Author Archive | Alan Larkin

How much child maintenance should I pay?

How much child maintenance should I pay?

Two kids x 20% gross income, err, less pension payments, and then, erm, divided by 3 nights equals… Damn. Start again.

Two years ago I launched a child maintenance calculator to deal with the vexed question:  “How much child maintenance should I pay?”  The reasons I took the time out to develop this free tool are set out here.  It’s fair to say I had the hump with the Child Maintenance Service, on behalf of parents struggling with the issue of child maintenance, at the poorly executed calculator provided by that organisation.

I am not able to spend as much time on this blog as I used to; I felt some years ago that my spare time had to benefit as many people as possible and that I should concentrate my efforts on a more ambitious way to help people connect with specialist family law advice.  I put it all down to a numbers game.  I have been very busy with those long-term plans aimed, a wee bit ambitiously, at bringing family law into the 21st century.  So, being distracted by grander plans, I was pleasantly surprised to see that there have been 900 calculations using my child maintenance calculator.  Most of the calculations were carried out by private individuals, but with a sizeable number generated by lawyers, mediators and some advice agencies.

I will continue to host and maintain the calculator as long as it meets a need.

0

My ex is cohabiting

Postbox

My virtual postbag has another enquiry regarding an ex-partner who is now cohabiting:

MP tells me:

We are about to sign the paperwork regarding our financial settlement but my ex husband is lying about the fact he is cohabiting… does that make a difference for me as far as the financial settlement?

I receive a great deal of traffic about the effect of cohabitation in the context of divorce financial settlement.  I probably don’t have a lot more to say on the issue here except that this enquiry is interesting in respect of the obligation on each party to a divorce to tell the truth about their financial circumstances.  That obligation to be full and frank about any change in relevant circumstances carries on until the point an order is approved and sealed by the family court.

MP feels certain that her ex husband is lying about the fact he is cohabiting and asks whether this makes a difference as regards the financial settlement.  I can’t really answer that question as I don’t know the circumstances.  But I can say that MP’s ex needs to tell the truth about his circumstances because MP may feel that her ex’s new partner has a reasonable amount of income and can share expenses with the ex.  In other words, this new partner represents an income resource to this ex.  That may be relevant to MP’s circumstances if she is in need of spousal maintenance from her ex.  If MP has lawyers then they can advise her upon the situation.

From the sound of it, MP is about sign ‘the paperwork’ on her financial settlement.  This sounds like a consent order.  Any consent order needs to be submitted to the family court for approval and be accompanied by a Form D81 – also known as a Statement of Information Form.  One of the questions on the form requires a declaration as to whether either party is cohabiting or intends to cohabit. MP’s ex, when he signs this D81, must tell the truth.  His lawyers, if he has them, must ensure that he understands his obligations in this regard.

It is open to MP, if she feels strongly about this point, to refuse to sign the consent order or the D81 form until her ex provides a truthful response.  She will need to be guided by her lawyers.

0

Faulty online divorce Form E

Form e financial disclosure

As we discovered just before Christmas, the online divorce Form E provided on the Court website was faulty.  It appears a section of the Form which summarises, amongst other things, the capital and income of divorcing couples, failed to carry forward the liabilities from an earlier section.  The result was that the net capital values produced in the summary section may have been falsely inflated by missing out any liabilities.

The person who claims to have noticed the error (a self-styled family expert)  used the publicity to criticise solicitors, barristers and judges for not having noticed it themselves.   This fed into the usual lawyer-bashing on public forums and comment pages.  Most family lawyers were taken aback by this particular slew of criticism because:

  • It is the Court service’s form, so nothing to do with lawyers;
  • 99% of family lawyers don’t use the court’s online Form E as we pay to have our own software;
  • Family lawyers pay no attention to the summary page of the Form E anyway as it is not helpfully laid out and does little to aid understanding;
  • The Form E financial information is quickly superceded by later rounds of  financial disclosure any way;
  • Family lawyers tend to reproduce the Form E information in separate Excel spread sheets (to model likely settlement options) so any error would be quickly spotted.

