child support

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Simple childhood pleasures - sometimes free

 

Child support issues and the CSA feature heavily in my postbag nearly every week. Disputes about child support occur whether the context is one of divorce, or separation following co-habitation. Children are expensive.  One of the difficulties is that the economic circumstances of both parents can change, sometimes dramatically, during the minority years of a child and the CSA or the family court can struggle to keep up.

I received an interesting enquiry from Joan:

Hi….wondered if anybody could help. I have a daughter who is now 15, when she was 18 months old her father & I split up. He saw her a handful of times after that & has never paid any maintenance.

In 2004 he won the lottery. I separated from my ex husband & made contact with my daughters father & she started to see her dad. The CSA did an assessment at the time (it was automatic as I was on Income Support)but they said they could not trace any income even though he had properties interest from his earnings!…Being non confrontational & then finding a job I decided not to push the situation plus I felt uncomfortable with the fact that people may think that I was out for his money!

He has helped with paying for her holiday a couple of times but that’s about it (all in all approx £1000 max-Coutts & co cheques!) Things have moved on and financially we’re struggling and think it’s about time now that he helps out. Don’t know which way to play it, contacted him but had no response….surprise surprise!!…advice please 🙂

Well, as usual, I must emphasise that I do not offer ‘advice’ on this blog.  I can’t: simply because it would dangerous to do so when I do not have possession of all the facts.  But I can offer some observations.

The CSA are presently dealing with your daughter’s maintenance.  You can talk to them about any concerns you have about your ex’s non-disclosure.  But I could indulge in a bout of speculation to the effect that once he had his lottery win he may have organised his finances in such a way that the CSA could not take into account all the interest he earned from certain sources.  In some cases, business assets (rather than investment properties) can be excluded from the deemed income or interest regulations.

Your ex banks with Coutts.  Well, that’s rubbing it in, isn’t it? Coutts used to require new customers to have investible assets (i.e. money knocking around that could be placed with the bank) of at least £500,000.  It went up to £1M recently.  Whilst Coutts will say that this criterion is only a guideline, the key is that your ex must have had significant funds (non-business assets) to invest or hold with Coutts to have obtained an account.  Did you tell the CSA he was banking with Coutts?  That should have at least raised eyebrows at the CSA.  Your ex may demonstrate a lifestyle inconsistent with his declared income.  Perhaps he is married and has diverted the lottery capital or income to his wife?  Press the CSA again and consider a complaint if they are not taking you seriously.

Regardless of whether the CSA will take steps to properly investigate your ex’s financial means, you could make an application on your daughter’s behalf under Schedule I of the Children Act 1989 for lump sum orders and property adjustment orders.  You have probably left it too late to ask the court to consider an order requiring your ex to buy or provide a property for you and your daughter to live in as she will shortly be coming to the end of her minority.  (But I don’t know all your circumstances or your daughter’s so you must take advice).  But you can apply for multiple lump sums for various needs your daughter may have, to do with health, disability or education, for example.

An application to the court on your daughter’s behalf would require your ex to provide financial disclosure which may be very interesting.  The family court can take into account all of your ex’s assets and income in deciding the appropriate orders.

However, you should take advice upon the timing of any application.  Because, your daughter, when she attains the age of 18, can make an application on her own behalf under Schedule 1 of the Children Act, for periodical payments (maintenance), property adjustment orders and lump sums, if she is in education or vocational training and providing she did not have immediately before her 16th birthday a periodical payments order in force for her benefit.  So, it may be worth just waiting until your daughter is 16 before you think of applying on her behalf so you do not prevent her applying in her own right later on.

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divorce finance toolkit

The Court of the Kitchen Table

What happens when couples going through a divorce, having to sort out child support, the future of the matrimonial home, or even pension splitting upon divorce, have no access to a family lawyer?  I have talked before about what may happen when legal aid is withdrawn from family law.

My gut instinct tells me, and any other family lawyer you ask, that the withdrawal of legal aid will lead to more people trying to sort it out themselves – the DIY divorce route – or representing themselves in court (as litigants in person).  The court system is already  struggling with budget cuts and is ill-equipped to deal with an upsurge in self-reppers.

