Darke v Strout

Factual and Procedural Background

The parties formed a relationship and cohabited starting in 1991. They purchased a home together in August 1992, holding it jointly, and had two daughters born in August 1993 and January 1997. Shortly after the birth of the second child, the Defendant father left the family home. The parties signed a written agreement on 26th May 1998, which detailed maintenance payments and arrangements concerning the family home and financial support for the mother and children.

In January 2000, the Defendant reduced his payments under the agreement due to changed personal circumstances, including remarriage and a new child. This caused financial hardship for the Plaintiff mother, forcing her to move and discontinue her university degree course. The Child Support Agency assessed the Defendant’s liability at £706 per month from April 2000, which he has paid since.

The Plaintiff commenced proceedings on 13th March 2001 seeking enforcement of the May 1998 agreement, claiming damages for breach due to reduced payments. The Defendant defended the claim, arguing absence of consideration and intention to create legal relations. The trial before Judge Appleton in February 2002 resulted in a judgment against the Plaintiff, primarily on the ground that the agreement lacked consideration.

Permission to appeal was granted, and the Court of Appeal reviewed the matter with a focus on the nature of the agreement and the statutory rights and obligations involved.

Legal Issues Presented

1. Whether the May 26, 1998 agreement constituted a legally enforceable contract supported by consideration.
2. Whether the parties intended to create legal relations by entering into the May 1998 agreement.
3. The proper legal characterisation of the agreement—as a separation agreement or a child maintenance agreement—and the implications of statutory provisions on its enforceability.
4. The appropriate remedy and procedure for assessing damages or variation of the agreement in light of changed circumstances.

Arguments of the Parties

Appellant's Arguments

• The agreement was supported by consideration, including the Plaintiff’s transfer of her property interest and her substantial change of position by moving out, giving up employment, and commencing education.
• The agreement was intended to create legal relations, reflecting the parties’ mutual obligations towards their children and housing arrangements.
• The agreement should be characterised as a child maintenance agreement with statutory recognition and enforceability.

Respondent's Arguments

• The agreement lacked consideration and was therefore unenforceable.
• The parties did not intend to create legal relations by the May 1998 agreement.
• The transfer of property rights did not constitute valid consideration because the property had negative equity and the Plaintiff remained liable on the mortgage.

Table of Precedents Cited

Court's Reasoning and Analysis

The Court of Appeal analysed the agreement within the context of statutory rights under the Children Act 1989 and the Child Support Acts 1991 and 1995, which recognise and give effect to maintenance agreements. The court held that the agreement was more properly characterised as a child maintenance agreement, not merely a separation agreement, and thus was enforceable.

The court rejected the Defendant’s argument that the agreement lacked consideration, reasoning that the Plaintiff’s agreement to transfer her equitable interest in the jointly owned property, along with the compromise of statutory rights and obligations, constituted valid consideration. The court clarified that “negative equity” did not negate the existence or value of the equitable interest transferred.

Regarding intention to create legal relations, the court found that the formal nature of the agreement and the statutory framework strongly indicated such intention. The court emphasised that separated parties typically intend their agreements to be legally binding, especially where children and property are involved.

The court acknowledged procedural shortcomings in the trial court’s handling of the case but ultimately concluded that the trial judge erred in dismissing the Plaintiff’s claim on the basis of lack of consideration and intention.

The court noted the complexity of assessing damages, particularly given the Child Support Agency’s administrative assessment and the Defendant’s changed financial circumstances. It recommended that any further determination of damages should be conducted by a district judge with expertise in ancillary relief and family law, or preferably resolved through negotiation or mediation.

Holding and Implications

The Court of Appeal ALLOWED THE APPEAL and substituted the trial judge’s order with an order for judgment in favour of the Plaintiff for damages to be assessed.

The decision underscores that maintenance agreements made between separated parties concerning children and property are enforceable contracts supported by valid consideration and an intention to create legal relations, especially when statutory rights are compromised.

The ruling directs that disputes involving variation or enforcement of such agreements should be managed with reference to statutory provisions and encourages resolution by mediation or negotiation to avoid protracted litigation. No new legal precedent was established beyond affirming existing principles regarding consideration and intention in family maintenance agreements.