Enforcement of Family Financial Orders. Resolution s response to the Law Commission

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1 Enforcement of Family Financial Orders Resolution s response to the Law Commission Resolution s 6,500 members are family lawyers, mediators and other family justice professionals, committed to a non-adversarial approach to family law and the resolution of family disputes. The preparation of our response has been led by Resolution s Property, Tax and Pensions Committee. General comments We have largely replied to the consultation questions on the basis that the debtor will be a nonpayer who wilfully refuses to pay a financial sum due under a family order, rather than a non-payer who cannot afford to pay. We assume that the debtor will have agreed a consent order or be subject to a court order which has not been appealed and which is not dependent on another factor. Variation and extension of time to implement applications are of course already available. We very much welcome the Law Commission s proposals where they shift the onus onto the nonpayer to argue certain matters and within streamlined procedures. Response to consultation questions The impact of enforcement 6.3 We ask consultees to tell us about their experiences of the impact, financial and otherwise, of: (1) non-payment of sums due under family financial orders; (2) difficulties in obtaining information and advice about the enforcement of family financial orders, including court procedure; and (3) enforcement proceedings on (a) debtor and creditor; b) third parties (such as the debtor s other creditors); (c) banks and financial institutions; and (d) the family justice system. (1) Non-payment of a sum due under a family financial order can be catastrophic especially in average cases where people are living in ordinary circumstances without significant resources, for example, where it is essential that a lump sum be paid before a party can purchase a property to house themselves and any children. If that sum is not paid and there is non-recovery and/or the process drags on, for whatever reason, this will inevitably have a negative financial and emotional impact on the individual concerned and those close to 1

2 them. Non-payment of sums can also result in increased claims for welfare benefits and tax credits. The current system often works against encouraging early enforcement. Enforcement is a complex and difficult area to successfully navigate without legal advice. But a substantial sum or arrears needs to be owed to make enforcement proceedings worthwhile from a proportionality perspective, with a significant detrimental impact on the creditor in the meantime. (2) There is little information available about the enforcement of family financial orders, including on outcomes, the predictability of such and likelihood of success or otherwise. The system remains largely opaque and daunting. Our members practical experience of enforcement is often limited. It may be uneconomic for clients to instruct them for enforcement purposes. Unclear processes make it more difficult and expensive to advise clients at the enforcement stage. Dealing with disclosure within an enforcement process is a particularly difficult area. It is almost always more cost and time effective for the client to clearly address issues of implementation and any risks around non-payment when advising on the settlement and in the original consent or court order, to avoid if possible use of the enforcement processes at a later time. It can be easier to address what to do in relation to once and for all capital payments (clean breaks) than it is for maintenance (unless secured periodical payments are an option) because of its periodic nature. As the volume of litigants in person in the system increases, so too will (a) the volume of orders drafted without detailed legal input, which may then be more susceptible to enforcement issues; and (b) the volume of litigants left without legal advice at the point of enforcement issues arising. We can only assume that litigants in person find the law and procedure of enforcement complicated, confusing and difficult to use, if they can access helpful information or advice at all. It is currently impossible to explain simply enforcement to a litigant in person both when to do it and how. People need speedy access to the court to apply for variation or enforcement or to obtain appropriate and clear direction to the simplest methods of enforcement. There is a need for better guidance before proceeding to court. (3) Our members mainly see the impact of enforcement proceedings on creditors. Enforcement is usually an overly complex, lengthy and costly route for a creditor to take. There are particular challenges where the debtor is self employed and/or continuing arrears of maintenance is the issue. We don t see the debtor s other creditors as being in any different or special category. Unless the debt is secured, they take their own risk. (4) The vast majority of those working within the family justice system are unlikely to have significant experience of the different types of enforcement proceedings and of how effective individual remedies are. 2

