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Family analysis: Professor Nick Hopkins, Law Commissioner for the Property, Family and Trust law and Maxwell Myers, research assistant in the Property, Family and Trust law team, discuss the recommendations for reform of the law of the enforcement of family financial orders in the Law Commission’s report published on 15 December 2016.
Enforcement of Family Financial Orders (Law Com 370)
What does the report cover?
The Law Commission report, Enforcement of Family Financial Orders (Law Com 370), contains a number of recommendations for reform of the law of the enforcement of family financial orders. The package of proposals is designed to create an effective and accessible system that operates in a way that is fair to both the creditor and the debtor.
Family financial orders are typically made on the ending of a marriage or civil partnership and require the payment of money, or the transfer of property, between the former spouses or civil partners. Family financial orders can also be made between parents under Schedule 1 to the Children Act 1989. The enforcement of child maintenance payable following a calculation by the Child Maintenance Service falls outside the scope of the report. The recommendations are therefore concerned with how court orders can best be enforced, rather than the size or nature of the original order.
How significant an issue is enforcement?
The enforcement of family financial orders is a practically important yet often overlooked area of law. The Law Commission estimates that there are on average 4,200 enforcement cases annually in relation to family financial orders and that approximately £15-20m owed under such orders goes unpaid each year. Resolution, an organisation representing over 6,500 professionals working in family law, described the effect of non-payment in this context as potentially ’catastrophic’.
Further, these figures are likely to be an underestimate as they do not account for those individuals who are not receiving what they are owed under a family financial order, but who do not take enforcement action. They may not take action due to a lack of understanding of the system, a feeling that they need legal representation that they cannot afford, concerns about their relationship with the debtor, or simply a lack of faith that action will achieve compliance. With financial orders often being enforced by litigants in person, it is vital to the proper administration of the family justice system that the law is as clear and efficient as possible.
What problems are there with the current law?
The current law governing the enforcement of family financial orders is complicated, being contained in a range of legislation and court rules. It was described by the Law Society as being ’so complicated [that it] may well deter creditors from taking action to obtain payment’. It can be difficult for parties, particularly litigants in person, to recover the money they are owed. This can lead to significant hardship both for the parties and for their children.
The Law Commission’s recommendations to improve the enforcement of family financial orders are made with four key problems with the current law in mind, as well as making a number of additional improvements. These problems are:
What recommendations does the report make?
It was clear from the responses to the Law Commission’s consultation that the enforcement rules are hard to find and difficult to follow, both for lawyers and for litigants, particularly for those acting without legal representation. Given that many litigants will be acting in person, it is vital that the rules are accessible. To simplify the law, the Commission recommends consolidating the rules within the Family Procedure Rules 2010 (FPR 2010) and providing more guidance and information for litigants.
Information about the debtor’s financial circumstances is key to effective enforcement. Information is necessary to determine whether the debtor has the means to pay and, if so, the most appropriate method of enforcement. There is no point in pursuing enforcement against a debtor who cannot pay. The Law Commission makes two recommendations with a view to ensuring that the court has sufficient information to successfully enforce family financial orders:
Wider scope of enforcement methods
A further problem with the existing rules is that a number of assets are beyond the reach of the courts’ enforcement powers. Debtors may therefore be able to shield their assets and avoid enforcement action. The Commission makes recommendations to extend third party debt orders to apply to funds that are deposited in a jointly held bank account and to make it easier to enforce against the income of self-employed debtors. We also recommend enabling enforcement against a debtor’s pension assets.
Applying pressure to debtors who will not pay
The courts currently lack the power to apply sufficient pressure to debtors who have the means to pay but will not pay. Although it is possible under the current law to send a debtor to prison for not paying what they owe under a family financial order, this is often inappropriate and can be hard to achieve, given that the criminal standard of proof applies. The Law Commission recommends that where the court finds, to the civil standard, that a debtor has the ability to pay, they may be disqualified from driving or prevented from travelling out of the country for up to 12 months, where it is in the interests of justice to do so. The court will be able to postpone the order and the order will also come to an end on full payment of the arrears.
In addition, the report makes a number of recommendations concerning the allocation of enforcement cases, with a view to making the enforcement process generally more efficient. Greater judicial continuity between the judge who determines the original financial order and who hears any subsequent application for enforcement is recommended. The Commission also recommends increasing the enforcement powers of lay justices, and the appointment of an enforcement liaison judge in each family judge area to help build expertise in enforcement and improve the management of enforcement proceedings.
The Commission also recommends reform to the general enforcement application to improve the efficiency of enforcement proceedings. A general enforcement application is an application for the court to make ’an order for such method of enforcement as the court may consider appropriate’ (FPR 2010, SI 2010/2955, 33.3(2)(b)). It means that litigants do not have to select an enforcement method to apply for. A new and revised procedure is recommended that will both help litigants and save court time.
To allow for greater fairness, the Commission recommends extending the period of time for which arrears can be enforced without needing the court’s permission, and also recommends that the court should grant permission to enforce earlier arrears where there are good reasons to do so. A new power for the court to cancel arrears is also recommended, alongside reform to the costs rules that apply on enforcement. The Law Commission considers that these reforms will strike a more appropriate balance between the interests of the creditor and debtor.
Finally, it was apparent from the responses to the consultation that the enforcement of family financial orders is an issue often overlooked – there is a tendency for parties to think that the process is over once a financial order has been made. A number of recommendations are made to encourage parties, lawyers and judges to think ahead to enforcement, with a view to ensuring that the process is as simple and effective as possible. For example, the Commission recommends that judges should be directed to consider enforcement whenever a family financial order is made.
What happens next?
The recommendations were submitted for consideration by the government on 15 December 2016. The Law Commission’s protocol with government states that the government will provide an interim response within six months, and a full response within one year, explaining the reasons for any major amendments or decision not to implement any of the recommendations.
Should the government accept our recommendations, many of them can be implemented by amending the FPR 2010. A number will require new primary legislation, in particular the recommendations to allow enforcement against pension assets and to introduce new powers to disqualify debtors, in certain circumstances, from driving or to prohibit them from travelling out of the country. Recommendations requiring primary legislation may have to wait for a slot in the government’s legislative programme, whereas it may be possible to amend the procedural rules more quickly.
Interviewed by Geraldine Morris, solicitor and head of the LexisPSL Family team.
This News Analysis was also published in LexisPSL Family. Click here for a free one week trial.
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