S v C

Where separated parents hold damages arising from a child’s disability claim, the court may regulate those funds under section 23 of the Matrimonial Causes Act 1973 even though the child has no beneficial entitlement to the damages. The court should secure provision for the child’s future needs while respecting each parent’s ownership, autonomy and family life. A formal trust transferring ownership is not justified merely because one parent has financial difficulties. Such an order requires a proportionate response to the identified risk, and a particularly draconian restriction requires evidence of egregious financial misconduct. A secured maintenance fund, a charge over housing purchased with the funds, and life assurance may provide an appropriate middle course.

The applicant sought financial remedy orders concerning a fund derived from the settlement of a negligence claim brought by both parents for the additional costs associated with their daughter’s disability. Their matrimonial claims had been resolved by a clean-break consent order in 2016. The settlement proceeds were held by the parents in equal shares, but their relationship had deteriorated and they disagreed about the extent to which the money should be preserved for their daughter.

The applicant sought child maintenance, secured maintenance and a substantial trust structure controlling both parents’ use of the funds. The respondent opposed compulsory restrictions, principally seeking to retain ownership and autonomy while providing for the child. The central issue was the extent to which the court should impose conditions on the release and use of the settlement funds.

1. Jurisdiction and purpose. The court had jurisdiction under section 23 of the Matrimonial Causes Act 1973 to make child maintenance, lump-sum and secured-maintenance orders. Although the damages were legally and beneficially owned by the parents rather than the child, the funds were generated by the child’s needs and were intended to provide a stable financial base for her future.
2. Formal trust rejected. The proposed disability trust under section 89B(1)(a) of the Inheritance Tax Act 1984 was rejected. It would be disproportionately expensive, exposed the parties and trustees to significant tax uncertainty, and was likely to generate continuing conflict between the parents. A trust would also unnecessarily diminish the available assets.
3. Proportionality and autonomy. The court was entitled to take the parties’ financial history into account, but neither parent’s past financial difficulties justified transferring ownership of the majority of the funds to trustees. Interference with the respondent’s Article 8 rights had to be necessary and proportionate. A particularly draconian restriction required evidence of an egregious course of deliberate financial misconduct. The respondent should retain ownership and control of his funds, subject to proportionate safeguards.
4. Orders made. The respondent was ordered to pay child maintenance of £2,000 per month, index-linked, with £150,000 secured for that purpose. £900,000 was preserved towards his purchase of a home and secured by a charge in the child’s favour, while allowing mortgage finance subject to conditions protecting the charge. The applicant could use her share to redeem the mortgage on the former matrimonial home, subject to equivalent security obligations. Both parents were required to obtain life assurance for the child’s benefit. The remaining surplus was to be dealt with by the parties subject to court approval of the final order.