Let’s set the scene:
You’re a family lawyer with a new client. There she is, a new mother, sitting before you exhausted from lack of sleep and looking nervous. Her neck is a blotchy red and she tells you that she is single with a three month old baby.
She and her partner have never lived together. They had been together for three years before she became pregnant, but they always lived in their own homes and her home has become messier and smaller with the arrival of the baby. She is not currently working. She has a reasonably well paid job to which she will return in six months’ time.
The father has signed the birth certificate which gives him parental responsibility but he isn’t particularly interested in the baby or her, and their relationship was always blighted by his refusal to settle down. But she thought one day he might. It’s the same old story.
She asks you: What is his legal responsibility to maintain the baby? And does she have any claim for herself given she’s unable to work?
So you ask about the father. What is his financial position?
Your client tells you he is a high earner, but is able to manipulate income, and can more or less dictate what it will be from one year to the next. He enjoys the high life, owns various homes, holidays frequently, drives an expensive car, and has no debt. However, on paper the information sent to HMRC about his income appears to bear no resemblance to reality. He told them and has told her he has a gross income of £35K per annum.
That means he has a child support liability to pay her £81.00 per week for the child.
In reality, this doesn’t go anywhere near helping her to manage financially. How is she supposed to manage even buying nappies for a week while he thinks nothing of paying £100 for a bottle of wine? A buggy for the baby has already cost her several hundred pounds, let alone all the nursery items she has had to pay for.
So what do you, the lawyer, advise?
First you ask what steps she has taken with the Child Maintenance Service (CMS) who now operate the child support scheme, under the Child Support (Maintenance Calculation) Regulations 2012/2677.
The basic formula is that a non-resident parent, depending on whether he has one, two, or three children living with the parent with care, pays 12, 16, or 19 per cent of his gross income up to £800 per week, and then nine, 12, or 15 per cent of his income from £800 up to the new maximum of £3,000 per week.
Solicitors do not usually deal with the CMS on behalf of their clients, (although of course there are some) but on the whole it is not cost effective. Child Maintenance Options is a service set up to help people broker agreements between themselves, and the emphasis is very much on reaching agreement without using the CMS. They must be approached before the CMS can get involved. I’ve been to visit them, and found them extremely good. I was able to listen to them advising people, completely free of charge, and they are very well trained. From what I saw, they kept very calm and helpful while dealing with some very distressed people. Do remember that if an agreement is made, it is always sensible to have a consent order in court setting out the terms of the agreement so it can be enforced if the payer stops payment.
If no agreement can be reached through CMO, then an application can be made to the CMS. This link is very useful for non-lawyers, and explains the procedure.
Be warned, however, that payments to the CMS and collection and enforcement charges now apply and must be paid by both paying and receiving party. The application fee is currently £20 and the collection fee is four per cent of the payment to the receiving party and 20 per cent to the paying party.
Now back to the client.
The CMS have decided that, in her case, the payment should be £81 per week. They have made that decision after liaising direct with HMRC and learning from the tax man exactly what he says his gross income is. That is what must happen and they’ve done it. What does she do next? She has to act quickly. She must ask for a mandatory reconsideration of her case within one month from the date of the letter informing her about the decision and she must put her request in writing. She should explain why she believes the assessment is wrong. She probably won’t get anywhere unless she can show he is in receipt of additional income, such as unearned income which might come from a trust or a relation, and/or that he has been diverting it by paying it to someone else, or not drawing it from his company which might be possible to discover via the HMRC by CMS accessing and reading his full accounts. I once saw a small footnote in some company accounts that a shareholder had elected not to draw a dividend and it had been carried over to the following year. It was the husband on the other side of my case trying to reduce his income.
The next step after a mandatory reconsideration is an appeal to the Tribunal again within 28 days. I used to chair these appeals under the old system and they are about fact finding, but Tribunal Judges can only remit the case for a recalculation. So it won’t be over then but don’t worry, because the hearing is more informal than a court and the Tribunal Judge will want to get to the bottom of what is going on. However, the old argument under the old rules about lifestyle inconsistency with standard of living has gone. Instead the CMS will rely on documentation supplied to them by HMRC.