Gut instinct is fine but it’s always helpful to see some objective evidence and I therefore read, with keen interest, the results of a study sponsored by Simpson Millar Solicitors which can be found here.  The stand out headline is that 65% of women and 53% of men in Leeds and Manchester would try to get by on their own in a divorce situation.

I am very troubled by this stat.  God knows how two spouses, both unrepresented, can sort out complex issues around the kitchen table.  I can just imagine the conversations where words like ‘clean break’ will be bandied around without any understanding of the long-term consequences for both spouses and their children should they actually end up with a clean break.

The challenge for the legal profession is how to preserve access to justice and mitigate some of the worst effects of family breakdown: like the provision of expert legal advice. Some of us in the legal profession still give a damn about this even though it’s clear the Government doesn’t.  The majority of the retail operators about to move into the legal market (estimated value £25 billion) have not come from a background or training that still sees ‘the law’ and the profession of lawyer as offering society something more valuable than a ‘commodity’.  These retailers will cherry pick the best bits and won’t give a second thought for Kevin and Tracy sitting around the kitchen table in Manchester and Leeds.

 

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Child support: excluding the CSA

Full of cheer? The Christmas Order

Self-represenatation in family proceedings is difficult.  Many litigants in person, or ‘self-reppers’ find it hard to fund legal advice from a family specialist.  This is particularly so where the only dispute may be about an income claim such as child support because it is not as if you may recover a valuable asset or receive a lump sum out of which you can repay your legal fees at a later date.

When faced with a self-repper, a family solicitor (who, we must remember is an officer of the court) should try to assist the litigant in person to understand the process or the proposal being made.  This is not to say, that the solicitor must advise the self-repper: they cannot do that as it would be a conflict of interest with their role as an advisor to their own client.

I have a great deal of sympathy for self-reppers, as may be evident for any regular readers of this blog.  When facing them in court I go out of my way to be courteous and helpful, mindful always of the stressful nature of the proceedings in which we are all involved.  I have sometimes had self-reppers throw doubt upon my parentage, but I don’t mind as I know, in most cases, it is just the pressure of the situation getting to them.

Unfortunately, this pressure of the occasion at court can cloud the judgment or even hinder the understanding of self-reppers.  This is presuming of course, that the lawyer on the other side of the self-repper and the judge have sufficiently explained the situation to the self-repper.  This is the subject of a recent enquiry from a ‘troubled mum’:

My son settled in court to pay a woman he had a one night stand with £750.00 per month. This was at a stage 2 meeting. My son had to represent himself because he could not afford the legal fees. The barrister representing the applicant explained the order was a “christmas Order” which meant it could be looked at again if my son were to win the lottery or found himself without a job ( I was there I heard the barrister say this) We now have received a typed up copy of the court order that we agreed on the 3rd May to let a legal person look at it. We have been informed the words “Christmas Order” means it automatically goes up each year which we were definately not informed that this was the case. Can we ask the court to take out that clause because we were informed wrongly of its meaning please help this is a nightmare regards very troubled mum

As ever, with many of the enquiries I receive, I do not have all of the detail but my initial thoughts are as follows:

  • I wonder why this matter was not dealt with by the CSA.  The child’s mother could simply have referred the case to the CSA to make a maintenance assessment and fix the amount of child support.  No need for her to pay for a barrister (unless she had public funding – or legal aid).
  • Since the CSA were not involved I am presuming the case before the family court was under Schedule 1 of the Children Act 1989 which can provide for financial orders between unmarried parents for the benefit of their biological child.  Such orders usually being:
    • Periodical payments (or child support)
    • lump sum orders (there can be more than one)
    • a property adjustment order (the provision of a house for the child and mother to live in) although the property will in most cases revert back to the father when the child reaches the age of majority.
  • If this case was being brought under Schedule I Children Act proceedings, then the father in this case could have referred himself to the CSA and the family court would no longer have the ability to make a periodical payments order.  The family court could still have made a lump sum order or a property adjustment order but whether the father had the financial means to meet such orders is not mentioned in the enquiry.  I suspect not.
  • The father has agreed (remember that the family court can only approve a child support order if it is with the consent of both parents) to a ‘Christmas Order’.  I have used such orders before but from memory I have only done so when my client’s spouse or partner has had legal representation.  This is because the Christmas Order attempts to oust the jurisdiction of the CSA (which, technically speaking, is against public policy).  Readers of this blog may remember that a court-approved child support order may only have a shelf life of just over 12 months because either parent can then refer the case to the CSA to take over and the family court order bites the dust.  A ‘Christmas Order’ is designed to automatically renew itself just before the 12 month period lapses so it is as if a new order is born out of the ashes of the preceding order each year.  Because the order never quite gets to be one year old before being renewed each year the CSA never gets to have jurisdiction.  The month of automatic renewal is usually December: hence the Christmas connection.   Clever. Unless you did not understand what you were signing up to.
  • A Christmas Order can be quite helpful in some circumstances but, as I mentioned earlier, I am troubled if the father of this child did not have a clear understanding of what he was agreeing to.  Without his consent this order could not have been made. Even if the barrister had not explained it clearly enough, I would have thought the judge, who approved the order, would have explained very clearly to the father what the Christmas Order entailed.  After, all it is an unusual order so the burden upon the barrister and the judge to assist the self-repper in this case is, in my view, even higher than normal.
  • The ‘troubled mum’ behind this enquiry and her son then consulted a ‘legal person’  with the result being: “We have been informed the words “Christmas Order” means it automatically goes up each year”.  That’s not right.  The Christmas Order operates as I have explained above: it automatically renews itself each year in such a way as to prevent the CSA having jurisdiction.  It would only go up in value each year if there was a specific clause saying that it will increase in value.  The normal mechanism for this to happen is to link the child support payments to the increase in the Retail Prices Index (RPI).  I have tried to explain how this operates in a number of posts on this blog. Again, I am troubled if the father in this case did not know he was agreeing to an automatic increase in the value of the payments each year.  Don’t get me wrong, I think such automatic increases can be a good thing but it is essential that all the parties (especially self-reppers) understand what they are agreeing to.)

Although I must reiterate again that I cannot advise anybody on the pages of this blog, one option open to the father is an appeal against the court order.  It will be an appeal against a consent order which makes it difficult to say the least but it may be worth a try if the father is certain that the order was not explained to him by the judge and that if it had been explained to him, he would not have agreed to it. The guidance for making such an appeal is here.  However, the usual time period for making such an appeal is 21 days from the date of the order so that time period has already passed.  It is, however, still possible to make the application to appeal (out of time) and the father may be given more leeway because he is unrepresented.

BUT: remember that such an order is variable.  That is, if there is a significant change in the father’s circumstances such as the loss of a job or a significant pay cut then it is possible to have the amount of the maintenance varied downwards on an application back to the family court.  At the same time the court could be asked to simply drop the automatic renewal (the Christmas Order) aspect of the child support so that it could, if either parent wanted to, fall back within the jurisdiction of the CSA in the future.

My inclination, if this father needed to vary the order in the future, would be to invite the mother of this child to mediation.  Much less stressful than contested proceedings.

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Tax credits for separated parentsWhen couples separate or divorce, their respective family lawyers, if involved, will try to  agree a financial settlement and, as ever, the issue of child support is usually first on the list.  Some parents may have agreed upon shared care arrangements so that the child or children spend extensive periods of time with both mum and dad.

In such arrangements, the child support needs to be more ‘fluid’.  It should, if possible, reflect the fact that the financial burden under such shared care arrangements will be more evenly distributed between two households.  So, the black and white distinction used by agencies such as the CSA, for the ‘parent with care’ and the ‘non-resident parent’ (NRP) look old-fashioned and inflexible.  You may think they are only labels, but language is a powerful tool.

The CSA can take into account the fact that the NRP has the child or children for a significant number of nights during the year and this reduces the amount of child support that will be paid.  It’s better than nothing but it will still be a major irritant to the so-called NRP who has almost has much care of the children as the so-called parent with care.