In short, although I have not been slow to have a pop at my fellow lawyers on the pages of this blog, I did think this particular story, as a vehicle to slag off family lawyers, was a bum rap.

The real story is that LiPs have been let down.   These people, the vast majority of this blog’s readership, cannot afford legal advice or struggle to maintain paid legal representation.  I’m guessing it would be LiPs in the main who would have been using the Court service online Form E.  I mean: it’s there to use, it’s free, and it’s on the official court website, so it must be safe to use, right?  Right?

The Minister responsible issued a statement to Parliament: “Update on investigation into faulty online form used in divorce proceedings”.  We now know the number of people likely to have been affected:

A total of 36,527 cases contain a version of Form E filed from these periods. HMCTS staff have now reviewed all these cases and found that 3,638 files – 10% – contained the faulty calculator version of Form E with an incorrect figure for net assets figure in the summary table.

1,403 of these cases are still live, allowing HMCTS to intervene immediately to clearly flag these cases to the courts in order to avoid the error affecting the final orders in these cases.

The remaining 2,235 files – 6.1% – were closed cases….I have instructed HMCTS to write to all parties in the 2,235 closed cases. The letter expresses our sincere regret for the error, sets out what happened and explains that, although Form E is just one part of the evidence used in their case, there remains a possibility that the error affected the final outcome.”

If you are one of the people with a closed case receiving a letter from the court service you will need to work out whether you may have been prejudiced by the software error.  Apparently, the letter sets out the options available for those parties who think they have been adversely affected, which includes seeking to set aside any final order made or varying such an order.  The letter also contains a link to a specific court form to be used by those who wish to set aside or vary their settlements.  If anyone has received such a letter or has the link I would be happy to post a copy (suitably anonymised) on this blog.

If there is anyone out there who thinks they are affected but has not yet contacted the court to register their concerns then please use the specially designated email address:  formE@hmcts.gsi.gov.uk.  Only 51 people have done so as at 21 January 2016.

0

The Numbers Game

Divorce Finance Toolkit

Behind the scenes

Firstly: an apology

To the hundreds of readers who have sent me emails, chronologies and asset spreadsheets asking for help, advice or comments on their particular legal troubles.  I haven’t been much help.  There are just too many of you.  And your circumstances are always unique to you and your family so there is no pre-formed answer I can drag off a shelf and present to you.  I’m sorry that I haven’t been able to respond to all of you.

Secondly: an explanation

I have been unusually ‘quiet’ on this blog.  I’ve haven’t posted anything for months.  It is not just that I have felt overwhelmed by the number of people asking for help.  It is not just that my main job at Family Law Partners takes up most of my waking time.  The real reason, the reason that I hope is worth the effort over the last 5 years is that I have been building something that I think will help more family lawyers help more people with family law related problems.  We have been using the prototype at Family Law Partners for the last year and it has fundamentally changed how we engage with our clients at the first point of contact.

Thirdly: the future

There are too many people now who do not have access to legal advice, usually because they think they cannot afford to do so.  So they try to deal directly with their ex-partner but find it is really hard to communicate against a backdrop of distrust, anger, fear and sadness that marks out the breakdown of a relationship.  Some people find themselves as LIPs pitted against their ex-partners in court.  It must be incredibly hard to navigate legal proceedings as a LIP when the rules of the game are anything but clear and the legal professionals you encounter: the judges and lawyers, are speaking something that sounds like English, but is full of words you don’t remember coming across at school, work or anywhere else for that matter.

But what if a solution, enabled by technology, allowed more people to access legal advice at the very start of a family law ‘problem’ emerging.  What if that solution gathered the information from a potential legal client in a helpful and intelligent way at zero cost.  And then presented that information to a family lawyer in a format that allows them to immediately offer advice, whether paid advice, or free, or a combination of the two.  And what if that solution enabled a client to come back to the same lawyer from time to time and have the same process repeated (commonly known as ‘unbundling’) even though the facts of their case had changed in the interim?

