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Financial Provision for Adult Children: What Constitutes a ‘Special Circumstance’ under Schedule One after UD v DN [2021] EWCA Civ 1947, [2021] 1 WLR 595

Zoe Harrison, pupil barrister at One King's Bench Walk, explores Moylan LJ’s judgment and its focus on the importance of dependence.


















Zoe Harrisons, Pupil, One King's Bench Walk

Very few Schedule 1 cases have made it to the Court of Appeal since Re P (Child: Financial Provision) [2003] EWCA Civ 837, [2003] 6 WLUK 616 making the decision in UD v DN [2021] EWCA Civ 1947, [2021] 1 WLR 595 of even greater significance and interest to family practitioners specialising in this area. One of the most important aspects of the case concerned the limited circumstances in which the court may legitimately make financial provision for children with the intention of benefitting them after they have reached the age of 18. This article explores the lessons we learn from the Court of Appeal judgment in UD v DN on what the court will consider to constitute a 'special circumstance' justifying an award under Schedule 1, benefitting a child into their adulthood. 

Legal framework

Paragraph 1 of Schedule 1 to the Children Act 1989 makes provision for orders benefitting children (i.e. under the age of 18) and is the most common route through which orders are made under Schedule 1. There are express limitations on the duration of periodical payments made under Paragraph 1.  Put simply, an order for periodical payments made under Paragraph 1 which commenced before the child turned 18 may continue after that child's 18th birthday, but only if he or she is still in education/training, or if there are special circumstances.

Paragraph 2 provides that the court may make an order "on an application by a person who has reached the age of 18" for i) periodical payments and/or ii) a lump sum, provided that the person benefitting from the order (i.e. the 'adult child') is i) undergoing training or education (usually to first degree level), or ii) there are special circumstances which justify the making of an order. Again put simply, provision can be made for an 'adult child' – one who issues the application himself/ herself – under Paragraph 2 if the adult child is still in education/training, or if there are special circumstances.

Of course if a court makes an outright capital provision to a minor child, the benefit of that order will extend beyond the child's 18th birthday. There are no express restrictions in the legislation itself that limit the powers of the court to make a capital order, though there is a long line of authority (starting with Chamberlain v Chamberlain [1973] 1 WLR 1557) which makes clear that the power of the court to make capital provision benefitting children into adulthood (beyond the completion of their education/training), is limited to 'special' or 'exceptional' circumstances.  Thus, capital provision can be made for a child under the age of 18, the benefit of which will extend into the child's adulthood, where there are 'special circumstances.'

'Special circumstances' has been understood throughout the case law to be narrowly defined. In Chamberlain v Chamberlain Scarman LJ refers, at pp. 1564 H/1565 B, to "special circumstances which required them to make demands on their parents after the conclusion of their full-time education." (emphasis added). Hale J (as she was) summarised in J v C (Child: Financial Provision) [1997] 4 WLUK 122, at p155:

"children are entitled to provision during their dependency and for their education, but they are not entitled to a settlement beyond that, unless there are exceptional circumstances such as a disability, however rich their parents may be." (emphasis added)

This article will explore what constitutes 'special circumstances' for the purposes of financial provision for 'adult children' under Schedule 1, in light of the recent Court of Appeal decision in UD v DN [2021] EWCA Civ 1947, [2021] 1 WLR 595. Having outlined the background of the case, the first instance judgment and the appeal judgment, this article will assess (in the context of ascertaining 'special circumstances') the importance of:

1. Focussing on dependency rather than vulnerability;

2. The role of the paying parent's conduct;

3. The effects of the domestic abuse and;

4. The impact of wealth.


UD v DN [2021] EWCA Civ 1947

Background
:

The case concerned the appeal of an order of Williams J (dated 7 July 2020) requiring the appellant father (F) to settle a property in trust for the benefit of the parties' two younger children, who at the time were 19 and 14 years old. The trust was to end, essentially, on the first to occur of both children reaching adulthood or completing tertiary fulltime education. At the end of the trust period, 6.5 per cent of the gross sale price or market value of the property would then be held on trust for the benefit of the two children absolutely. Williams J also ordered periodical payments and a lump sum for the purchase of a car.