To make matters worse, valuable additional sources of income to meet children’s needs suffer from a similar administrative straitjacket:

    • Child benefit cannot be split between two claimants.  This single payment rule means that separated parents who share the care of their children can decide which one of them is to receive the benefit.  In the absence of agreement, HMRC can exercise a discretion over who should receive it.  I have known cases where child benefit has been allocated for one child in one household and the child benefit for another child allocated to the additional household.  Of course, the payment for the first (older) child is greater than the second child so there will still be a differential.
    • Child Tax Credit (CTC) like Child Benefit can cater for separated parents to agree who should receive the credit.  In the absence of agreement, HMRC must consider the “main responsibility test” i.e., which parent has the main caring burden for the child.  So, HMRC cannot share the CTC out between the separated parents but must pay it in its entirety to just one of them.  This can seem manifestly unfair to the parent who may fall short of the “main responsibility test” by just a few hours in any given week because of the significant level of shared care.

I have often wondered whether this inflexibility would be judicially challenged.  Now it has:

Humphreys (FC) (Appellant) v The Commissioners for Her Majesty’s Revenue and Customs (Respondent).  Judgment was given on 16 May 2012.  The Appellant father had argued that the denial of sharing of CTC indirectly discriminated against men because men were more likely to have less care of children after separation.  HMRC conceded that the discrimination was real.  However, the court held that this discrimination, the ‘no-splitting rule’ was justified on public policy grounds as it was the best way to tackle child poverty and was therefore a reasonable approach for the state to adopt.  As an aside, Baroness Hale, in giving the unanimous judgement, thought it unhelpful that the family court did not have the power to make orders about splitting such benefits when it made orders about the welfare of children.  She said:

Unfortunately, the advent of the child support scheme has removed the possibility of doing justice from the courts. To restore it would obviously be the more rational solution to the problem under discussion. 

That seems sensible to me and most other family lawyers I know.  Is the Government listening?

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Child support enforcement

Over the hills and far away

It is not uncommon for divorce proceedings in the English jurisdiction to involve a spouse who lives abroad and child support issues are usually one of the main concerns.  How do you obtain a divorce financial settlement including child support if your ex is not willing to negotiate? The Maintenance Orders (Reciprocal Enforcement) Act 1972 may help.

This is the subject of a recent enquiry from Sarah (not her real name)

I am divorcing my husband who lives in USA – the divorce case is in UK. I first contacted my solicitor last year in may and this has been taking a year now just to get divorce – i am not asking anything financially from my husband even knowing how much i am entitled to, however i want him to start paying child support which is 15% from his income as i have been advised from my solicitor. i tried to negotiate but my soon to be ex husband is not paying. how long will it take if i issue proceedings? thank you!

To be honest, I don’t know how long it would take if Sarah issued proceedings.  It depends upon the type of proceedings, the foreign jurisdiction she is dealing with and the speed of her lawyers,  but I suspect it will not be quick for reasons I will explain shortly.  International claims for financial relief are a notoriously difficult area to navigate even for highly experienced family lawyers.

Back to basics…

It sounds as if Sarah has done the right thing first which is to try and negotiate the level of child support.  Unfortunately, her spouse is not playing ball.  There are few things more unattractive than a man who won’t take financial responsibility for his child or children.  So what can Sarah do?

In the English jurisdiction, for the great majority of cases in the family courts involving child support, the court only has power to give an order if the spouses are in agreement.  In the absence of agreement, the CSA has the power to carry out a determination of the absent parent’s net income and demand payment on the basis of a formula.  In Sarah’s case, since her solicitor advises she should seek 15%, I deduce that Sarah has one child with her husband. (The CSA will seek 15% of net income for one child, 20% for two and 25% for three or more children). In general terms, the CSA only has jurisdiction for parents who live in England and Wales.

But the CSA can still retain jurisdiction for the absent parent if:

  • the absent parent is in the armed services; or
  • working for the UK government; or
  • employed by a UK registered company

I’m presuming that none of these categories apply in Sarah’s case.  So if Sarah can’t negotiate with her husband and the CSA don’t have jurisdiction, then she will just have to issue in the English court to get child support, right?  Not necessarily.

 Transmission of a claim?

If Sarah issues financial proceedings in the English courts – and it would normally be in her local Magistrates’ Court (also called a Family Proceedings Court) and obtains an award of maintenance (for child support) against her husband then she will need advice upon how to enforce it in the USA.  But Sarah should consider, if she has not already, the ability to transmit her claim for maintenance rather a final order for maintenance to the USA and to ask the court there to initiate the claim for child support against her husband.  To my knowledge, the American states give the choice of transmission of the claim or the enforcement of an English order.  It may be more advantageous to Sarah to transmit the claim to the American jurisdiction rather than have her English lawyers pursue it here and then seek to enforce in the States.