This is the challenge that I have been working on for the last 5 years.  And, over the last 12 months this solution has started to take shape and become realisable.

This explains why, I hope, that I have been ‘quiet’ on the blog front. I’ve devoted most of my spare time and energy to this new solution because it is ultimately a numbers game.

The numbers game

When I started out as a family lawyer many years ago I did what most lawyers do.  I helped out at advice centres, CAB rosters or church drop ins – trying to provide what lawyers call pro bono (free) advice.  If I was lucky, about four punters would stumble in to see me on a cold, rainy night.  At least one of them would want to sue the local council for something or other: pigeons crapping on their conservatory roof or a bin man doing Les Dawson impressions within the vicinity of their no humour zone.  I was once shown an ingrown toenail and once shown something worse. I was even asked for a prescription.  Very occasionally, someone would appear with an unambiguous legal need but drop 5 boxes of paperwork on the desk and ask for ‘a quick bit of advice’ about their case that had been trundling on for years.

As my career positively blossomed I graduated to seminars where I could charm and educate a captive audience with my knowledge of family law – sometimes as many as 50 lucky, lucky people so long as there was no major sporting event on.

Eventually I discovered the world of blogging.  I remember my excitement at being told that I could have as many as 50 visitors a month if I worked really hard at my blog.  Imagine that.   Perhaps 100 visitors a month after a few years, I was told.  Wow, I thought, imagine reaching that many people.  So I started my blog.  Real amateur stuff.  Most legal blogs are lawyers talking to other lawyers. No harm there, all good clean fun.   Or law firms posting blogs that can be summed up, no matter what the subject matter, as:

Hey you with the sad face, did you know divorce and separation are horrible, that kids get stuck in the middle, and you might lose your house?  Call us now and book an appointment.

How helpful is that?  I loathe those sort of legal blogs.  As much use as a chocolate teapot.

I knew early on that my blog would be aimed at people who needed legal help but might be struggling to get it or pay for it.  I knew that I was going to be giving away lots of information without being paid for it.  I knew that might annoy (a small minority) of fellow lawyers.  I knew it would be difficult to write blog posts that were detailed enough to be helpful but not so specific as to be useless to the majority of my blog visitors.  My blog has grown.  I looked at Google Analytics recently for the first time in almost a year.  I am astonished to see that I had nearly 7000 visitors to my blog last month alone.  I know those numbers are only small beer for some websites but I would have to go some at the local CAB or advice drop-in to match those figures.

But those numbers are the tip of the iceberg.  I can’t keep up with all the requests for help that come into me on this site. I confess I am overwhelmed.  But there are lots of family lawyers like me out there and if we can find a solution to making access to lawyers easier, faster, and more affordable, especially at the beginning of a legal problem we may be able to stop difficult situations escalating into all out war in the family court room.

So, here’s to bigger numbers.  I’ll keep you posted.

 

0

Child maintenance and cohabitation should not be linked

 

Postbox

 

My virtual postbag brings me a question from P: a common question about the relationship between the payment of child maintenance and cohabitation.   P obtained a consent order dealing with financial matters arising out of divorce.  The only problem being that her ex has interpreted the terms of the consent order in a way that has a detrimental financial impact upon P.  She tells me:

“Paragraphs 2&3 are relevant. My ex-husband believes that because I have been cohabitating with my new partner for 12 months (2c) he has no legal obligation to pay child maintenance (paragraph 3).”

