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S v C [2020] EWHC 2127 (Fam)

Decision of Roberts J in an ‘unusual application’ by a former wife for a financial remedy order in respect of A who is the parties’ only child, who is six years old.

Brief facts
This case concerns A. A's parents, following separation and divorce, settled their financial disputes and the court approved a financial remedy consent order in 2016, which achieved a clean break. Shortly after birth A was diagnosed with a serious genetic chromosomal disorder. A claim, related to the antenatal care which was provided to A's mother during her pregnancy by a consultant obstetrician (and in reality his professional negligence insurers), was issued in the Queen's Bench Division for damages for the additional costs of bringing up a disabled child. A's father was included as a claimant because of the separate costs he was likely to incur when looking after A at his home. At the time of the conclusion of the financial remedy proceedings the litigation in respect of A was in prospect but the outcome was unknown. Specific recitals in financial remedy order record that they would continue to have joint conduct of the personal injury claim and that "any settlement or award made for the benefit of the child of the family shall only be invested and applied in a manner expressly agreed between the parties in writing in advance" and "at the point when any settlement or award is made, the parties shall review all payments made by them for the benefit of the child of the family to consider whether such payments should be met from the settlement or award moving forward".

Roberts J concluded that the parties 'relationship as parents has completely broken down and the proceedings have been infected with an extraordinary element of personal antagonism which should have no place in a forensic arena where their child stands at its centre.'

Settlement was reached in January 2019 when the insurers agreed to pay a lump sum of £5M to A's parents; this sum was not based on any specific calculations or projections of A's future needs.  Following settlement, an issue arose as to the beneficial ownership of those funds and the extent to which either or both of A's parents should have control over the investment and use of those funds.  They were advised by their legal team that the fact that damages had been quantified by broad reference to the ongoing future needs of a child did not mean that those damages were for the benefit of that child who was not a party to the proceedings.  As a matter of law, A had no interest in, or entitlement to, the damages.  Her parents were the claimants and their claim had proceeded on the basis that they were likely to incur additional costs over a number of years in caring for a child whose future needs were likely to be greater than those of child who had not been born with a chromosomal imbalance.

In order to deal with the impasse in relation to the funds it was holding, Kingsley Napley issued an application whereby the court was asked to determine the beneficial ownership of the £5m award.  Following an agreement that each parent had an entitlement to 50% of the frozen funds an order was made authorising the payment out of the Kingsley Napley funds into accounts set up by A' parents.  Each agreed to preserve their respective funds until the Family Court had resolved the mother's application for financial remedy orders. 

The issue

With all matrimonial claims between A's parents now settled, to what extent should the Family Court exercise its jurisdiction under section 23 of the Matrimonial Causes Act 1973 so as to impose conditions on the release to the parties of a frozen fund of some £3.74 million?


Roberts J first turned to the issue of computation. Her Ladyship's detailed summary and findings are set out at paragraphs 15 to 22.  The agreed bottom-line figure in respect of assets directly within the control of the parties was £4.646M (including the equity in the former matrimonial home in Fulham which was retained by the mother as part of the divorce settlement and the Kingsley Napley funds released to each but preserved pending the resolution of the current litigation). Having relinquished any further claims on the property as part of the divorce settlement, A's father had been living in rented accommodation since he and the mother separated in 2015. Roberts J observes that the father was carrying a substantial raft of debt (amounting to c.£453,000), which was a point relied upon by A's mother as evidence of C's financial unreliability going forward. The mother also had significant tax debt, including £483,260 owing to HMRC. The available liquid funds (including equity in property) held by the mother was £3,552,584 and the father £1,373,472. 

It was accepted that the father should move out of rented accommodation and into a home of his own, but the issue which dominated the proceedings was his ability to choose a home of his own, subject to mortgage funding, and the extent to which he should have access to his own funds to complete that purchase.

Two issues were given particular considered:

(A) At paragraphs 23 - 30 Roberts J deal with trust interests, including 'the S Trust' (an offshore trust settled in April 2002; administered by corporate trustees based in Switzerland; which owns a BVI trust, CHL a property holding company) of which A and her mother are discretionary beneficiaries. The underlying value of the trust was agreed at £4m. This trust was not disclosed in the mother's Form E, nor within the 2016 financial remedy proceedings.

