied.

Mr Justice Thorpe went on: “We are concerned that the judge’s erudition may have blinded him to the simplicity of the case and its proper outcome. Had there been full and frank disclosure…it is inconceivable the wife would not have raised her sights.”

Disclosure of the negotiations for the husband’s new contract of employment, “was essential…the duty to disclose extends beyond what is certain on the date that the order is made to any fact relevant to the court’s review of the foreseeable future.”

And finally:

“The judgment of [Mr Justice Charles] should not be treated as a precedent or followed insofar as it expresses views beyond or inconsistent with those expressed in the judgment”

 It couldn’t be clearer, could it? Whether it will have the desired effect remains to be seen. There are too many occasions when practitioners, acting in what they consider to be their duty to their client, choose to limit the extent of their client’s disclosure. Thus I have been involved in cases where companies are being sold for far more than their disclosed value, cases where the othern party is moving jobs (as in this case) and even cases where there has been no change of job, but a huge hike in salary and benefits on the horizon once the wife has been taken care of.

Non-disclosure issues surface when the facts come to light months or years down the line. By then, it may be too late for the wife to do anything about it. Certainly, costs and anxieties will often prevent the wife from doing so; indeed, it may be an insurmountable burden for her to prove that in fact the husband knew at the time of the matrimonial negotiations exactly what was going on.

This judgment clearly increases the burden of disclosure upon the parties. In future, practitioners who are in any doubt at all would do well to remember these words of approval from Lord Justice Thorpe of his fellow judge Lord Justice Sachs 54 years ago. Not only must disclosure be full and frank, it must be clear.

Image credit: butler.corey.

Some of the cases with which I become involved strike me as “entrapment”.

Following my comments about cohabitation, Mr. Justice Charles, a veritable Sir Lancelot in shining armour, rides to the rescue!

I am often asked to advise mothers who have not married their partners. They need to know the financial settlements they can expect for themselves and their children when cohabitation breaks down. The reasons why they have never married are varied.

In cases involving wealthy men, I have often found that the husband’s fear of paying a substantial divorce settlement is a key factor. Such men view themselves as open chequebooks. Yet they also want to have their fun. That usually includes an attractive woman and unprotected sex.

Some of the cases with which I become involved strike me as “entrapment”. I can recall one wealthy client, who had to confront a paternity suit from a Russian nightclub hostess after a one night stand. He had been wined and dined in a London club and, having drunk too much, had picked up the stunning looking woman. Following unprotected sex, the woman announced that she was pregnant – and paternity tests would later confirm that he was the father. This man was unlucky. Before the child was even born he was faced with the mother’s applications for housing, maintenance and capital.

My client wanted to protect himself against any future comebacks. He agreed to provide funds to enable mother and child to live in a modest house, that she would own, but on the basis that there would be no further claims against him – including child support. Any future claims would be offset against the equity in the house. The client decided to have no relationship at all with his child, and the matter ended peaceably. Perhaps in years to come, the child will wish to learn more about his millionaire father – and who would blame him?

In law, however, this type of “clean break” arrangement is far from typical.

The recent case of Moses-Taiga v Taiga, (MT-v-OT (2007) EWHC 838 (Fam)) in which Mr. Justice Charles delivered his customarily lengthy judgment, is a must-read for wealthy fathers and their partners.

In the judgment, Mr Justice Charles restated current law; in particular, that in cases involving wealthy parties, parties should have broadly comparable homes. He made the point that even if the father enjoyed greater financial resources than the mother, their children were entitled to be raised by both parties in circumstances that bore a relationship to the wealthier party’s current resources and standard of living.

This does not mean that in such cases, the mother would own the property. Instead it would be purchased by and owned by the father, and would revert back to him when the children became adults or finished their full time education.

Mr. Justice Charles added that the length and nature of the couple’s relationship was generally of little relevance. After all, a child born after a one night stand has the same needs and dependency as a child born after parents have cohabited for years.

For me, the most interesting part of the judgment is his examination of what is referred to as the “wife’s maintenance” in a case involving a married couple, and the “carer’s allowance” in a case involving a cohabiting couple.

How is the mother’s allowance as the children’s carer to be calculated? Mr. Justice Charles says that “a generous and broad brush approach” should be adopted. There is “an inevitable tension between a mother’s lack of personal entitlement and her entitlement as the children’s carer, which could be difficult to balance”. This is “particularly marked where the father is very wealthy”.

The court had to “recognise the responsibility and often the sacrifice of the unmarried parent. In order to discharge that responsibility the carer had to have control of a budget that reflected her position and that of the father, both social and financial.”

This is a pragmatic judgment, which sets out the law and demonstrates the willingness of the courts to make appropriate provision for children and their mothers.

What is still needed, however, is provision for cohabitants in their own right – not by proxy through a child. What if a couple splits up after their children have left home, or if they have no children? The woman can be left with no income, no capital and no pension except for the state one. The relationship could have left her at an economic disadvantage – but unlike a married woman, she would have no automatic entitlement to compensation.

I appreciate that, using what he had available to him in law, Mr. Justice Charles did what he could. We need specific law, so that cohabitants can put their relationship before the court in the same way that divorcing couples can.

If only we had a Sir Lancelot in government!