Sarah should test the water by googling family law attorneys in the state where her husband resides and then sending an email to several of them asking them to weigh up for her the benefits of transmitting her claim for child maintenance or enforcing a final order for that maintenance from the English Court.  This feedback will assist her English lawyers to decide the best course of action for Sarah.

Enforcement of final order

Whether Sarah is advised to transmit her claim for child maintenance or whether she obtains a final order first in England and then seeks to enforce in the USA, she will have to follow pretty much the same procedure.  Her solicitors will need to contact the REMO (Reciprocal Enforcement of Maintenance Orders) unit at the Office of the Official Solicitor and Public Trustee.  REMO is a central authority for international maintenance claims in England & Wales.  The good news about this approach is that most of the enforcement is undertaken by way of liaison between governmental departments (in the English and foreign jurisdictions) so it will often be free.

Since Sarah is looking to get financial support from a husband in the US, I’m sure her solicitors will have regard to the Reciprocal Enforcement of Maintenance Orders (United States of America) Order 2007 which allows for a UK order for maintenance to be enforced provided the payer is resident or has assets there.  Equally, if Sarah and her advisers conclude that the transmission of her maintenance claim to the US is the better option then they will consider The Recovery of Maintenance (United States of America) Order 2007.

Finally…

Sarah states that she is not asking for anything financially from her husband (apart from child maintenance).  I’m not sure why not, if she really needs it and if her husband can pay.  The Maintenance Orders (Reciprocal Enforcement) Act 1972 deals with spousal maintenance as well as child maintenance.  I’m just saying…

 

 

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Equality of arms and divorce outcome can be undone by a CSA assessment

Every divorce should result in a clear financial settlement.  Whether the family court order is given by consent or handed down by a judge at final hearing, each spouse should have negotiated a divorce settlement that makes sense in the round.  No one wants a coach and horses to be driven through a delicately balanced court order just months after it is given.  It wouldn’t be fair, surely?

This is the situation facing Jane, who asks me:

Please can you tell me whether I am able to take my ex husband back to court to enforce the court order for child maintenance that the CSA have reassessed and reduced.  There has been no change in his circumstances other than a salary increase but he no longer wants to pay what was agreed in our settlement and has reduced payment by £300 per month. He only pays for the children, I have no claim on pensions etc. and he does not pay me maintenance. I gave him £20,000 on divorce based on what he would pay for the children. He has now been able to disregard the court order but, of course, has not returned any of the money I gave him. It just seems unethical to me and leaves us in dire financial straits.

I would like to know whether the CSA have the final say on this matter or whether I can go back to court to challenge their decision.

Jane’s child support enquiry reflects one of the great problems for divorce clients who have reached what is hopefully a carefully balanced divorce settlement taking into account capital claims and income claims, including spousal maintenance and child maintenance.  The problem is this: even if there has been a family court order for child maintenance made at the time of divorce, provided the order was made after 3rd March 2003 and has been running for more than one year, then either spouse is able to ask the CSA to deal with the child maintenance aspects.  The child support element of the family court order is therefore made redundant.   The family court can no longer deal with the child maintenance element.  That carefully crafted and balanced family court order is now in danger of looking very lop-sided.

It would appear from what Jane tells us, that the £20,000 lump sum she agreed to pay her ex-husband was more than she would have agreed to, if she had known that the amount of child support maintenance she would receive in the short to medium term would be reduced.  I do not know how much Jane was receiving under the original court order but I’m guessing that the reduction of £300 a month is an absolute killer.

Jane`s ex-spouse will now be assessed to pay child support by the CSA until the children reach the age of 17 (or 19 if they are in education or vocational training).  The family court will have no further role to play on child maintenance – unless there are some exceptions, such as the costs of meeting the needs of a severely disabled child, which do not appear to arise in Jane’s circumstances.