By way of background, the parties were in a relationship between 1996 and 2017/2018 and had three children (the eldest was 22 at the time of the hearing before Williams J). The family were wealthy (with M and the children living in a c£10 million property in London) and in late 2017 F gave the eldest child £600,000 to buy his own property. M issued Schedule 1 proceedings in February 2018, arguing that outright capital provision should be made for the younger two children. The basis for her argument was that the two younger children should be in the same position as the eldest child in terms of the provision of a first home, and that 'but for F's conduct' and, in response to such conduct, M bringing legal proceedings to obtain protective orders against F, F would have purchased homes for the two younger children. M submitted that there was no requirement for special circumstances, but if there were such a requirement, this was satisfied given the 'level of abuse and trauma suffered by the children.'

Judgment at first instance:

At first instance, Williams J considered the 'net effect' of the line of authorities which dealt with the powers of the courts under Schedule 1 in relation to adult children (Scarman LJ's (as he then was) judgment in Chamberlain v Chamberlain [1975] 1 WLR; Hale J's (as she then was) judgment in J v C (Child: Financial Provision) [1999] 1 FLR 152; and Munby J's (as he then was) judgment in Re N (A Child) Financial Provision: Dependency) [2009] EWHC 11, [2009] 1 WLR 1621), and concluded that:

"[85]…Absent special or exceptional circumstances capital orders which provide a benefit beyond minority or the cessation of tertiary education should not be made. It is equally clear that what can amount to special or exceptional circumstances is restricted…
It seems to me that what one is focusing on is the child and whether there is something about this child or this child's situation in particular vis-à-vis that parent that creates a situation which exceptionally (i.e. as an exception to the usual rule) generates a need for the child to be provided with capital which will be of benefit to them as an adult possibly for many years."

Williams J concluded that the two younger children were vulnerable to and potentially dependent on F, arising from the fact that F would seek to use his 'financial muscle' to control them by giving financial ultimatums (specifically by seeking to persuade them to join him and his business in Russia) and that the emotional abuse they had sustained made them particularly vulnerable to this. He decided that the only way to protect them from F's control and pressure was to give them a degree of financial independence [161-162].

On this basis, Williams J was satisfied that the 'special circumstances' requirement was met, and made the order outlined above.

Court of Appeal judgment:

Moylan LJ made clear on appeal that provision for adult children who are not in education or training is limited to 'special' or 'exceptional' circumstances, and that such circumstances must be 'relating to the children' … 'such as a physical or mental disability, which create a financial need [76]'. He held that there were no such special or exceptional circumstances in this case, and the long-term capital provision must be set aside.

Observations:

Moylan LJ's judgment is helpful in bringing sharp focus to the importance of dependence in ascertaining whether circumstances are 'special' or 'exceptional' for the purposes of financial provision under Schedule 1 for adult children. In assessing the utility and importance of his judgment, I make the following observations:

1. Dependence v vulnerability

Moylan LJ writes:

"[82] The Judge sought, at [161], to support his decision to award the children an interest in the family home by interpreting the use of the word "dependency" in the authorities as connoting "some form of vulnerability or need continuing from childhood into adulthood which can be remedied by capital provision". In my view, this does not support his decision because it is far too broadly expressed a proposition and one which does not accurately reflect the effect of the long line of decisions dating back to Chamberlain v Chamberlain." (emphasis added)

The distinction between vulnerability and dependency is an important one. Whilst vulnerability and dependency are very likely to overlap, they are not one and the same, with the former encompassing a much broader category than the latter. Vulnerability is a broad spectrum on which many people fall, but not everyone with a vulnerability is 'dependent' in the sense of requiring financial support. The parameters of Schedule 1 would potentially be stretched too far if every adult with a vulnerability could make a claim under Schedule 1 against their parents.

Two points can be made in response to this. First, it could be argued that most, if not all vulnerabilities can be ameliorated (if not fully remedied) by capital provision, whether this enables medical care, therapeutic support, housing or other practical support to be funded, and so we risk encountering the same concern about all adults with vulnerabilities having claims against their parents. Second, it could be argued that a vulnerability that can be remedied by capital provision is exactly the same thing as a dependency. This may often be the case, but as the facts in UD v DN show us, it is not necessarily and not always the case.

