Darke v Strout

A written child-maintenance and housing agreement made following the breakdown of a relationship may be enforceable where it represents a compromise of the parties’ statutory rights and obligations. The compromise may supply consideration. An agreement to transfer an equitable interest in property can also be valid consideration, even if the property is in negative equity and the transferor remains liable under the mortgage.

Where separated parties formally record arrangements for their children and property, they will ordinarily be taken to intend legal relations unless cogent evidence shows otherwise. A later change in circumstances should be addressed through the statutory variation mechanism in Schedule 1 to the Children Act 1989.

Following the end of their relationship, the parties signed a letter under which the father agreed to make specified payments for the mother and their two children. The mother agreed to transfer her interest in their former jointly owned home to him. After the father reduced the payments, the mother claimed damages for breach of the agreement.

His Honour Judge Appleton in the Preston County Court dismissed the claim on the ground that the agreement lacked consideration. He made no finding on the alternative defence that the parties had not intended legal relations. The mother appealed. The central issue was whether the letter was an enforceable agreement for child maintenance and related housing arrangements.

Decision

1. The appeal was allowed unanimously. The Court set aside the dismissal and entered judgment for the mother, with damages to be assessed.

2. Per Thorpe LJ, the letter was properly characterised as a child-maintenance agreement, not simply as a separation agreement. It compromised the mother’s statutory rights to seek housing provision and maintenance for the children, and the father’s corresponding obligations. Those reciprocal compromises supplied ample consideration.

3. Chadwick LJ gave an additional and independent reason. The mother’s undertaking to transfer her legal and beneficial interest in the former home was capable of being consideration for the father’s undertakings. Negative equity did not extinguish, or make valueless, her equitable interest in the property. The fact that she remained exposed to the mortgage liability reinforced that conclusion.

4. The defence of no intention to create legal relations was hopeless. The formal terms of the letter and the parties’ separation showed an intention that their arrangements should have legal effect. Chadwick LJ applied the approach in Merritt v Merritt [1970] 1 WLR 1211, observing that separated parties normally seek to finalise rather than leave their future arrangements to mutual trust.

5. The father’s later financial commitments should have been addressed by an application to vary the agreement under Schedule 1 to the Children Act 1989. Because damages raised issues concerning the child-support assessment and the agreement, their assessment was to be undertaken by an appropriately experienced district judge. The Court also urged mediation. Costs were awarded to the mother here and below.

• Court of Appeal (Civil Division): Allowed the mother’s appeal in [2003] EWCA Civ 176, set aside the dismissal, entered judgment for her with damages to be assessed, and awarded her costs here and below.

• Preston County Court (His Honour Judge Appleton): Dismissed the contractual claim on the ground that the agreement lacked consideration. The judge did not determine the alternative issue of intention to create legal relations.