Guidance: Enforcement of financial remedy orders.
Sadly, for many separating couples the topic of enforcement is central to their litigation. Both the brave new world that we currently face and recent case law add to the conversation. This article looks at the recent changes and the options open to parties when their former partner refuses to pay in compliance with a financial remedy order.
Not identical - but related, a new stick to beat with?
In January 2020 Mr Justice Cohen gave judgment in (HR v DS [2019] EWHC 2425 (Fam)) where the remedy of a Hadkinson order was confirmed and extended to prevent a non-compliant party pursuing their legal remedy in not just the case in question but also in an associated case as a means of securing compliance . A Hadkinson order can be made where one party is persistently in breach of a financial remedy. The effect of the order is to prevent that party from pursuing further legal remedy in the proceedings (Hadkinson [1952] P 285).
Whilst such an order is draconian in effect it can be indispensable when one party will simply not do what they have been ordered to do.
Lord Justice Peter Jackson had provided a helpful summary of the use of such an order in De Gafforj (Appeal - Hadkinson Order) [2018] EWCA Civ 2070 [10]-[11]:
- An order of this kind can be made at any stage of proceedings;
- The making of such an order is exceptional and therefore the following conditions must first be met:
(1) The respondent must be in contempt;
(2) The contempt is deliberate and continuing;
(3) As a result, there is an impediment to the course of justice;
(4) There is no other realistic and effective remedy; and
(5) The order is proportionate to the problem and goes no further than necessary to remedy it.
Jackson LJ noted from the case law (Mubarak v Mubarik [2006] EWHC 1260) that non-payment in breach of a maintenance order will amount to contempt of court, regardless of ability to pay. The ability to pay is only considered when the court decides whether and how to act on the contempt [12].
The judgment in HR v DS was unique in that it had allowed for the first time the use of a Hadkinson Order in related proceedings; Cohen J himself noted:
“I accept that this may be the first time in which the Hadkinson principle has been extended to cover proceedings which are not identical, albeit related. But it seems to me that this is a remedy which is not so closely confined that it cannot be extended to this situation” [25].
The facts of the case are particularly appalling. In June 2019, one of the parties’ children brought Family Law Act proceedings to exclude their mother’s new husband from the home. This application was backed by the former husband (the children’s father). The child’s application was held to be without jurisdiction and was dismissed. The father was ordered to pay the costs of the mother’s new husband (£37,000) given the role he had played in the litigation. In response, the father stopped paying child maintenance and appealed the costs order.
The mother therefore made an application for a Hadkinson order to prevent her former husband from continuing his appeal unless and until he remedied his default in payments of child maintenance to her.
The father was held to be in contempt for his failure to pay; he was a rich man who could pay, and this was a deliberate choice made by him. This action by the father had been an impediment to justice; Cohen J held that fathers cannot be allowed to choose to pay nothing towards their children, particularly when payment is the subject of a consent order. Finally, it was held that there was no effective alternative means to enforcement [21] – [23].
Whilst the proceedings were not identical, it was held that they were intrinsically linked and that it was a direct result of the outcome in the Family Law Act proceedings that the father had chosen not to pay maintenance from the other set of proceedings [24]. Cohen J therefore concluded that a Hadkinson order could be made.
COVID-19
In light of the current global pandemic, enforcement of financial remedies has been brought into sharp focus. Many people will be concerned about their financial positions and even more so where their former spouse is refusing to pay up in accordance with a financial order.
Despite the restrictions under COVID-19, the court is still able to conduct remote hearings, with Central Family Court guidance given by His Honour Judge O’Dwyer on 30 March 2020 indicating that enforcement applications and hearings can continue and will be classified as urgent matters.
The starting point: making an application
To make an application to enforce an order for the payment of money, the creditor/receiving party will need to apply to the court where the order was made and complete an application notice accompanied by a statement setting out the amount they are due and why (r. 33.3(1) FPR 2010).
When making the application, the creditor can indicate whether they are seeking:
- a specific enforcement method; or
- such a method of enforcement as the court may consider appropriate, using the Form D50K procedure (r. 33.3(2)).
Note that, where the application relates to payments that have been in arrears for more than 12 months, the applicant must first obtain leave of the court (s. 32 Matrimonial Causes Act 1973).
The powers of the court
- Magistrates’ powers of enforcement
Starting with the powers of the lay justices. The enforcement options available to magistrates include:
- To require that the debtor/paying party make a payment for the amount specified in the order plus an amount in respect of arrears (Family Court Practice, 1.95);
- To order that periodical payments be made by standing order (s. 1 Maintenance Enforcement Act 1991);
- To make an attachment of earnings order (part 39 applies (r. 33.19)); and
- Committal by way of judgment summons (NB: this requires a specific application to be made).
However, where the magistrates take the view that a different enforcement remedy may be more suitable for the matter, the case may be reallocated to a District Judge.
- Means of payment order
The court can make a means of payment order where periodical payments or a lump sum has been ordered. The court can order that payments be made by standing order or direct debit. It may also order that payments be made via the court (s. 1 MEA 1991); the court can then deal with any necessary enforcement (Law Commission No. 370 Enforcement of Family Financial Orders, 2016).
The benefit of this order is that payments can be recorded and/or traced, which can increase the likelihood of payment.
Such orders can be considered in the course of proceedings (s. 1(8) MEA 1991), otherwise, the application should be made to the court on notice via the part 18 procedure (Family Court Practice, 1.111).
