Capitalisation of Child Maintenance

Capitalisation of child maintenance refers to the conversion of ongoing, regular periodical payments into a single one-off lump sum payment. This is extremely unusual in respect of child maintenance although common in respect of spousal maintenance. For child maintenance, it is only ordered in exceptional circumstances.

Since 1998, the courts have had the power on an application to vary spousal maintenance to capitalise spousal maintenance by ending the periodical payments order and making a one-off capital lump sum award to meet needs.

The issue of capitalising child maintenance was discussed by Mostyn J in a 2021 case.

Mostyn stated in this case that the court did have the power to capitalise child maintenance on a variation application although indicated that it would only be done in very exceptional and limited circumstances. Previously, the court was not considered to have this power.

Mostyn decided that whilst the court cannot, on an application to vary spousal or child maintenance, make a property adjustment order or a pension sharing order and cannot, on an application to vary the spousal maintenance, make a lump sum order, there was no equivalent prohibition on making a lump sum order on an application to vary child maintenance.

Capitalisation of child maintenance is so unusual and rare that Mostyn himself stated that he had no memory of ever encountering the issue before in his long legal career before adjudicating on this case.

The fact that something is unusual and rare does not mean however that the court lacks jurisdiction to make such orders, he stated.

The difficulty is that claims for child maintenance cannot be dismissed entirely. Mostyn J addressed this by stating that ‘where the court has made a capitalisation of child maintenance, it would need a change of circumstances of exceptional magnitude before the court would augment what was intended to be a one-off commutation payment’.

The judge made it clear that capitalisation of child maintenance would remain a very rare bird indeed. The court does not have the power to exclude the jurisdiction of the Child Maintenance Service for more than 12 months after the making of an order. This means that in reality capitalisation of child maintenance will only properly be considered where the Child Support Act 1991 would not apply for example because one of the parents of the child was habitually resident abroad or because the child was over 19.

In addition, in the majority of cases, the risks and uncertainties inherent in capitalisation will probably still leave the court to make traditional, ongoing periodical payments. The judge however indicated that capitalisation of child maintenance might be appropriate in the situation of incessant litigation or repeated defaults by one party in paying the child maintenance and perhaps if the child was over 19, meaning there was a relatively short period of maintenance remaining.

The above relates to parties/parents who were married. If parents were never married and the CMS does not have jurisdiction, child maintenance will be governed by Schedule 1 of the Children Act 1989. There was a case in 2018 where Mr Justice Cohen made a child maintenance order based on a capitalisation approach.

In practice, capitalisation of child maintenance seems able to be used as an enforcement mechanism where there has been past default particularly where the paying party resides outside of the jurisdiction, meaning the CMS does not have jurisdiction.

Orders are only likely to be made where the remaining period of maintenance is limited.

Mostyn only dealt with the possibility of capitalising child maintenance on variation application, and it remains unclear whether the court would allow such an order within an initial financial relief application.