There is often confusion on the part of maintenance payers between spousal maintenance and child maintenance.  Spousal maintenance is paid by one spouse to the other after divorce.  Lawyers refer to it as spousal periodical payments.  Let’s have a look at the relevant paragraph in P’s consent order that requires her ex to pay her spousal maintenance:

screenshot of consent order

 

OK.  So we can see here that there is a reference in paragraph 2 c to P’s spousal periodical payments terminating in the event that she cohabits with another for a period of 12 months.  Cohabitation with a new partner can be a common terminating event for spousal maintenance.   Let’s then look at an entirely separate paragraph dealing with child maintenance (referred to as periodical payments):

 

screenshot

 

The order requiring P’s ex to pay child maintenance to her for the benefit of their child is entirely separate (as I would expect) from the paragraph dealing with spousal periodical payments.  The payments of child maintenance cease when the child reaches age 18 or ceases full time secondary education.  The payments of child maintenance DO NOT CEASE if P cohabits with another for a period of 12 months.  Unfortunately, P’s ex has misunderstood the terms of the order.  He has linked the child maintenance and cohabitation.  It is P’s spousal periodical payments that have ceased (or will cease) upon 12 months of cohabitation.  This has nothing to do with child maintenance.  But that misunderstanding has a serious financial impact upon P’s child.  The payment of child maintenance and cohabitation are not linked in this consent order.

Perhaps P could refer her ex to this blog post so he can see how the confusion has arisen.  He should then reinstate the payments of child maintenance for his child.  At the end of the day, these payments of child maintenance are not for P’s benefit but for the child.

0

Child maintenance charges

 

Child maintenance charges

GOODBYE CSA – HELLO CHILD MAINTENANCE SERVICE

I hear the Child Maintenance Service has written to 50,000 single parents currently using the Child Support Agency (CSA) to warn them that if they cannot reach a new voluntary agreement they could face child maintenance charges for using the CSA’s replacement service.  The BBC’s report is here.

Child Maintenance Charges – in summary

The new rules mean that if a voluntary arrangement cannot be reached then:

  • The paying parent  will have a 20% charge added to the maintenance payment;
  • The receiving parent will pay a 4% charge to receive the child maintenance;
  • All parents will be charged a fee of £20 for registering with the new service.

Voluntary Agreements for child maintenance

Obviously, it is best to agree the level of child maintenance and to avoid having to face a child maintenance charge.  All this does is reduce the value of the payment that is meant to be benefiting the children.  This is a form of indiscriminate taxation as far as I can see it.

One of the problems with expecting parents to reach agreement between themselves is that the government has been slow to provide the necessary information and the appropriate tools.  If you are a parent who has received such a letter or you are recently separated and unsure about how to agree child maintenance then have a look at the Child Maintenance Options site.  BUT IF YOU FIND THEIR CHILD MAINTENANCE CALCULATOR UNHELPFUL THEN HAVE A LOOK AT MY CHILD MAINTENANCE CALCULATOR INSTEAD.  I think you will find it a lot more useful and the calculation produces a PDF which you can print out for your ex or email to them instead.

 

0

Why I created a child maintenance calculator

Everybody knows that the war is over
Everybody knows the good guys lost
Everybody knows the fight was fixed
The poor stay poor, the rich get rich
That’s how it goes
Everybody knows

Everybody Knows“, Leonard Cohen

About 10 months ago I became annoyed with the very basic child maintenance calculator provided by the Child Maintenance Agency (CMA) and decided I could copy it, refine it and then, greatly improve it.

Sure, the CMA’s calculator carries out the calculation but it lacks real thought, care and class. It introduced a new formula – that based on gross income – that was not as easy to understand as I first thought. In fact, in places, it was quite complicated.  It introduced nil, flat, reduced, basic and basic plus rates.  It no longer became the sort of calculation you could quickly scribble out on a piece of paper.

Sometimes, life is complicated but in my humble opinion, if a government decides to make something as important as child maintenance complicated it has an obligation to make its delivery to its citizens as understandable as possible. The CMA’s  online calculator is not good enough for such an important function. So, at first, I was just irritated at the lack of care in the delivery. I could not see how such a basic calculator could help parents to communicate about the appropriate level of child maintenance. The child maintenance result was not explained; it could not easily be emailed or otherwise electronically communicated to the other parent.   Because the calculator did not care to explain itself, its results could not easily be queried by the parents who needed to understand its workings in order to reach agreement.

