In a recent family law case considering children and housing provision, the court was asked to determine whether the parties’ mortgage borrowing capacities should be considered a resource when determining the extent of an unmarried parent’s obligation to provide housing for their children under Schedule 1 Children Act 1989 (Schedule 1).

Paralegal Meghna Dwyer examines the judge’s decision in ZU v LT.

Background

The parents met in 2007 and were in a relationship for three to five years. They rekindled their relationship in 2015, and thereafter had two children, before permanently separating in 2019. The father (F) owned two properties (a two-bedroom apartment in London and a four-bedroom property), both of which were heavily mortgaged. The mother (M) and children lived in the two-bedroom apartment. F was a founding partner of a hedge fund, and M was a former professional tennis player who worked part-time for a charity (of which she was a CEO) and undertook freelance work.

In May 2021, M began Schedule 1 proceedings, which allows the court to make financial provision for children, including when the parents have not been married. The parents agreed to refer M’s application to arbitration. The arbitrator determined the two-bedroom property would be sold and F would pay the proceeds of sale towards the purchase of a new property for occupation by M and the children. So far, all uncontroversial. However, the arbitrator continued that F must also utilise his mortgage borrowing capacity to supplement the proceeds of sale from the apartment so a higher value property could be purchased for occupation by M and their children. The arbitral award was issued in August 2022.

Challenge and appeal

F challenged this award on several grounds, one of which was there was no power for the arbitrator to make an award requiring him to borrow money by way of a mortgage on a joint purchase with M as, fundamentally, this was not money he had.

F’s application was determined by Her Honour Judge Evans-Gordon, who agreed with F. She decided the court did not have the power under Schedule 1 to order a payer to borrow money for the purpose of buying a property. M appealed the order on various grounds but mainly on the basis that the judge had been wrong to hold there is no power to settle property for the benefit of a child under Schedule 1 requiring mortgage borrowing for its funding.

The case came before Mr Justice Cobb, who allowed the mother’s appeal.

Mr Justice Cobb disagreed with Her Honour Judge Evans-Gordon that the court did not have the power under Schedule 1 to settle property which requires mortgage borrowing. Mr Justice Cobb stated that the court was not solely limited to the existing resources of the parties but could also consider the likelihood of the parties acquiring such resources.

Comment

Partner Matthew Humphries comments:

“This is a helpful decision making it clear that the parties’ mortgage capacities can be a resource in Schedule 1 cases, and the court has wide discretionary powers to take this into account when addressing the housing needs of children, including of unmarried couples.”

 

 


 

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