Enforcing family financial orders

In March 2015 the Law Commission published a consultation paper entitled: ’Enforcement of Family Financial Orders’. Here is an in-depth look at its aims and recommendations.

The Law Commission have put forward reforms to improve the way family financial orders are enforced more effective and more efficient. They have also suggested introducing new coercive measures, so that debtors can be induced to comply.

The topic was first recommended to the Law Commission in 2010 by the Family Law Bar Association. It described the current law of enforcement as ’hopelessly complex and procedurally tortuous’. The Law Commission have also noted that courts can sometimes struggle to enforce an order, as well as a general feeling amongst family law practitioners that the current system is not effective. Family financial orders are often made to meet reasonable living needs. Failing to enforce these orders can thus lead to undue and prolonged hardship.

It is important to note that the paper is concerned with people who choose not to pay, rather than those who can’t pay. This is reflected in the Law Commission’s recommendation that the debtor should complete a financial statement on every enforcement application. This would provide an overview of the debtor’s financial circumstances, and thus not only aid proceedings, but provide those who are not able to pay the opportunity to show evidence of this.

Improving existing methods of enforcement

Third party debt orders

The Law Commission has suggested three ways to improve third party debt orders: streamlining, use of joint accounts, and periodical third-party debt orders. Here’s what this means:

1. Streamlining the procedure: a final order would be made without a court hearing, unless any objections are raised by the debtor or third party following the making of an interim order. This will save the court time and could lead to faster payment of the debt.
2. Extending third party debt orders to joint accounts: this would allow funds to be moved into a joint account, which would prevent individuals from protecting their funds. This is at present out of the reach of a third party debt order. Some protection would have to be given to the other holder of the joint account. The commission suggest there should be a starting point whereby 50% of the account is deemed to belong to the other (non-debtor), and is therefore beyond the reach of the order. They also suggest that both parties and the other account holder should be afforded the opportunity to debate the starting point.
3. Periodical third party debt orders: to enable the creditor to recover funds as and when they become owing to the debtor, without the need for a further application to the court. At present orders are only effective where the debt owed is already in existence at the time of making the order. It is suggested that this type of order would help people enforce periodical payments or lump sums by instalments. The commission also ask for views as to whether there should be a safeguard in place so that a debtor’s balance could not be depleted below a suggested minimum balance.

Charging orders

As with third party debt orders, the Law Commission suggest streamlining the process so that there is no final hearing following an interim order, to save the courts time and to speed up the process of payment.

It is also considered whether charging orders should be extended to apply to assets other than those to which they are currently applicable (i.e. land, shares, unit trusts and certain securities). The commission do, however, highlight that one would need to bear in mind the ability to register the charge. It would not be easy to register a charge against an asset that has no system of registration.

Attachment of earning orders

Currently, if an individual ceases employment with the employer to which the order was made, the order lapses and does not revive, unless redirected by the court. A debtor is, of course, under a duty to inform the court of their change in employment but a debtor who is unwilling to pay may be unlikely to comply.

The Law Commission have suggested a tracking system, whereby the court could request information from HMRC as to the debtor’s employment, and therefore the means to revive the order. Provision for this system appears in the Tribunals, Courts and Enforcement Act 2007, but is not yet in force.

The Law Commission also asks for views as to whether the information obtained from HMRC should be disclosed to the creditor, and whether there should be a duty on the court to redirect orders.

Pensions

At present the court has no power to make an order against a pension held by the debtor. The Law Commission considers whether the courts should be given the ability to make the same orders in respect of pensions that are currently available during financial proceedings.

New Coercive Measures

A judgment summons (an application for the debtor’s imprisonment) is currently the only coercive measure available in the enforcement of family financial orders. As these proceedings are considered to be criminal, the creditor must prove their case beyond all reasonable doubt.

The commission notes that this, alongside the debtor’s right to silence and privilege against self-incrimination, can make it difficult to bring a successful application. The commission proposes that the suggested new coercive measures should be based on the sanctions being civil and not criminal, thus requiring a less onerous standard of proof.

The Law Commission proposes three new coercive orders: disqualification from foreign travel, disqualification from driving and curfew orders.

1. Disqualification from foreign travel: in addition to the two existing methods of preventing foreign travel, the writ ne exeat regno and passport seizure order, it may be useful for the court to have the power to prevent a debtor from travelling outside the jurisdiction, specifically designed as a method of enforcement of family financial orders. They propose that a debtor may be prevented from travelling outside the jurisdiction for a period up to 12 months in the first instance.
2. Disqualification from driving: a method currently available in the use of enforcement against child maintenance debtors. The Law Commission suggests it should become available to all family creditors. They propose that a debtor should be disqualified from driving for a time period of up to 12 months in the first instance. They say it should be used with caution, to ensure it does not affect the debtor’s ability to earn.
3. Curfew orders: the commission proposes that the court would have the power to make a curfew order for a period of up to six months with the intention of inducing compliance. An individual would be required to remain at a specified place for periods of between 2 and 12 hours in any one day.

To bring a coercive order, the creditor would have to show that, on the balance of probabilities, the debtor has the means to pay and has not done so. The court would then have discretion to make an order taking into account all of the circumstances of the case, which would include:

1. Degree of non-compliance
2. Other enforcement methods available and likely success
3. The effect of the order on the debtor’s ability to earn a living
4. The effect of making the order on any dependants of the debtor.

A comprehensive summary of all the suggested recommendations and a copy of the full consultation paper may be found on the Law Commission’s website.