The two younger children in UD v DN may have been vulnerable, but they were not dependent (or at least there was no reason to believe they would be once they had completed tertiary education). The abuse they had suffered and their susceptibility to pressure from F did not necessarily make them dependent, in the sense that it didn't prevent them from becoming independent. There was (on the evidence, and as far as we know) nothing preventing them from educating themselves, training, obtaining a job, earning money, and/or establishing a self-sufficient adult life. They did not need to take up their father's offers of money or property to do this. They (very unfortunately) may be vulnerable to his abuse and exert of control, but that did not make them dependent. This is contrasted with adult children with certain disabilities or lack of capacity, which not only makes them vulnerable, but negatively impacts on their ability to have a completely independent life, and therefore renders them dependent on their parents even after their majority.

When considering whether special circumstances exist with regards to adult children, courts should focus on the question of dependency and any need that arises for the particular child in the particular circumstances. Whether that child has a vulnerability (which may or may not be assisted by capital provision) is certainly informative, but it should not be decisive.

2. Role of conduct

In contrast to the Matrimonial Causes Act 1973, conduct of the parties is not a factor included within the statutory checklist under Schedule 1. The case law suggests that 'special' or 'exceptional circumstances' should not include consideration of the conduct of the parent, but rather the circumstances of the child and any need/dependency of that child. The conduct of a parent is only relevant if it has created circumstances for the child which have led to a dependency (for example physical abuse that has led to a physical disability), but it should not be factored in as a way of punishing a parent through Schedule 1. In Kiely v Kiely [1988] 1 FLR 248, Booth J held that special circumstances had to be 'relating to the children' (as opposed to relating to the adult(s)).

In his judgment, Moylan LJ suggests:

"[80]…the Judge's assessment was not based on the children having a continuing need for financial provision, or on (to quote again from Kiely v Kiely) some circumstance "relating to the children", but on the father's prospective behaviour." (emphasis added)

In defence of the first instance decision, Moylan LJ draws attention to the causal connection made by Williams J between F's prospective behaviour and the children's 'vulnerability', and it is noted that Williams J does not frame his decision as being in any way to punish F. However, references throughout his judgment suggest that Williams J was influenced by his views on F's bad conduct. He writes:

"[161]… Quite how one comes to terms with your father threatening to slit your throat or your mother's throat and threatening to throw you out of your home I am unsure."

Ultimately, it is the potential threats that F might make, the manipulation he might seek to exercise, and the effects of his past abuse that underpin Williams J's finding of special circumstances, rather than any characteristics or circumstances of the children themselves.

The impact that the influence of conduct may have had on Williams J's decision can be seen by imagining an alternative, hypothetical scenario in which it is not F who has been abusive towards the children, nor F who may seek to make financial ultimatums to control the children, but rather a third party. If we imagine a scenario in which one of the children was previously in a controlling relationship with an abusive partner (a third party) who tried to exert financial control over them, we might query how William J's analysis would be applied. Following his logic, the only way to protect the child would be to provide capital so they could gain financial independence from this partner/third party. In that situation would F have been required to provide a capital lump sum? If the court is not looking at the conduct of the parent, but rather the circumstances and needs of the child, then on William J's analysis, the answer would be yes; there would be special circumstances justifying an order requiring F to provide outright capital.  The impact on the child is presumably the same regardless of whether the abuse and financial control comes from F or a third party. It is unclear however whether Williams J would have come to such a conclusion.

Such an outcome would appear to stretch the envisaged bounds and purpose of Schedule 1. The conclusions of the Court of Appeal suggest that Williams J may have placed too much emphasis on F's conduct, rather than focusing on the children's needs.

3. Effects of domestic abuse

As has been discussed, the conduct of the paying parent should not (in and of itself) form part of the assessment of special circumstances. That being said, the effects of domestic abuse on a (adult) child may still have some bearing, and certainly were central to Williams J's decision in UD v DN. He wrote:

"[161]…Long experience in children's cases and the research into the long term effects of abuse on children (see amongst others the report of Drs Sturge and Glaser [2000] Fam Law 615) suggests to me that whilst these children may be able to get on with their lives they are likely to carry the emotional scars in some shape or form for a very long time indeed. This is a product of the abuse that they have been subjected to by the father."

Ultimately, Williams J held that the effects of the domestic abuse were relevant, not because they created an ongoing dependency for the children (and specifically not because they had an ongoing financial need for therapeutic support), but because of their more general vulnerability to F's potential future financial ultimatums. [81]

On appeal, Moylan LJ helpfully explained the extent to which the effects of domestic/parental abuse are relevant:

"[82]…Whilst I certainly accept the Judge's observation, at [161], about "the long term effects of abuse on children", I do not accept that a judge can derive from that a "vulnerability" or "need" which justifies any specific financial award under Schedule 1."