So, I decided to take the child maintenance calculator and make it better. It proved to be very time-consuming. I wanted to give up quite a few times, frustrated at my inability to make the damn thing work and as the months passed I started to become less Mr Mardy Bum and more Mr Angry.  To be honest, if it wasn’t for getting the right hump I would not have finished this calculator.  But my beef was not with my stumbling efforts at coding but rather with the attitude demonstrated by various ministers responsible for key policies.

Why so angry?

So, why did feeling angry with the government’s treatment of families make me even attempt to build a child maintenance calculator?  Here’s why, quickly:

  • It was abundantly clear that the government would withdraw family legal aid anyway despite the warnings from most respectable quarters about the adverse impact on vulnerable families;
  • The government held up mediation as the panacea: withdrawing legal aid would matter not a jot we were told.  But in its wisdom, the government thought it unimportant to highlight the fact people could still get means-tested legal aid for mediation. I mean, really let them know: spend a small amount of the millions that would be saved publicising the availability of legal aid for mediation. The result was a policy car crash; mediation referrals fell off a cliff.  Litigants in person, unable to afford legal help have flocked to the courts – the very outcome the government was trying to avoid.
  • Even before family legal aid was knifed in the back in April of last year, high street solicitors’ firms were disappearing from the high street faster than my mum’s scones as soon as they came out of the oven. It suddenly became impossible for a very significant part of the public to get legal advice at at time when their families were in crisis.
  • The family courts are reeling from successive budget cuts. The public counter service intended to help the public used to open between the hours of 10.00 am to 4.00 pm.  Then it was reduced to the morning only.  Now, it doesn’t really exist at all.  You have to make an appointment if you want to see someone at the public counter. Think about that. You have to phone up the court (hoping the phone gets answered) and make an appointment. But if you want to make a court application you have to do so by post.  You can’t just drop it off at the court like you used to.   Such court applications by litigants in person are, understandably, often incorrectly drafted. They are then sent back by the court. In the days of access to a public counter you could at least go in with the papers and have the usually helpful staff at least iron out the worst mistakes and try to put people on the right track. To believe you could actually walk into a court to seek help. Literally, have access to justice.  The court service is no longer a service to all its citizens. It discriminates against those who are poor or of modest income who cannot afford legal advice.
  • Allied to the policy decision to deprive the poorest citizens of legal advice is a wholesale reform of the welfare state that has driven more children into officially defined poverty. A cabinet defined by high privilege knowingly consigns the poorest and youngest amongst us to the direst of life outcomes.  I find that unforgivable.

All in all, I just get the strongest impression that the government doesn’t give a toss.  It is an abdication of responsibility by the state to enact such policies and hope that the private sector will come up with the answers.  It may deliver some solutions but it will, inevitably, be driven by the bottom line: it will cherry pick those citizens it is interested in and filter out the rest.  The not for profit sector will soldier on but comes under an increasingly heavy burden.

For individuals to do nothing in the face of official indifference is as much an abdication of responsibility as that being demonstrated by the state. So, as a lawyer, like many others, who believes that access to justice is a fundamental principle that must be protected I have to do something rather than nothing.  Partly, that is why I started this blog, rather than going back to, say, the voluntary CAB roster of many years ago.  I realised that I could reach more people in one day using my blog than I could in a whole year of once a month voluntary sittings at CAB.

And this is why my small, further effort at doing ‘something’ rather than ‘nothing’ led me to create a proper child maintenance calculator to help parents towards that difficult conversation about money.  To allow parents to communicate more easily about the appropriate level of child maintenance in circumstances where they no longer have the assistance of lawyers, the courts or the state.

1

Pensions and investments or how to turn Pensions into Porsches

Pensions into porsches Sam Jermy

GUEST POST FROM SAM JERMY

 

Turning Pensions into Porsches

I usually refrain from posting my reaction and opinion on a budget until at least a week has passed.  This provides some time to ponder and digest the detail; much of which only becomes clear post budget day.  In this blog post I will focus on the largely unexpected reforms being made to money purchase pension funds.