3 The law and procedure in this area are not simple. Where there are enforcement proceedings, those may be disproportionately expensive and lengthy as a result. 6.4 We ask consultees to tell us their views about the economic impact of any potential reform of the law relating to enforcement. The potential economic effect of potential reform for individuals who currently find it too difficult or costs prohibitive to pursue and achieve enforcement could be significant. In responding to the consultation questions we have attempted to consider what reform would be easiest and cheapest to achieve to avoid wider cost and resource implications. This is an area where it may be difficult to provide strong or research based evidence in advance to demonstrate that tools will encourage compliance if introduced. Enforcement by the court 6.5 We invite consultees views on the enforcement of family financial orders by the court. Could the system be improved or extended? We agree that litigants of all sorts need to be more aware of the single family court s power to require that periodical payments are paid into court and what the creditor can then do to access those funds. It makes sense to adopt the general enforcement application procedure as necessary. We would support the court also being able to enforce the payment of lump sums by instalments where that is agreed between the parties or ordered by the court. General enforcement application 6.6 Do consultees think that orders to obtain information, and the general enforcement application, work well? How could they be improved? We suggest that an option for the court to direct the filing of a short standard form for initial disclosure would be of assistance in general enforcement applications. Our members still tend not to have much experience of general enforcement by the court, preferring to deal as far as possible with potential issues around enforcement when negotiating and drafting the original order. But it is a useful tool and step in the right direction towards a simpler, but comprehensive enforcement system. Since the law and rules in this area are so difficult to navigate, a general application for enforcement with the court deciding what is best, must currently be the easiest option for unrepresented parties. This does of course raise resource issues for the courts and judiciary, and emphasise the desirability of frontloading the work at the time of the making of the original order which of itself raises significant challenges for both the courts and any represented party where one or both parties are unrepresented. We recommend that whatever level of judge in the single family court a general application for enforcement comes before at first instance, they should have the power to make the 3

4 appropriate order. For example, magistrates have no power to make a charging order requiring transfer to a District Judge. Our members welcome being able to go before a District Judge of the Day (as previously available at PRFD / CFC) or urgent business judge about implementation of a lump sum payment or transfer of property. Information requests and orders 6.7 We ask for the views of consultees as to: (1) whether the provisions of the Tribunals, Courts and Enforcement Act 2007 relating to information requests and orders should be brought into force in relation to family financial orders; and (2) whether the information so obtained should be disclosed to the creditor. (1) Yes, we would welcome information requests and orders being brought into force in relation to family financial orders. (2) Yes, the information should be provided to the creditor on a confidential basis for the purposes of family proceedings. Information from the debtor 6.8 We provisionally propose that: (1) an obligation be placed on the debtor to complete a financial statement where the creditor makes an application for enforcement proceedings; and (2) that the form of the financial statement be based on a variant of the Form E. (1) Yes, we agree. Insufficient information about the circumstances of the debtor is the biggest barrier to creditors who wish to obtain payment. A short Form E type standard form with some evidence attached would be helpful in preparing for and advising before an information question hearing proceeds. In the absence of a prescribed form, the debtor may do and provide nothing. A basic statement of means with some documentary evidence, such as recent pay slips and the most recent tax return should be sufficient. (2) Yes, we agree on the basis that this would ideally be a much shorter variant of the Form E limiting the documents to be attached. Execution of documents 6.9 Do consultees believe that any reform is needed to the procedure for the execution of documents by the court, for example the removal of the conditions that the power can only be exercised where the party has refused or neglected to comply with the order to execute the document, or where that party cannot, after reasonable inquiry, be found? As discussed earlier, the focus really has to be on addressing issues around the implementation of orders, including addressing the issue of execution of documents, from 4