(B) The father's business interests ('the V Group') in detail at paragprahs 31 – 37. For the last decade the father had been involved in the world of motor sports and powerboat racing, including providing some form of consultancy services for Formula 1. Roberts J notes that he appears to have been reasonably successful in brokering deals which provided him with an income. In 2012, with a partner, the father set up the V Group of companies, the focus of the Group's mission being the manufacture and sale of high-performance boats destined for the international security sector. The boats are subject to marine mortgages which had recently been restructured so as to leave a residual net asset value of c. £1 million.  Father believes the Group is on the point of concluding an external funding exercise which will provide the business with an equity injection of some £20 million.  If and when that investment is concluded, father has an agreement with the new shareholders that he will be entitled to withdraw his £500,000 from the company or convert that sum to an increased shareholding on preferential terms.  He remains the founder and majority shareholder. There was much cross-examination and challenge of the father's business interests, as is evident in the discussion at paragraphs 33 – 37 of the judgment.

Other key information
Under the terms of the 2016 consent order, and in order (as the father told Roberts J) to ensure continuity and security for A, the father agreed to restrict his capital claims to a sum of £250,000 in total.  That sum was paid to him.  He, in turn, agreed to pay to the mother a sum of £48,000 for A's benefit together with child maintenance at £2,500 (rising to £3,000) per month.  That sum included his 50% contribution towards the costs of a nanny.  He also agreed to pay A's nursery fees and school fees thereafter.  The mother was to be entitled to a nominal spousal maintenance order but that order was to cease on A's 18th birthday.  She, in turn, agreed not to make any claim on his business assets.  Roberts J describes that the essence of the 'deal' was that the mother would be left with the former matrimonial home in Fulham, albeit one which was subject to a substantial mortgage, and the father would 'walk away' for a lump sum of £250,000 (subject to £48,000 being returned to the mother) and the ability to devote his time and energy to his commercial activities subject only to his ongoing financial obligations to A.

Towards the end of 2017 the mother was obliged to issue enforcement proceedings since the father was nearly £6,000 in arrears of maintenance payments for A.  His response, contrary to the intention expressed in the 2016 consent order, was to make an application to the CMS.  In the Form E which he swore in the context of those enforcement proceedings, the father stated that he was "seeking to secure investment into the group but if a substantial commitment is not made shortly, the business is likely to fail and then I will be forced into bankruptcy".  It is that statement in large measure which the mother relied on in these proceedings as driving her concerns for A's future financial security in the context of C's financial position and the future contribution he will be making towards her ongoing costs.  The enforcement proceedings were compromised at the beginning of 2018 and, in June 2018, an order was made in Children Act proceedings which spelt out how A was to divide her time between her parents' two homes. 

The parties' positions at the hearing
The mother brought her application on behalf of A under three separate limbs:

(A) an application for a lump sum for A under s. 23(1)(f);

(B) an application for child maintenance under s. 23(1)(d) - permitted due to A's ongoing disabilities; and

(C) an application for secured child maintenance under s. 23(1)(e).

For these purposes, she accepted that the nominal spousal maintenance order agreed as part of the 2016 consent order should now stand discharged.

The mother proposed the establishment of a trust operated by three trustees, with a total of £1.5M to be transferred by each of the parents into two separate trusts. Of that sum, mother proposed that £1M should be used to discharge borrowing on her Fulham home, reflecting A's interest in the property. The father was to have up to £1M for his housing needs but he was not permitted to use any part of that sum as collateral for further borrowing. The remaining £500,000 was to be released to each party on the basis that the father could choose to use 50% of that sum towards the purchase of his property or to retain it or in repayment of his debt. For the remaining 50% he was required to establish a ring-fenced fund of £150,000 which would be reserved as a designated maintenance fund from which A's maintenance would be met at a rate of £2,000 per month. The only free capital which would be made available to C outside this agreement was a sum of £350,000 less any further sum up to £250,000 which he chose to invest in property "which [he] may retain absolutely".  In her turn, the mother would ring-fence a sum for A to cover nanny and other costs in the sum of £150,000.  She was to have the free use of £350,000. Under the terms of the mother's proposal, the trustees would retain the ability to consent to, or refuse, any request to move house and, in the event of either forming a new relationship with a different partner, that individual would be expected to sign an appropriate waiver in respect of any rights of occupation.

