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Litigation funding and financial provision payments for children of unmarried parents

By Stephen Peaker & Michael Openshaw

This is the second in a series of articles where we examine recent trends in Family Law issues which have a broad impact on the community. The initial article discussed recent developments in divorce law and procedure in England and Wales regarding “no fault” divorce. This article relates to litigation funding and maintenance payments for children of unmarried parents.  

The Family Law Department of OLN headed by Partner and Head of Department Stephen Peaker has been closely involved for several years in a long-running series of court hearings regarding various cutting edge issues in an evolving area of law: (1) the rights of a child to certain financial provision irrespective of its parents’ marital status, (2) the breadth of discretion of the court to award such payments, and (3) the availability of litigation funding to finance a party’s legal costs in securing such payments.   

Background

The hearings all relate to the same case, a dispute between two unmarried parents. The parties to the dispute were in a four year relationship and had a daughter. They never married, but cohabited for a period of time. A year after their daughter was born, the relationship broke down and the mother moved out with their daughter. The father made regular payments to the mother for rent and her and their daughter’s expenses. The mother subsequently applied for custody and related financial provision and included in the application an order that either the father buy or transfer to her a property outright for their child to live in, or he pay a lump sum to purchase a property to accommodate her and their child which would be held in trust for her child until she reached 18 or completed full time education, and then revert to the father. 

Rights of children of unmarried couples

The application was brought under the Guardianship of Minors Ordinance Cap 13 (“GMO”) as opposed to the Matrimonial Property and Proceedings Ordinance Cap 192 (“MPPO”) as the MPPO currently is limited to children born to married parents.     

The mother argued that either the property should be purchased outright pursuant to s10(2)(a) GMO as there was an “immediate and non-recurring need”, failing which it should be purchased on trust with a reversionary interest pursuant to s10(2)(e) GMO (on the basis that the language “property to which such parent or either of such parents is so entitled” means money to purchase property, ie a property which could be purchased in the future). The father’s argument was that accommodation was not an immediate and non-recurring need but an ongoing, everyday need and consequently the mother’s application was based on an incorrect interpretation of the GMO. HHJ Bruno Chan (in IDC v SSA [2013] HKFLR @ 61) agreed with the father and consequently held that the court had no power to make an award, dismissing this limb of the mother’s claim for financial provision.

The mother appealed at the Court of Appeal (“CA”) (IDC v SSA CACV [2014] HKFLR @ 267) arguing that the lower court had erred in not accepting that s10(2) was broad enough to allow the court to grant an order, and that the relevant legislation discriminated between children of cohabitants in favour of a married couple because such an order would have been available under the MPPO. The CA, in reviewing the relevant legislation, determined that the language in the relevant provisions of the GMO was not intended to, and did not in fact, discriminate between the two classes of children. It also found that the lower court erred in its reading of s10(2)(e) GMO and that it could in fact have made such an order as the language was indeed broad enough to encapsulate money to purchase a property. It is now clear that the court has power under the GMO to order a financial provision including a lump sum to purchase a property upon trust, with a reversionary interest to the parent providing the funds.    

However, on the particular facts of the case the CA held that the original decision not to make the order was correct notwithstanding the judge did not consider making such an order at the time of the trial in 2013 as he proceeded on the basis that he had no jurisdiction to do so. This was an important point to note as the CA has not only confirmed the current statutory interpretation but it also affirmed that the lower court has discretion on the facts of the case to order a lump sum in the future.  

The mother then applied to the Court of Final Appeal (“CFA”) (IDC v SSA  [2015] HKFLR @158 ) for leave to appeal on grounds that there were issues of great general or public importance at stake. She argued that the CA erred in not using the principle of the fairness approach when considering the quantum of financial provision in cases involving a child of unmarried parents as opposed to married parents. Ma CJ dismissed the application. He found that there were no issues of great general or public importance at stake and that at best this was a complaint that the CA had incorrectly exercised its discretion. He added that the court had looked at the correct cases and referred to the principles set out in the cases. In this case, the answer was dependent on the underlying facts of the case at the date of the trial in 2013.

In a related and subsequent hearing to this case, HHJ Bruno Chan J (in IDC v SSA (Relocation of a Child) [2015] HKFLR @ 404) in granting the mother’s application to relocate to London, commented on  the issues raised in the  related financial provision litigation between the mother and father, saying the issues were “in my view [issues which] desperately require to be addressed by legislation and serious soul-searching by society”. Highlighting that a dependent cohabitant of a deceased person had the right under statute to make a claim for financial provision from the estate, he found it illogical that current law would offer a dependent legal remedies on the death of a cohabitant but no such remedy whilst the cohabitant was still alive.  He added that “it is time that some workable scheme or system should be put in place through legislation to help individual cohabitants and their children for financial provision and adjustment of property right between cohabiting couples on separation…”. 

Litigation Funding

In April 2018, the father applied to vary downwards and/or discharge the earlier 2013 maintenance order. Around the same time the mother applied to vary the same 2013 order, seeking a variation which would provide inter alia a lump sum payment and property transfer order in the name of the child and/or the mother. These applications are currently progressing through the Family Court system. 

However, in a more recent reported judgment (In the matter of Z [2019] HKFC255) between the same parties on an interlocutory matter, the court was asked to determine whether the mother could apply for litigation funding to cover her legal costs in continuing litigation with the father.  HHJ C.K. Chan first considered whether disputed legal costs should be dealt with under s10(2) GMO (final orders) or s13(3) GMO (interim orders). He confirmed that where costs are not agreed by the parties they cannot be dealt with under s10(2) which presumes a cost or expense is final and therefore agreed, so must therefore come under s13(3). 

He subsequently confirmed the principle that “…in considering whether such a litigation funding order should be made, the principles as set out in Currey v Currey [2006] EWCA Civ 1338 are applicable, despite the fact that these are not matrimonial proceedings”.        

In brief, the Currey principles are: (1) that the applicant spouse has no assets, or none that can be reasonably deployed; (2) that she can provide no security for borrowing, or none which can reasonably be offered; (3) that she cannot reasonably obtain legal services by offering a charge on the outcome of the litigation; (4) that she cannot secure publicly funded legal help “at a level of expertise apt to the proceedings”. 

On the facts of the dispute, the court decided that the mother did satisfy the Currey test, and would need further funding to have “some equality of arms before the court”. HHJ C.K. Chan then set out his rationale calculating the quantum of the award.  

This is an important confirmation of the current law and is consistent with the other recent judgments in this area involving litigation funding for financial provision cases involving an unmarried party.

OLN is proud to have been able to play a role in the development of an important area of the law regarding financial provision for a child of unmarried parents. In the 2015 case cited above, HHJ Bruno Chan’s concluding words were “…it is time that some workable scheme or system should be put in place through legislation to help individual cohabitants and their children for financial provision and adjustment of property right between cohabiting couples on separation….”. Commenting on his team’s work on these long-running cases, Stephen Peaker remarked “it is very satisfying to see such positive decisions from the courts on these types of issues and I hope that we will see progress in the legislation in due course. My team and I have been working hard to fight for many clients who currently face significant disadvantages as the law currently stands, and we would welcome further positive developments in this area of law”.  

June 2020

Stephen Peaker, Partner and Head of Family Law
Michael Openshaw, Consultant
Family Law Department
Oldham, Li & Nie

This article is for information purposes only.   Its contents do not constitute legal advice and readers should not regard this article as a substitute for detailed advice in individual instances.

 

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