5 the outset i.e. in the consent order or court order. The court can, for example, provide that the document can be signed by a district judge on behalf of a party within say 14 days of receipt of the order or the parties can give joint authority for a nominated person to do so. Third party debt orders 6.10 We provisionally propose the streamlining of the procedure for a third party debt order so that there is a final hearing only where a debtor or third party raises an objection following the service of the interim order. Yes, this is a sensible proposal We ask for consultees views about the following options for reform: (1)the introduction of third party debt orders against joint accounts; (2) the use of the streamlined procedure for third party debt orders against joint accounts; and (3) whether, in any event, there should be provision for disclosure of details of any joint accounts held by the debtor and another person, by the bank, when a third party debt order is made against a bank. We also ask for consultees views about: (4) the introduction of periodical third party debt orders; (5) the introduction of a protected minimum balance when a third party debt order is made against a bank account; and (6) provision for disclosure of a debtor s bank statements, by the bank, when a third party debt order is made against a bank. (1) to (3) We agree with all of these options for reform. It is not right that such resources are not available where a debtor will not pay. The starting point should be that half of the sum in any joint account held by the debtor and another person belongs to the debtor, with the debtor having the opportunity to argue otherwise. (4) to (5) We are not clear how periodical third party debt orders would practically work and how evasion and diversion of funds to another account by debtors intent on not paying could necessarily be avoided, even with minimum balance provisions. An attachment of earnings order could be sought, but would raise familiar difficulties where the debtor is self employed or has dividend income. We do not see these options as straight forward or must haves for reform. (6) Again, we do not see this as a high priority for reform. Charging orders 6.12 We provisionally propose that the procedure for charging orders should be streamlined so that a final hearing only takes place where a debtor raises an objection following the service of the interim order. Yes, we agree. 5

6 6.13 Are consultees aware of any problems with the application of charging orders to financial products? We have no comments on this point Do consultees think that there is scope to use assets other than land and securities as security for family judgment debts? Pensions Consideration might be given to enabling the freezing of bank accounts to help secure the payment of family judgment debts. Whilst we appreciate that it is a complex area, we also wonder whether further thought should be given to the use of the charging order device against overseas property (particularly where that is the only asset) and issues around reciprocal enforcement Consultees are asked to give us their views: (1) on the court being given the power, at the time of any enforcement proceedings, to exercise its powers to share and attach pensions; and (2) the restrictions that should apply to the exercise of any such power; should those that currently apply to the exercise of these powers on the making of the original order apply at the time of enforcement and should there be any additional restrictions? (1) In principle we see no reason why sharing and attaching pensions should not be a resource to satisfy, for example, a lump sum order which has not been appealed or the payment of which is not dependent on a future event. In practice pension sharing is likely to be the more used and useful tool. If the parties have already been appropriately advised, the power may have already been exercised at the time of making of the original family financial order. However, even where a pensions sharing order has already been made, its use as an enforcement remedy where there has been failure to comply with another part of a financial remedy order could be considered, especially in the context of the wider pensions liberalisation scheme. (2) The restrictions should include not exercising the power where: a pensions attachment or sharing order has already been implemented; the making of an order would ultimately reduce the benefit of the creditor who is already the beneficiary of an existing pensions order; or the making of an order would prejudice a third party - we have in mind a first spouse with the benefit of a pensions attachment order and so with an interest in the pension income We provisionally propose that Part III of the Matrimonial and Family Proceedings Act 1984 be amended so as to provide that the existence of an English pension arrangement is a jurisdictional ground for financial relief after an overseas divorce. 6