Over the week we have witnessed attention grabbing headlines such as describing the budget as the death knell for annuities. Lib Dem Steve Webb’s comments regarding his relaxed stance on people purchasing Lamborghinis with their pension funds has provided plenty of substance for debate. I now wait with nervous anticipation for marketing slogans such as “We Turn Pensions into Porsches”.

The proposed pension reform includes changes that were implemented from 27th March 2014.  These include a higher maximum income available from Capped Pension Drawdown, a lower Minimum Income Requirement for Flexible Drawdown and a higher lump sum figure available under Triviality Rules.  Ditching the technical terms, these changes basically mean.

People electing to drawdown their pension fund rather than buying an annuity will be able to take a higher annual income than that available previously.  For example, a 65 year old can draw a maximum of £8,850 p.a. from a fund of £100,000.  

People with secure pension income totalling at least £12,000 p.a. from sources such as the State Pension and a guaranteed annuity can now elect to have full flexibility on how much they draw from an invested pension fund.  

Pension benefits can be withdrawn from age 60 as a lump sum for funds totalling £30,000; individual pension pots can be withdrawn as a lump sum for pension pot values up to £10,000.

As is typically the case with pensions, the above rules are all subject to complex qualification rules, commencement dates and restrictions.  Professional advice should be sought before any action is taken.

The more dramatic changes to pensions will take place from April 2015.  From this point, people over 55 years of age will have full flexibility in how much they drawdown from their invested pension funds and will not be subject to the above limits and restrictions.  Note, the minimum pension age is proposed to increase to 57 in 2028.  Whilst in theory a full drawdown seems attractive, the tax implications of large one-off withdrawals may make it less so.  With only up to 25% of the withdrawal being free of tax, it is important to take into account marginal tax rates and any potential loss of personal allowances. 

This future flexibility for pensions and investments has led to a fierce debate as to whether people can be trusted not to blow their pension pots in one go.  The government’s stance is relaxed on this point as the introduction of the single-tier state pension is broadly at the level for means-tested benefits. Squandering a personal pension fund should not provide people with the means to claim additional state benefits. This does seem like an odd stance considering the government’s drive behind encouraging personal and workplace pension provision.

I do provide financial planning guidance to clients who have accumulated pension funds that are surplus to their lifetime income requirements.  They are a small minority however. The vast majority of my clients are greatly dependent upon their pension funds to support their basic spending needs and lifestyle aspirations.  Financial security during their retirement years is the key priority for most. For this reason, annuities should still have their place as they can offer guaranteed income levels for life.  That said, I would expect to see significant innovation in the annuity market and increased competition to win annuity business. All positive news for the consumer.

There has also been talk of a ‘Buy to Let’ bonanza fuelled by people fully withdrawing their pension funds and investing into property.  Again, what seems like a good idea in theory, in practice, may not be so.  The tax liability on pension withdrawals, property purchases (Stamp Duty Land Tax) and the tax on rental income may result in a less than attractive overall net rental yield.  The numbers need to be fully ‘crunched’ to determine the suitability and benefits of this option. 

Other considerations include the pros and cons of holding investments within ISAs vs. Pensions. Watch this space for the next blog on this specific subject and have a look at my previous post on Divorce Finance Toolkit on the subject of state pension changes.

The implemented pension changes and forthcoming reform gives people greater flexibility to make their own choices regarding when and how to draw their invested pensions. With so many variables at play such as tax, investment risk, inflation risk and liquidity; planning becomes essential. A qualified financial planner can provide guidance and assistance to help people make informed decisions and achieve financial security in retirement.

 
Sam Jermy works for Family Law Financial Planning Ltd which is an appointed representative of North Laine Financial Management Ltd which is authorised and regulated by the Financial Conduct Authority. North Laine Financial Management Ltd’s FCA Register number is 446522.  The views expressed in this guest post are Sam’s own. Please contact your own independent financial adviser or family lawyer if you believe the issues raised by Sam impact upon you. Alternatively, please post a comment or query below and Sam will do his best to respond.