- Attachment of earnings
Where the court has ordered one party to pay periodical payments to the other, this can be enforced by an order for attachment of earnings (Attachment of Earnings Act 1971). Here, the paying party’s employer will deduct the amount owed from their monthly income (s. 1 MEA 1991; 1.98, The Family Court Practice). The amount deducted is passed to the Central Attachment of Earnings Payment System (CAPS) before being re-distributed to the relevant spouse (1.99, Family Court Practice).
Where the paying party is on notice for an attachment of earnings order or an order to provide the court with information (such as employment details pursuant to s. 14 AEA 1971), and they fail to attend the hearing, the court may adjourn, ordering them to attend on another day. If the paying party then fails to attend or does attend but refuses to provide the relevant information, they may be imprisoned for not more than fourteen days (s. 23(1) AEA 1971).
Form FE15 should be used when making an application for this specific remedy.
- Third party debt order
An alternative method of enforcing money owed is through a third-party debt order. This order is made against the paying party’s bank or building society to make a payment to the receiving spouse (r. 72.1, CPR 1998).
An application for a third-party debt order may be made without notice; and must be issued in the court which made the relevant judgment or order (r. 72.3(1)).
The application notice must be in form N349 and contain the following information:
- the name and address of the paying party;
- details of the judgment or order;
- the amount of money owed;
- if the money owed is payable by instalments and the amount of any instalments owed;
- details of the relevant branch of the paying party’s bank;
- if the receiving party knows or believes that any person other than themselves has a claim to the money in the bank, their details and information known to the creditor about their claim (r. 72.3(2); PD 72, 1.1 & 1.2).
A two-step process must be followed by the court when making a third-party order:
Stage 1: The court must make an interim order (r. 72.2). To make the order, the court must be persuaded that the relevant bank or building society holds money on the paying party’s behalf. The application will normally be dealt with on the papers.
The interim order will:
- fix a final hearing (r. 72.4);
- direct that the bank/building society must not authorise any payments that reduce the account balance below the amount owed (r. 72.4); and
- specify the amount the bank must retain in the account, to cover both the amount owed and a separate amount for the receiving party’s costs (PD 72, para 2).
The bank or building society served with the interim order must then carry out a search identifying the accounts held by the paying party. The bank must inform the court the existence of the accounts and whether they are in credit and, if so, whether the balance covers the debt (r. 72.6).
Stage 2: Within 28 days of the interim order being made, the court will determine whether a final order should be made (r. 72.4(5)). When deciding whether to make a final order the court will consider the amount involved and the financial position of both parties.
A final third-party debt order will become enforceable as an order to pay (r. 72.9).
- Forcing a sale in default of property transfer or periodical payments
Where the court makes an order for periodical payments, the payment of a lump sum or the transfer of a property, then on making that order, or at any time thereafter, the court may make an order for sale (s. 24A MCA Act 1973).
Therefore, where one spouse fails to pay or transfer property to the other, the court can make an order for sale, with the direction that part of the proceeds of sale are used to pay off the arrears (Sendall, J. (2019) Family Law 10th ed, OUP).
Consideration will, however, need to be given to public health restrictions. At the time of writing, the housing market in England has been allowed to re-open (https://www.legislation.gov.uk/uksi/2020/500/regulation/2/made). The government has permitted the following activities:
“in connection with the purchase, sale, letting or rental of a residential property—
(i) visiting estate or letting agents, developer sales offices or show homes;
(ii) viewing residential properties to look for a property to buy or rent;
(iii) preparing a residential property to move in;
(iv) moving home;
(v) visiting a residential property to undertake any activities required for the rental or sale of that property”
Therefore, estate agents can now provide house viewings, however, there may be some delay in this whilst the logistics for social distancing are considered. Such a delay is likely to be short term.
Whilst the housing market has reopened, it should be noted that the Land Registry has issued a notice stating that they anticipate significant disruption to transfers of property titles, with the process now likely to take longer than usual.
- s. 38 & s. 39 court signing relevant documents for transfer
Where the court, as part of the final order, has ordered that there be an order for the sale of a property and the transferring party is not willing to sign the relevant documents so as to allow the transfer, a judge has the power to sign the documents under s. 38 County Courts Act 1984 (family court) or s. 39 Senior Courts Act 1981 (High Court).
- Judgment summons
A paying party may be committed to prison where they default on the payment and it is proved that they had both the means to pay and refused or neglected to pay (r. 33.14 FPR 2010).
The relevant application notice for a judgment summons is found in Form D62 and must be accompanied by a statement complying with r. 33.3(1) (above), containing all the evidence on which they intend to rely and exhibiting a copy of the original order.
When the court determine whether the paying party ought to be committed, the court must have regard to the following:
a) The fact that the respondent has had, since the date of the order or judgment, the means to pay the sum due must be proved to the criminal standard of proof;
b) The fact that the respondent has refused or neglected, or refuses or neglects, to pay the sum due must also be proved to the criminal standard;
c) The burden of proof is at all times on the applicant; and
d) The respondent cannot be compelled to give evidence.
(Prest v Prest[2015] EWCA Civ 714, [2016] 1 FLR 773, McFarlane LJ, paragraph 55)
As part of the hearing, the court may also make a new order for payment of the amount due under the original order, together with the costs of the judgment summons, either at a specified time or by instalments (r. 33.16).
Concluding remarks
The recent judgment of Mr Justice Cohen has shown the flexibility and the extent to which Hadkinson orders can be used when enforcing a financial remedy, thus providing further armoury to the family practitioner when a party refuses to follow orders.
However, before a practitioner reaches the stage at which a Hadkinson order may be appropriate in proceedings, a number of options are available to them, as set out in this article. Whilst the list above does not seek to be comprehensive, it does set out the starting point for the options available to clients and the impact that the current public health crisis may have on them.