7 Yes, we strongly agree on the basis that the claim should be restricted to dealing with the English pension arrangement. Resolution has long called for an amendment to that legislation to found jurisdiction for the purposes of pension sharing (restricted to the relevant pension) based on the existence of a pension scheme administered in England and Wales, even if neither party can establish jurisdiction by domicile or habitual residence. It is of course important to seek to address complex international issues from the outset, for example, where a party lives abroad and has a pension or other assets here, rather than at the later enforcement stage. Attachment of earnings orders 6.17 Do consultees think that the provisions for tracking, contained in the Tribunals, Courts and Enforcement Act 2007, should be brought into force for family financial orders? Yes. This seems to us to be a sensible and welcome measure. We see no reason why the provisions should not be brought into force for family financial orders Do consultees think that, in family proceedings, information obtained by the tracking provisions should be disclosed only to the court or should it also be disclosed to the creditor? We consider that information obtained by tracking provisions should be disclosed to both the court and the creditor Do consultees think that it is practicable for attachment of earnings orders to be redirected automatically when the debtor changes employment? Automatic redirection of orders could make a real difference for some creditors and should be possible We would welcome consultees views on the idea of a national register of attachment of earnings orders. In our view, whilst maintaining such a register may be helpful, it would not be a high priority. We query who would maintain and pay for such in the current economic environment. Arrears of maintenance 6.21 Do consultees think that change is required to the rule that arrears more than 12 months old are recoverable only in special circumstances? If so: (1) should the 12 month period be increased? (2) should the starting point be that all arrears are enforceable, with the debtor having the opportunity to argue otherwise (whether after 12 months or longer)? 7

8 (1) We consider that arrears over 12 months old should generally remain recoverable. The 12 month period should be increased. This would be fairer to creditors who, after all, have the benefit of a court order. And a creditor might commonly wait for almost a year to make an enforcement application worthwhile under the current system. (2) We agree that all arrears should be enforceable with the burden shifted to the debtor to argue otherwise whether after 12 months or longer We provisionally propose that the court be given the power to remit arrears on a freestanding basis. Costs Yes, we agree. On the basis that the court could remit where it considers that this would be fair to both parties Do consultees think that any reform of the costs rules, and provisions for the payment of fees, for proceedings for the enforcement of family financial orders would be useful? We would welcome working towards a single and robust regime for recovering costs of enforcement proceedings with significant costs penalties and potentially fines in addition to costs, whatever remedy is ordered, to provide an additional disincentive around noncompliance with family finance orders. We do not believe that a creditor should usually be obliged to pay a debtor s reasonable travel expenses to court where s/he is required to attend court in relation to enforcement. This seems to us to dilute the importance of compliance with a court order. When our members advise clients in the position of creditor about this obligation, they are met with surprise and concern. The debtor might make a claim for travel expenses in exceptional circumstances or there could be provision for those expenses to be repaid to the creditor on a successful application by the creditor or where there is litigation misconduct. Judgment summons 6.24 We welcome consultees views on the use of the judgment summons procedure and whether any reforms could usefully be made to the procedure, bearing in mind the need for it to be human rights compliant. The judgment summons process is full of hurdles and probably only has a very limited role to play in family cases. We recommend focusing on the development of the Law Commission s provisional proposals to introduce civil coercive measures to produce compliance. Coercive measures 6.25 We provisionally propose that: (1) an order disqualifying a debtor from driving should be introduced; 8

9 (2) an order disqualifying the debtor from travelling outside the United Kingdom should be introduced; (3) an order imposing a curfew on the debtor should be introduced; (4) that disqualification or curfew orders should be available where the court is satisfied on the balance of probabilities that the debtor has the ability to pay and has not done so; (5) that disqualification or curfew orders should be imposed where the court believes it to be in the interests of justice, taking account of all the circumstances of the case including: (a) the degree of non-compliance; (b) the other enforcement methods that are available to the creditor and the likely success of those methods; (c) the effect of making the order on the debtor s ability to earn a living; and (d) the effect of making the order on any dependants of the debtor (6) that disqualification orders should take effect, in the first instance, for up to 12 months and curfew orders for up to six months. (1) and (2) We do not regard the issue of whether coercive orders are civil, not criminal sanctions, as entirely clear this could probably be argued either way. But we agree that orders disqualifying a debtor from driving or from travelling outside the United Kingdom should be introduced. This is on the basis that a court will have given the debtor an opportunity to be heard and decided that the debtor can afford to pay a sum due under a family order. In our members experience, creditors find the threat of prison to be draconian but unrealistic, and unlikely to reduce tensions or change the debtor s attitude. Adding disqualification orders to the package of available coercive measures would, in our view, provide more affordable, appropriate and practical options to promote compliance. We are not persuaded that there is no point in introducing new orders at all or in the absence of a wholesale simplification of the existing system. Coercive measures might fit the circumstances of the case and would provide a wider range of tools in the court s armoury for dealing with wilful non-payers. The Commission may wish to note that we have had serious reservations about the use of coercive powers against parents in the child maintenance context in light of various historic concerns, for example, around guaranteeing accurate calculations of arrears and the adoption of fair processes. Similar concerns do not arise for us in the context of the present consultation. (3) We are not opposed in principle to the introduction of curfew orders, although the views of our members on this point are more mixed, including as to whether this could be an entirely civil matter to which the civil burden of proof would apply. We think that curfew orders would be perceived as more draconian and punitive than coercive to produce compliance. And that these orders and the monitoring of such would give rise to a greater logistical and costs burden than the other two types of order. 9