0

Conduct in divorce cases

the relevance of conduct in divorce financial proceedings

GUEST POST: LISA BURTON-DURHAM

Conduct in divorce cases often raises its head as an issue when family lawyers are first consulted.  To most clients, it seems clear as day that since their spouse is at fault in some way, it must follow that this will impact on the financial outcomes in the divorce settlement.

I asked one of my colleagues at Family Law Partners, Lisa Burton-Durham, to let me post an article she has recently written on this enduring issue.  I think my readers will find it of great value.  Thanks, Lisa!

Conduct in divorce cases

I am often asked whether a spouse’s behaviour would have an effect upon the financial settlement following a divorce.  Indeed there is a common misconception that one person’s ‘bad’ behaviour will mean that their spouse will receive a larger financial settlement by way of compensation for one and penalisation for the other.  But is that right?

Conduct is one of the factors that the court should take into account when looking at the appropriate financial settlement within divorce proceedings.  However the law is very clear in that the conduct will only be taken into account if it is so serious that it would unfair for the court to disregard it.

Of course, deciding on whether conduct is such that it should be taken into account will be subjective to many.  I often hear: “It was my husband who went off with someone else so why should he get anything?” or “She recklessly gambled away lots of our money so why should she get half of my assets?”

When looking at the relevance of conduct there are two types to be considered: personal misconduct and financial misconduct.

Personal misconduct involves some sort of ‘bad behaviour’ on the part of one party. In my experience it the type of misconduct that is complained of the most but it is actually very rare that it will have any bearing upon the financial settlement.   Adultery and most forms of ‘unreasonable behaviour’ will probably only be relevant when deciding who should pay the costs of the divorce.

To be a relevant factor in a financial settlement, personal misconduct has to be of a very serious nature and outside the range of normality.  Ordinary fighting and quarrelling in an unhappy marriage would not be sufficient neither would one party having committed adultery.  Examples of cases where personal misconduct was taken into account include a wife shooting her husband and a husband committing incest with the children of the family.  Thankfully, these types of cases are extremely rare.

Financial misconduct is normally where one party recklessly or purposely squanders assets prior to the divorce proceedings, thereby reducing the amount of the ‘matrimonial pot’.  Examples of this are gambling and spending money on unnecessary things like expensive holidays and cars. 

In such circumstances the court will try to put right the circumstances by ‘adding back’ the money or assets that have been spent and continuing on the basis that the party still has them.

It is also important to note that conduct during the course of the divorce proceedings, such as failing to comply with a court order, is not usually punished by providing a lower settlement to the ‘guilty’ party.  However they can be penalised by the court ordering that that party pay a contribution towards the other party’s costs.  This is known as ‘litigation conduct’.

To summarise, it is quite unusual for a conduct claim to be successful, especially if the misconduct is personal.  It is therefore very important that legal advice is sought before embarking on such a claim as this could save considerable expense in the long run.

Lisa Burton-Durham is a Chartered Legal Executive and accredited collaborative lawyer with Family Law Partners based in Brighton.  Nothing in this article constitutes legal advice.

0

Taxing access to justice

Another (austerity) budget

Tax policy to incentivise mediation

I have often wondered, when sending my clients their legal bills, how on earth they can afford my services?  In short, how can they afford access to justice?  The cost charged for the work  carried out will look imposing enough.  But the killer touch is when VAT at 20% is added to the bill.  A stiff bill becomes a….really large bill.  This is important because most legal aid for family work has now been kicked into touch.  “Access to justice” is no longer a slightly dry form of words bandied around by academics or politicians.  It is real and it affects us all because it you can’t afford to pay for it, you ain’t getting it.

When providing costs estimates to clients at a first consultation the figure arrived at will be discussed and agreed.  A client will be encouraged to help themselves as much as possible, or use my online platform for document production: anything to keep the cost down.  So an estimate is arrived at and the client thinks: OK, I’d rather not be using my money to pay legal bills but I need the help and I can live with that likely cost.  Then comes the point when you have to add in VAT at 20%.  The client’s face always drops.  (Mine would in their position).  Adding in VAT at 20% has just broken the bank.  There is access to justice – you just have to clear the VAT hurdle first.