It is made clear later in the judgment of Moylan LJ that the Court of Appeal was not intending to create an absolute rule that the effects of domestic abuse could never justify a special financial award under Schedule 1, but rather had concluded that no such special circumstances could be established for these children in this case:

"[83] I make clear that I accept, of course, the emotional and psychological damage caused to children by parental abuse. The harmful effects of such abuse are well established. However, the general observations made by the Judge are not sufficient to establish any specific consequences for the children in this case which would support the exercise of the powers under Schedule 1 to make a financial award." (emphasis of Moylan LJ)

Moylan LJ commented on the evidence in this case which supported that conclusion, notably the Cafcass report and the lack of medical evidence that the children had any long term mental health or other difficulties that would create an ongoing financial need.

This all suggests that the effects of domestic abuse are only relevant to the extent that they create an ongoing dependency or financial need, for example a physical disability arising from physical violence, or mental health problems because of the abuse. In other words, it is not the source (i.e. the abuse) that is relevant, but rather the effects on the child's dependence and needs.

4. Extent of wealth

Generally speaking, the level of wealth enjoyed by a parent or family should not impact on whether 'special circumstances' exist. As has been outlined, the exceptional circumstances must be those "relating to the children" (Kiely v Kiely), "however rich their parents may be" (J v C). Williams J himself acknowledged at first instance:

"[85] Matters relating to changing societal attitudes, the wealth of a parent, or the like will not suffice."

In spite of the above, Williams J's decision at first instance seems to have been heavily influenced by the level of F's wealth. This issue was explored by Moylan LJ on appeal at [78]. In response to submissions from M's counsel (Mr Howard QC) that absent coercive control a man of F's wealth would help the children get on the property ladder, Williams J responded that "with most of those fathers … in most cases one would expect a father to make that sort of provision. I think the question here is whether he will make that provision without there being some quid pro quo from the children".

Whilst Williams J framed the 'quid pro quo' and the vulnerability to manipulation as the important factor (and not the wealth itself), his decision ultimately rested on an underlying assumption that a wealthy father should be expected to provide his children with financial assistance in obtaining a first property, which the Court of Appeal did not accept was appropriate to apply.

Moylan LJ considered the Judge's reasoning at first instance which (while not expressly, but by implication) appeared to place weight on the wealth of the father as an 'exceptional circumstance':

"[79] This was, therefore, not based on the children having any continuing financial need as dependent adult children but, rather, it was inverted, in the sense that the Judge doubted that the father would provide financial support in the way that, he considered, most wealthy fathers would …".

According to the Court of Appeal, while it accepted that many wealthy fathers do make such provision, their choice whether or not to do so is entirely a matter for their discretion, and having rich parents should certainly not constitute special circumstances for the purposes of the statute. Schedule 1 does not exist to enable adults from wealthy families to make financial claims against their wealthy parents for the provision of housing.

Wealth will inevitably be a factor of consideration when making awards for children (under 18) under Schedule 1, as 'income, earning capacity, property and other financial resources' of the parties is a specified factor under paragraph 4(1). The parties' standard(s) of living is also to be factored into the discretionary exercise (Re P (Child: Financial Provision) [2003] 2 FLR 865). Whilst these principles are central to the making of standard awards for dependent children under Schedule 1, they do not have a place in establishing exceptional circumstances to justify a special award for adult children. Different rules should not apply to adult children from wealthy families.

Conclusion

The Court of Appeal's judgment in UD v DN provides many helpful clarifications as to what may give rise to special circumstances when considering awards for adult children under Schedule 1. It seems that the category continues to be very narrowly drawn, and it remains to be seen in future whether anything other than disability and/or lack of capacity will suffice. The following key lessons can be learned from UD v DN when thinking about 'special circumstances':

1. The focus should be on dependency not vulnerability;

2. The conduct of the paying party (in and of itself) has no role to play;

3. The effects of domestic abuse are only relevant to the extent that they have created an ongoing dependency and/or financial need;
4. The level of wealth of the parents will be relevant to quantum once the discretionary exercise has been engaged, but it is not (in and of itself) to be treated as an 'exceptional circumstance' for the purpose of justifying an order being made in respect of an adult child.