In this article Family Law in Partnership associate Charlotte Symes examines the new rules relating to the enforcement of family financial orders.
Last year the Law Commission produced a consultation paper on the enforcement of family financial orders. The report recognised that enforcement is an often overlooked but essential area for ensuring people receive what they are due.
An important change resulting from the consultation paper relates to charging orders. Previously, jurisdiction within family proceedings came from part 73 and practice direction 73 of the Civil Procedure Rules (CPR) 1998, as modified. As of 6 April 2016 it is the new part 40 and practice direction 40A of the Family Procedure Rules 2010 (FPR) that apply. These new rules also apply to proceedings commenced but not disposed of by 6 April 2016.
What is a charging order?
A charging order gives the creditor the right to recover what is owed when the property or securities charged with the debt are sold. The creditor can then also apply for an order for sale to speed up the process of recovery.
A ‘creditor’ is defined as ‘the person to whom payment of a sum of money is due under a judgment or order or a person who is entitled to enforce such a judgment or order’. A ‘debtor’ is defined as ‘the person against whom a judgment or other order for payment of a sum of money was given, made, or ordered, as the case may be’.
Section 1 of the Charging Orders Act 1979 specifies that the following payments can be secured:
- A lump sum, including a lump sum payable by instalments (the court will consider if there has been a default);
- Arrears of maintenance;
- Costs, including the costs of making the charging order; and
- Money due by an order under section 36 of the Child Support Act 1991.
A charging order can be made over:
- Certain securities (including government stock, shares, and units in unit trusts);
- Beneficial interests under a trust;
- Property held on trust; and
- Property, within the jurisdiction, belonging to a debtor that is a partnership or a debtor who is in a partnership.
The application for a charging order is a two-stage process. The first step is an application for an interim charging order, usually without notice, to the Family Court or High Court (as appropriate and as specified in the 1979 Act); the second is an application for a final charging order, if the debtor does not satisfy the debt.
You must complete form N379 if the application relates to land, or N380 if it relates to securities. A creditor may apply in a single application notice for charging orders over more than one asset, but if successful, the interim charging order will be by separate order for each asset. A creditor may apply for a single charging order in respect of more than one judgment or order against the same debtor.
Unless it is an urgent application, the court will consider it on paper. If the interim charging order is granted, the court will list a hearing to determine whether it should be made final.
Rule 40.6 sets out who must be served with the application, supporting documents, and order. Service must take place not less than 21 days before the hearing. At least two days before the hearing, the creditor must lodge a certificate of service at court or produce such a certificate at the hearing.
Registered land can be protected by an agreed or unilateral notice. A beneficial interest under a trust of land can be protected by a restriction.
The court will decide whether to make an interim charging order final at the hearing. Any person who objects must file and serve on the creditor written evidence of the grounds, not less than seven days before the hearing.
At the hearing, the court may:
- Make a final charging order confirming that the charge imposed by the interim charging order continues, with or without modification, or discharge the interim charging order and dismiss the application;
- Decide any issues in dispute between parties;
- Direct a trial and give directions; or
- Make another order that the court considers appropriate.
If the final charging order charges securities, the order must include a stop notice (see chapter 4 of part 40).
All parties on whom the interim charging order was served must be served.
The Law Commission will no doubt recommend further changes in conjunction with the consultation paper, including the possibility of extending charging orders to joint bank accounts and pension assets. However, the difficulty remains with this method of enforcement that its effectiveness depends on the ability to register the charge.
This article was first published by Solicitors Journal on 10/05/16 and is reproduced by kind permission.
Charlotte Symes is an associate at Family Law in Partnership. She advises on a wide range of family matters including:
- financial issues arising from divorce and separation of cohabiting couples, often involving complex issues surrounding businesses, tax, pensions and investments;
- pre- and post-nuptial agreements;
- cohabitation agreements;
- financial claims for children;
- parenting issues involving child contact and residence; and
- relocation of a child both within and outside the jurisdiction.
Contact Charlotte Symes at E: email@example.com or T: 020 7420 5000.