Jane tells us: I gave him £20,000 on divorce based on what he would pay for the children. He has now been able to disregard the court order but, of course, has not returned any of the money I gave him. It just seems unethical to me and leaves us in dire financial straits.  I have not seen the order Jane obtained from the family court, I do not know whether it was given after a disputed final hearing or by consent.  If solicitors were involved then as advisers for Jane they should have warned her of the possibility of her ex-husband being able to involvethe CSA at a later date.  Clearly, Jane`s ex had calculated that he would pay less under the CSA regime than the amount of child maintenance he had agreed to meet under the family court order.  It is important to note that the family court cannot give an order for child maintenance unless both parents are in agreement for the order to be made.  So, if I understand Jane correctly, there may well have been an arrangement for the payment of 20,000 provided that child maintenance at the agreed level continued to be made.

The value of (good) lawyers?

This is where the lawyers are meant to earn their corn.  If Jane had divorce lawyers (and was not self-repping) she should have been told in words of one syllable that her ex-husband could go to the CSA.  Those same lawyers should have explored with Jane certain arrangements that could have been recorded in the family court order that would have protected Jane against the possibility of the CSA becoming involved.  One such mechanism would have been for Jane’s ex-husband to agree to make up, on a pound for pound basis, any shortfall in the amount of child maintenance ordered by the court once the CSA became involved.  There are a number of solutions that could have been explored but if Jane had divorce lawyers at the time and is unclear how she has been left so exposed she should contact them and ask for an explanation.

In short…

So, on the facts known to me, Jane cannot go back to the family court.  The CSA deal with matters now.  However, Jane is entitled to ask the CSA to check that her ex-husband has given full financial disclosure to the CSA.  I do not know the details of the case.  The CSA assessments are based, in the main, solely upon the net income of the non-resident parent.  But Jane may want to ask the CSA to investigate further, and ask for what is called a ‘variation’, if any of the following scenarios apply:

  • Her ex has capital assets (but not business assets or equity in his home) over £65,000.  If so, the CSA may deem the asset to produce an income of 8% per annum and this will be factored into overall income and increase the maintenance assessment.
  • He is taking dividends through a company rather than a wage or retaining significant capital in his company which could be taken as income
  • He is diverting income elsewhere, such as through a new partner
  • Her ex has a lifestyle that is clearly inconsistent with his declared income to the CSA.

 

 

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Contains more than the Chancellor’s sarnies

Mr Osborne’s UK Budget 2012 impacts on us all: but here is my kneejerk reaction to the changes that may be relevant for divorce cases,  and family law.  The Budget is portrayed as fiscally neutral but are there any nasty surprises in there for family lawyers and their divorcing clients?

    • Income tax personal allowance threshold is raised. For spouses on low income, working part time, this is a marginal improvement.  The Chancellor claims 2 million people will be taken out of tax altogether.  We will see.
    • Tax benefits, child benefits and housing benefits appear to be linked to CPI instead of RPI which is a clever, cumulative cut in the true value of these payments going forward.  I highlighted the CPI/RPI ruse in a previous post.  Expect lawyers acting for wives to continue to press for their client’s spousal and child maintenance payments to be linked to RPI to mitigate the impact of a realworld devaluation in child benefit and tax credits as the years go by.  Lawyers for the husband may argue the inflation link should be to the lower CPI measure “If it’s good enough for Mr Osborne…”
    • The big headline for Child benefit is threshold at £50,000 and taper up to £60,000.  A parent with 3 children earning £60,000 will lose approximately £2,400 per annum by these changes.  This will need to be factored in to any negotiations on child maintenance payments if an anticipated future pay rise sees the loss of such benefit. 
    • Spousal and child maintenance will continue to attract no tax relief at all to the person making the payments.  The person receiving the payments will not pay tax upon the same. 
    • NewBuy scheme on new build properties up to value of £500,000 could be helpful for individuals who have left a matrimonial home and who need to re-house themselves.  A deposit of between 5% and 10%  will be enough to secure a property instead of the market standard of 20%.  In matrimonial cases where liquid capital is tight, this could be helpful.   
    • Public sector pay is to made ‘more responsive.’   Not clear how this is going to pan out: some commentators say public sector workers in the North of England could find their pay frozen.  Differentials will presumably grow, quite intentionally, between workers in the same jobs but in different parts of the country.  I would certainly want to know whether my client was going to be finding themselves in a ‘more responsive’ part of the jurisdiction if spousal maintenance or child support issues were in question.  If I am acting for the payer of maintenance in those circumstances where the value of their pay is going to be eroded, I would be resistant to agreeing any RPI link at all.
    • VAT exemptions will remain on food, clothes and books.  Anyone raising kids knows just how much the little darlings cost so this is a relief for those on tight budgets receiving modest child support maintenance payments.