10 Bankruptcy (4) We agree but consider that curfew orders, if finally proposed and introduced, should only be imposed where the provision set out in paragraph 6.25(5) applies. (5) We agree in relation to curfew orders. Disqualification orders are arguably less draconian than curfew orders. We are of the view that where there is non-compliance and the court is satisfied that the debtor, having had the opportunity to be heard, has the ability to pay, judges should exercise their discretion to impose one of these orders as a coercive measure, unless a more suitable enforcement method is available in the particular case. (6) We agree. We wonder whether the Commission has also explored the introduction of community service orders as part of a package of coercive measures. This type of penalty is cheaper than imprisonment, which is not an effective threat We ask consultees for their views as to whether arrears of periodical payments should be provable in bankruptcy. Yes, arrears outstanding should be provable. Such arrears are a debt and the debtor may have deliberately allowed arrears to accrue with a view to seeking bankruptcy. However, we note that the minimum debt requirement applying from 1 October 2015 would require substantial arrears to arise before a bankruptcy petition could be issued, especially if debt arrears must arise within a 12 month period. Case management powers 6.27 Do consultees think that existing case management powers are sufficient and used effectively, whether at the time of the original financial order or at the time of enforcement proceedings? Resolution considers that the existing case management powers are probably sufficient at the time of enforcement, but not always used. Sometimes the judge just needs to recommend the most appropriate remedy and enforce the court order made. The return of proceedings to the judge who made the original order merits further consideration. Allocation to the level of judge who is able to grant the remedy sought also needs to happen in general enforcement applications or certain powers need to be extended to other levels of judge. We welcome the Commission s discussion of proactive measures at the time of the original order. The terms and drafting of the original financial recitals and order are key to facilitating implementation and fully effective orders, and avoiding enforcement issues, and can make a 10

11 real difference for the parties. Judges need sufficient time to give thought to this, especially where both parties are unrepresented. We would also welcome the judiciary being more directive about the consequences of noncompliance with an order. The standard financial remedy orders, if and when adopted, and Resolution s future commentary on those standard orders and our own and additional precedent orders present an opportunity to consistently build in security and enforcement provisions. We also hope that standard enforcement orders, if and when adopted and to which Resolution has contributed, will assist with the efficient consideration of all relevant issues within enforcement proceedings. Alternative dispute resolution 6.28 Do consultees think that the Family Court should be able to adjourn enforcement proceedings without the parties consent for the purpose of the parties attempting to reach agreement using alternative dispute resolution methods? No. We find it difficult to envisage any circumstances where this proposal might help or change the position. If there had been a change of circumstances or one or both parties had simply misunderstood the order, this should have become evident before this point. In particular, in the context of non-compliance with a court order by a debtor who may want delay, or to simply not pay or to pay less than ordered, we believe that the exercise of such a power would have no real purpose and would cause delay: it would not be fair to or understood by the vast majority of creditors applying for enforcement. As the consultation paper recognises, parties are not required to attend a MIAM before enforcement proceedings. Mediation would simply not be suitable why would you be willing to mediate if you refuse to make payment under the terms of a court order? However, we see scope for an increased role for this type of approach in proceedings for variation of a periodical payments order. There could also be more use of dispute resolution processes to facilitate implementation of family financial orders e.g. where the parties agree to arbitrate if implementation issues arise. Guidance for the public and litigants in person 6.29 We provisionally propose that Government: (1) consolidate and increase the information and support available to litigants in person and the public in respect of proceedings to enforce family financial orders, with information being published in both electronic and paper formats. 11