The client tells you she has had a mandatory reconsideration and has got nowhere. She has no evidence to help her. She is going to an appeal and you advise her to ensure the CMS has also demanded all the relevant information from his accountant, which they have power to do A variation of a CMS assessment usually can’t be made within 12 months and it’s intended that every 12 months a reassessment is made anyhow.
So much for the CMS and self-help. What can be done in the courts to help her? As she was never married and she never contributed to any property, her claims are limited to those she can make on behalf of her child.
You advise her about Schedule 1 Children Act 1989 and the claims for child maintenance, school fees, lump sum, property adjustment, and costs orders that can be made against him. In some cases, a “Carer’s Allowance” can be made too, which is an income payment for her, to enable her to care for the baby and allow them to live to a comfortable standard.
All sounds good. And indeed in theory it is, but… and this is where you sigh…
He really does have to be demonstrably rather rich. If he isn’t, the route to any increased child support is circuitous and it takes longer and involves her going back to the CMS.
So let’s compare and contrast what happens with the very rich and everyone else.
First, we have an eye watering case (well into “Gasp Territory” as one astonished barrister described the claims of an ex wife in a recent finances on divorce case) but a phrase that equally applies here. The billionaire father of a child was ordered to pay £204,000 per annum to the mother for the upkeep of a child. Housing provision had been made on terms that the property reverts back to the father when the child is no longer a minor or in full time education. The mother wanted £750,000 per annum income and with £204,000 upheld by the Court of Appeal, was demonstrably unhappy.
But in our case, the only maintenance our client can claim is limited to the CMS assessment alone, because unlike the billionaire above, this father has not been assessed to be earning the maximum by the CMS, which is £3,000 per week income. As such, under the CMS regulations, “top up” payments to increase the basic award can’t be made by the Court. But (tongue in cheek) don’t despair. School fees can still be paid. Not much use for a mother of a three month old baby, though.
So what redress can she get from the court? In addition to providing her with a more suitable home for her and the baby, until the child finishes full time education or is a no longer a minor (whichever is the sooner), she can also apply for a lump sum or lump sums, instead.
In Dickson v Rennie, Mr Justice Holman made it clear that the minimum income figure to trigger top ups is £3,000 per week without which no more would be paid and, for good measure, made it clear that lump sums were not to be used as disguised maintenance.
So no comfort there. However what our client can do is ensure that in the court case, when disclosure of documents is made, an application can be made by the CMS for the court to release those documents. The client can’t send them, because there is a duty of confidentiality.
So, in terms of income provision, it’s not great is it? I wasn’t happy when I wrote about Dickson v Rennie in 2014, and I’m not overjoyed now. Given that the CMS so obviously want to offload child support as far away from themselves as they can, I’m wondering if it isn’t now time to give more power back to the courts? I don’t see the sense of needing at least £3,000 a week income before a top up may be claimed, which leaves others struggling. Why have an arbitrary figure at all? Why not require a CMS assessment first and then top ups as advised?
Having said that, there is an intentional difference between provision on divorce and provision for an unmarried mother and her family and here we are seeing it. And in the same way we still are seeing the difference for the very wealthy too. £204,000 per annum is a fortune for most – for the mother of the billionaire’s child, it is a drop in the ocean.
So what’s the best advice to give this client?
Keep going with the CMS, apply also to the court and go for capital orders of a lump sum (say to cover furnishing a new home and a nursery) and lump sums (to cover future capital expenditure) and a new home which will be placed in a trust. Ensure there is full financial disclosure and keep the CMS aware of what they should be applying to court to obtain, or from his accountant. Finally, make it clear that the court costs of this exercise will be paid by him unless he sees sense. And then, who knows? Head to a good lawyer and mediator who knows this very complex area of the law.
NB. As I was coming to the end of my research for this post, I came across this excellent summary of the current law by Samantha Hillas of St Johns Chambers in Manchester. I do recommend a read, particularly for lawyers.
Photo by mrhayata via Flickr under a Creative Commons licence.