That’s it folks.  For now.

 

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Many a mickle makes a muckle

Spousal maintenance issues following divorce continue to dominate my post bag.  In particular: the automatic variation of maintenance following a divorce financial order by reference to the RPI.

What has been genuinely illuminating to me as a family law specialist is the extent to which there is boundless room for confusion over the interpretation of a maintenance order, whether spousal or child support.

This week’s postbag:

John (not his real name) had read some of my blog posts and then asked:

Re: Variation of Maintenance agreement. Could you clarify how it works for second and subsequent years.  My ex-wife and I disagree. She says that the shortfall is cumulative. [further details omitted to avoid personal identification]
The details provided by John made it clear that he had been paying the maintenance ordered by the court but, for whatever reason, the link to the RPI which was intended to increase the amount of the maintenance each year, had gone by the wayside. So, the sum of maintenance approved by the court in the original order has not been increased, as was intended by the order, for three years.  John and his ex cannot agree  how the shortfall created in the past is calculated or applied so they can get back on track.

The solution

I suggest the art of the practical.  Strictly speaking, the non-payment of the inflation-linked increase each year constitutes arrears.  For example, let’s say the original sum ordered by the court is £1800 per annum.  At the first year anniversary the application of the RPI link, if it is applied, would have increased the original sum.  Let’s imagine it is by £150 per annum.  So the second year sum of maintenance is £1950 per annum.  Upon the second year anniversary let’s imagine the RPI increase is £250 per annum.  The increased sum paid is therefore £1950 plus £250 = £2,200.  Continuing on this path, the third anniversary is (let’s say) an increase of £400.  That is, £2,200 plus £400 = £2,600.

I have laid out below how the missed RPI increase every 12 months would accrue  following an original order for maintenance.

So, by month 48 the arrears would be £1350.  This needs to be paid by John to bring the maintenance up to date.  If John refused, his ex could apply to the court to enforce the non-payment and ask the court to fix the payments at the correct level for month 48.   However, where there are arrears that are more than 12 months old, John’s ex would need to ask the court for permission to recover these older arrears.  John may ask the judge to remit (waive) the arrears older than 12 months.

In reality, the legal costs of going back to court would be prohibitive if there is no access to legal aid, and it would be stressful.  Better, surely, to fix the correct amount at month 48 so it is at the right level going forward and prevents any further arrears building up.  Then, the older arrears could be paid in a series of lump sums over the next year or 18 months.  So, divide the arrears by 12 or 18 and add on to the present monthly payments of maintenance.

Remember, if John and his ex are finding it hard to negotiate the precise way to get themselves back on track, they could consider a mediation session to help them get it sorted.  One session should do it.

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Who knows what the future holds?

My postbag continues to bulge with divorce enquiries focussing on child support issues and spousal maintenance.  The conclusion of a divorce does not, of course, mean the end of disputes or problems over child maintenance or the intepretation of family law court orders. Here is my most recent query:

Following a very messy and financially costly divorce, a court order was made that included a RPI increase at the insistance of the petitioner. The only alternative I had was to go througth a full court procedure which could have significantly increased the fees that at that point were spiralling out of control. The date of this increase is in effect from 20012 (this is the actual date on the court paper). My ex wife has not ‘reminded’ me about this probably because she is still being persued by her solicitor for the oustanding fees that she ran up during the divorce-since the divorce she has instructed other solicitors in an attempt to entangle me in more nonsense which I refuse to engage in. I normally direct the new solicitor to the original one where the fees remain oustanding and this tends to silence the correspondence for a while until a new instruction is generated.

I have and will pay the monthly child maintenance fees until my child reaches the age of 18 or until she leaves full time education as stipulated in the court order. It was my ex-wifes solicitor who drew up the order and maintenance payments will cease approximately 2018 but as stated the increase id documented as 20012-what are my options?

