The important decision in AZ v FM [2021] and capitalised child maintenance

Camilla Hooper, Associate, at law firm Cripps Pemberton Greenish has shared her views on the important decision made in AZ v FM [2021] by Mostyn J.

Since the onset of the COVID-19 pandemic, many families are sadly suffering financial hardship as a result of reductions in income or redundancy and job loss. During difficult economic times, many parties may feel that they are subject to onerous maintenance orders in favour of their ex-spouse and look to the family court to adjust the payments.  It is well known that a spousal maintenance order is variable during its term and, furthermore, it is commonplace for a paying party to seek to capitalise a spousal maintenance order so that they can discharge their on-going maintenance obligations.

However, is it also possible to capitalise a child maintenance payment in the same way?  

The answer is ‘yes’ according to Mostyn J, albeit in very fact specific circumstances, as confirmed by his recent judgment in AZ v FM [2021] EWFC 2.  Mostyn J was asked to consider the appeal brought by the paying husband against the trial judge’s refusal to grant him a downwards variation of the child maintenance payments; and the trial judge’s decision to capitalise the child maintenance payments.

Mostyn J has confirmed that the court has jurisdiction under section 31(5) Matrimonial Causes Act 1973 to discharge a child maintenance order and, in its place, award the payee a lump sum (known as a commutation lump sum) in lieu of future periodical payments. This has its obvious attraction for payees of child maintenance.   For example, it provides the payee with the child maintenance payments ‘up front’, allowing the payee to manage their finances with a higher degree of certainty.   Equally, from the payor’s perspective, a lump sum payment, as opposed to an on-going monthly payment, means greater certainty over managing their income and budget.

The worry is that this judgment could be interpreted by some as a licence to discharge their maintenance obligations prior to a child concluding their full-time secondary or tertiary education, something which the courts have been historically reluctant to consider and endorse; and that there was nothing preventing a parent from seeking further financial provision for the child even after the capitalised lump sum payment had been made.

It is important to note the particular facts of this case will likely preclude the universal application of section 31(5) of the Matrimonial Causes Act 1973.  Mostyn J did himself conclude that while he was satisfied that jurisdiction exists, its application “will remain a very rare bird indeed”.  Those facts were:

1. The husband was habitually resident in the USA and the Child Support Act 1991 therefore did not apply. As the husband was habitually resident in the USA, and given the age of the their daughter, the Child Maintenance Service would not have jurisdiction to carry out a child maintenance assessment.
2. The parties’ daughter was 19 years old and attending a London university, meaning the husband’s obligation to pay child maintenance payments would soon come to an end once she left university. Mostyn J’s view was that this limited the prospects of future applications for further financial provision for their daughter; and
3. The trial judge had found that there had been “incessant litigation” brought by the husband, and he had repeatedly defaulted on his maintenance obligations since the original order was made, thus justifying an effort to sever the financial ties between the parties.

Mostyn J went on to say that the risks and uncertainties inherent in capitalisation will lead the court to make, or continue, a periodical payments order for the benefit of a child in the overwhelming majority of cases. Capitalisation in child maintenance cases may only be an appropriate remedy in cases where the Child Support Act 1991 did not apply, either because one of the parents was habitually resident overseas or they were over the age of 19 (and one would assume if they qualified for an extended duration of child maintenance payments because of disability).

It is abundantly clear that one of the key factors in Mostyn J’s consideration was the level of continued litigation between the parties in this particular matter, and the desire on the part of the judge to break the cycle of litigation.  It is extremely telling that Mostyn J was critical of both the level of costs that had been incurred (the parties’ combined legal costs were over £220,000, yet the difference in the sums sought by each party was just £50,000), and the manner in which the litigation had been conducted by the husband (the trial judge having recorded in a supplemental judgment that there had been a lengthy history of litigation, upon which the husband had “thrived”).

So, while there is a great deal of caution on the part of the court, now that this point of law has been clarified there is the very real prospect that this “rare bird” begins to take flight more frequently.