Despite previous offers, which fell short of a formal trust structure, father's open position as the hearing commenced was that the court should not make any orders in respect of the Kingsley Napley funds but should leave them in the hands of each of A's parents on the basis they could and should be trusted to look after her needs both now and in the future. He sought the dismissal of the mother's application. In his evidence the father appeared to accept that, in principle, he would agree to at least £1M being held for A's benefit but the issue between them was how that money could be used.  The embargo which the mother had placed on him being able to offer any part of that sum as collateral for mortgage funding and her insistence on the control of that fund by third party trustees had led to the negotiations breaking down. 

A's needs going forward

There was no clear evidence before the court as to A's future needs. Roberts J found that A's current costs are nowhere near the sum initially thought in 2016, and further that A's needs appeared to be met through her school, the hospital and therapies which were already in place. A letter from the expert, Dr Carthegisan, said this:"[A's] chromosomal condition has a variable impact on learning ability and can be extremely variable.  However, it is associated with significant risk of developmental delay and learning disability but it is not possible to predict how severe this will be.  I do not have enough information about tis disorder to be able to say the amount of support or ability for independent living in the long-term and it is very likely that [A] will continue to require adult support to meet her needs as an adult."


Roberts J set out her assessment of the evidence of A's parents at length: paragraphs 66 – 78 in respect of A's mother, and paragprahs 79 – 81 in respect of A's father.

The conclusions reached can be summarised as follows:

(A) Roberts J did not accept the primary position advanced on behalf of A's father that the court should make no order at all in relation to the Kingsley Napley funds and simply leave each of the parties to apply them as they see fit, finding that there needs to be formal mechanism for ensuring that A continues to benefit from at least a significant element of those funds.

(B) Whilst held legally and beneficially by the parties, the funds were always intended to ensure a stable financial base for her future, and whilst not held now as a matter of law for A's exclusive benefit, they would not have been paid over but for the needs generated by the circumstances of her birth.  To the extent that those needs include a secure roof over her head, each of her parents will inevitable benefit personally.  There is nothing inherently objectionable about that in principle.

(C) Roberts J trusts each of A's parents to look after their daughter but she regarded the history as informing, to an extent, the future.

(D) There needs to be some tax efficient ring-fencing of the settlement monies which each parents holds.  It is not appropriate to require A's father to alienate his ownership of these funds, or the majority of them, into a specific trust vehicle where their value to him will be expunged entirely.  Such a draconian outcome would require evidence of an egregious course of deliberate financial misconduct before it could be justified.

(E) The idea of a section 89 disability trust was rejected on the basis that: (i) it will be disproportionately expensive to administer on an ongoing basis and, even if mitigated in part, it will have tax consequences for both the parties and the trustees; (ii) Roberts J could not see that such an arrangement would work effectively, or at all, given the need to interpose a third trustee between the nominations of the mother and father; and, (iii) there is merit in the submission about a fundamental unfairness to the father if, in the teeth of his objections, he is to be denuded of what might be the only significant capital he will hold going forward, in addition to respect for Article 8 rights.

The order
Believing that there is a middle way through the impasse which provides sufficient security to address the mother's concerns whilst affording the father the autonomy which he seeks, Roberts J made the following order:

(1) Child maintenance for A will be paid at the rate of £2,000 per month commencing from the date of the payment due following my order.

(2) From the father's share of the settlement monies, a sum of £150,000 will be set aside as a secured maintenance fund.  The mother will be entitled to draw down against that fund at the rate of £24,000 per annum (£2,000 per month) between now and A's 18th birthday in order to meet the child maintenance payments.

(3) Provision in a similar amount will be made from the remaining Kingsley Napley settlement monies retained by each of the parents:

a. A sum of £900,000 will continue to be preserved until such time as the father is in a position to purchase a property of his own. Any property he acquires (and it must be a property in this jurisdiction) will be held in his sole name and will be subject to a charge in A's favour.

b. The father will be permitted to raise mortgage finance in order to acquire his property but the value of A's charge must not be reduced below £900,000. Further provisions in relation to security and charges were also made.

(4) The mother will be permitted to use funds from her share of the Kingsley Napley settlement monies to redeem her existing mortgage on the Fulham property. 

(5) Thereafter, any surplus held by either party in their respective shares of the Kingsley Napley settlement monies will be theirs to deal with as each sees fit. 

(6) As a condition of the release of any funds to these parents, each parents shall put in place an acceptable form of life assurance in an agreed sum. 

Summary by Emily Ward, Barrister & Deputy Head of Family at Broadway House Chambers

Read the full judgment of S v C [2020] EWHC 2127 (Fam) on BAILII