To begin with, I’m not sure whether the order referred to above contained spousal maintenance and child support (maintenance) or just child maintenance and this attracts the RPI increase.  But, no matter, since the principles remain the same for either order (with one exception I’ll return to below).

    • the order is made against the payor so it is enforceable in case of default.  I consider that this includes any failure to comply with an RPI increase ordered by the court (even if it was by consent).
    • the purpose of the order is two fold – an automatic increase in the maintenance each year prevents it losing its true value over a period of years and it makes it unncecessary for the parties to have to apply back to the court for a variation (at significant legal cost) in the amount being paid.

Your options

Carry on as you are. 

    1. But you know the increase is due and the defecit will build up.  You may (eventually) receive a solicitor’s letter asking for payment at the new level (and threatening enforcement).  If you ignore it and an application for enforcement is made, be very careful as you could end up on the wrong side of a costs order.  Especially if a judge decides it is not a case of ‘can’t pay’ but ‘won’t pay’.
    2. The application back to court could be for a variation of the amount of maintenance as well as enforcement.  Your ex may think you could afford to pay more and ask for the increased amount to be index linked as well.  If this happened you are entitled to ask the court to decrease the amount and it will be a question of fact as to whether the judge thinks the original amount under the order should go up or down, or remain the same.  It is possible for an attachment of earnings order to be made at the same time (if you are not self-employed) as a way of ensuring that the right amount is paid each month going forward.
    3. If, by the time your ex made an application to the court to enforce or vary, your arrears were more than 12 months old, your ex would have to ask permission from the court to recover any arrears older than 12 months.

Apply back to court yourself

If you are struggling to pay the original amount you could apply back to the court yourself to vary the amount downwards and ask the court to ‘remit’ (waive) any arrears that may have built up.

Or, just pay the new amount

You could calculate the increase in the maintenance , start paying it and have a quiet life.

I mentioned an exception above.  This is where the order is for child support/ maintenance.  This would only be in existence if you and your ex agreed to the order.  In the absence of agreement, the family court has no jurisdiction in child maintenance issues (with some further exceptions, I won’t mention here!).  In the absence of agreement, the CSA will deal.  It is possible for either party to an agreed child maintenance order in the family court to wait, to all intents and purposes, a period of 15 months from the date of the original order and then ask the CSA to take over so the family court will no longer deal with the child maintenance element.

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RPI/CPI Comparison 2009 to 2011

Divorce maintenance payments: CPI or RPI

I have written before about whether maintenance payments for spouses and child support on divorce should be inflation-proofed by automatically increasing their value by any rise in the Retail Prices Index (RPI).  I pondered whether such a link could be made instead to the lower figure of the Consumer Prices Index (CPI).  I noted the Government’s quiet adoption of the CPI for the payment of benefits as a way of saving money in real terms.

Divorce solicitors will usually seek to protect the value of their client’s maintenance payments by linking future increases to the RPI.  However, the mass strike by public servants on 30th November this year (in part because their pensions are now subject to the lower CPI link) demonstrates that these policy decisions matter.  Likewise, a client who is awarded maintenance linked to the CPI over 15 years is going to be significantly disadvantaged in comparison to the client whose payments are linked to the RPI.

Rise of the CPI?

Surely this just means that solicitors should demand that the link is to the RPI?   After all, that’s the way it’s  always been, isn’t it?  So, it must be set in stone?  Perhaps no longer. The High Court today decided, in the face of a legal challenge by trade unions, that the Government’s linking of public sector pensions to the lower CPI figure was lawful.  Lord Justice Elias stated, in his judgement:

“The use of RPI has in the past been merely current practice.  Looked at objectively it could not properly be asserted therefore that any promise of its continued use had to be assumed”.

Personally, my view is that a link to the RPI for maintenance payments would still be appropriate since this is an inflation measure that includes the cost of housing (which the CPI excludes).  I cannot imagine many clients thanking their solicitors for securing a link to the ‘poor cousin’ CPI inflation measure.  But, as Lord Justice Elias demonstrated today, in these more economically austere times,  old assumptions may no longer hold true.

 

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