This post was first created as a draft over a year ago and then put in mothballs.  I’ve brushed off the cobwebs and published it now,  prompted by an article in The Law Society Gazette about Belgian lawyers resisting the imposition of VAT on their bills.  Not the sexiest of links I’ve stuck in a post but try to bear with me.

The problem with VAT

The imposition of VAT on legal services does not create a level playing field.  Because:

  • If a VAT registered company needs legal services (and think of the millions spent by large corporates every year on their legal needs) they can reclaim the VAT they have paid out so it is cost neutral for them.  Sweet.  So spend all you like, lads, on that latest merger.
  • If you are an individual you pay 20% VAT on top of your legal bills and can’t reclaim it from anyone.  Harsh.  So you can’t afford to get legal advice on access to your kids or financial agreements to keep a roof over your head, after all.
  • Some of my clients are individuals and don’t pay a penny of VAT on their bills.  (No way!)  Yes way.   Because they live abroad in non-EU member states and therefore don’t have to pay VAT on legal services even though the legal services are being conducted in the UK.  Fortunate for some.

I mean, I understand there has been (still is) a recession: the government needs these tax receipts. But access to justice should mean something: the government has taken the axe to civil legal aid and promoted mediation.  Unfortunately, the government’s championing of mediation was a fig leaf to distract from the legal aid cuts.  The catastrophic fall in mediation referrals is testament to the fact that the presentation of mediation as a panacea in family law work was political window-dressing rather than well-considered, appropriately resourced social policy.

If the government is serious about the promotion of mediation, and is equally serious about preserving access to justice, then I have a suggestion by which it can redeem itself, ever so slightly. My suggestion focuses on family law.

The solution

We all know that a blanket tax, like VAT, penalises the less well-off.  We also know that the government keeps banging on about mediation whilst doing nothing (in resource or policy terms) to promote its take-up.  Talking of policy, they really need to catch up with the fact that there are other options available to keep people out of the courts as well, such as collaborative law and family arbitration.  We know, despite the political window dressing, that the withdrawal  of civil legal aid has directly and adversely impacted upon  many individuals’ rights of access to justice – they can’t afford it – full stop.

So, here is my suggestion to help the government climb halfway out of the hole of its own making.

  1. Spend a few quid telling the public that legal aid is still available for mediation (on a means tested basis);
  2. Permit mediators and lawyer/mediators to reduce the rate of VAT on their services to 5%;
  3. Permit collaborative lawyers to reduce the rate of VAT on their services to 10%.  Family consultants and financial neutrals assisting the parties in the collaborative process be allowed to do the same.
  4. Impose a reduced rate of VAT at 15% on legal advice offered outside mediation or collaborative law.  This would apply to family arbitration, and work conducted under the pre-action protocol (attempting via solicitor-led negotiation to resolve matters without recourse to court proceedings).
  5. Impose 20% VAT on legal services from the moment one of the parties issues contested legal proceedings.  An application for a consent order (so not really contested) would attract VAT at the rate of 5% if it follows on from mediation and 10% if it arises following the collaborative process.

In my humble opinion, I think this is a win/win scenario.  The lawyers don’t get a penny extra, so the Daily Mail won’t get its knickers in a twist.  It will make legal services  (access to justice) more affordable.  It will incentivise individuals to choose dispute resolution models such as mediation and collaborative law that objectively produce better outcomes at lower cost.  The reduction in VAT receipts will be offset (I’m guessing) by the drop in numbers using the (expensive to maintain) family court system and perhaps even reverse the increase in litigants in person that is now threatening the bring the courts grinding to a halt.  Timely legal advice can prevent a host of problems later on and I don’t know how you even begin to count the cost in developmental and emotional terms for those kids whose parents cannot stop warring without legal intervention, or who don’t receive maintenance or the opportunity to develop a relationship with a parent who has been excluded from their lives.

Worth a punt?

0