12 (2) consider the scope for funding lawyers to provide free advice in person to litigants in person that goes beyond information and support but which is not based on a lawyer-client relationship. (1) We agree that Government should consolidate and increase the information available for the public. Little information is currently available, with any reported cases tending to relate to big money and/or international cases rather than those involving parties with more average means and assets. Early information about the nature and effect of the court process and any order, whether by consent or not, and the consequences of non-compliance is necessary. More could also be done in warning notices on court forms and court information materials to emphasise, from the outset of the court process, the potential consequences of breaching an order. It is also important for information to be designed to assist and be reasonably understood by all litigants. Presentation of materials for litigants in person only suggests special treatment for them. The suggestions about improving web content in the consultation are interesting, and we will include enforcement in our upcoming web content review. (2) The need for support and advice for potential family litigants goes far beyond advice on enforcement, and would be provided ideally at the earliest opportunity i.e. at the outset of the case before financial remedy proceedings begin. We agree that legal advisers based in courts or elsewhere to give general information and advice, including on enforcement, could not be based on a lawyer-client relationship. Many issues would arise and need to be addressed around the giving of any specific legal advice such as conflict checks, regulation and insurance issues. Unless tailored and proper advice is available, we fear that any scheme, whilst well intentioned, will be somewhat artificial and contrived and not provide people with the help they actually need/fill the policy gap. People would be better referred by the courts to free, fixed fee or unbundled services provided by local solicitors. The self help centres/family law facilitator model described or any type of free service would of course also have significant costs implications. Successful pilot services, such as Resolution s current Family Matters pilot which provides a free service to help low income separating couples who were previously eligible for legal aid, have required financial investment and involved experienced lawyers. Information and training for practitioners and the courts 6.30 We welcome consultees views on what more, if anything, could be done by practitioners and the courts, in the area of training and professional development, to help improve enforcement. The provision of accurate and informative government information as proposed would helpful for all and would most likely be cross referenced and built upon in information for family justice professionals. 12

13 We are very mindful of the need to train practitioners to think about and address future risks and enforcement within the original proceedings, and to carefully look at the final order with this in mind, whichever party they act for. Resolution is currently considering whether a Specialist Accreditation Subject could be developed in this area. This would identify the relevant knowledge and performance competencies, from which further training and good practice would flow on both the current law and any future changes in this area. Standard financial remedy orders, and the proposed Resolution companion editions with footnotes and guidance, will need to fully address planning ahead for enforcement difficulties. Judicial training should also include planning ahead for this. Resolution has begun work on a suite of precedent enforcement orders with accompanying information for practitioners which we will develop, depending on the progress of the standard orders project. Statistics on enforcement 6.31 We provisionally propose that HMCTS should begin collecting and publishing data on the use of the different enforcement methods in the Family Court. Yes. More needs to be known about the use of the existing raft of enforcement measures. But in the context of limited HMCTS resources we understand the need to balance this need alongside the need for other statistics and indeed to improve the core services provided by the family courts. Consolidation of legislation and rules 6.32 Do consultees find that the need to refer both to the Family Procedure Rules and the Civil Procedure Rules gives rise to problems? Whilst a change of the type proposed in paragraph 5.52 would aid convenience, we do not consider consolidation of the relevant legislation or rules to be a priority area for family law reform at this time. We would prefer to see priority given to especially the introduction of legislation to allow divorce without blame. For further information please contact: Rachel Rogers, Head of Policy, ; rachel.rogers@resolution.org.uk Resolution July