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CH v WH [2017] EWHC 2379

Judgment of Mostyn J (approved by the President) confirming that the court has the power to order one party to make mortgage or other household payments and to indemnify the other in respect of the same.

A draft final consent order concluding the financial remedy proceedings between the parties was submitted to the family court at Southampton.

The draft order provided for two jointly owned properties to be transferred, one to the husband and one to the wife. Both properties were subject to a mortgage and so the order provided that each party must use their best endeavours to procure the release of the other from the mortgage on the property that they were retaining and, in any event, to indemnify the other against the liability thereunder.

The draft order also provided that the wife would resign as a director of a company and would transfer her shares to the husband. It went on to provide that she had no claim against the company and that the husband would indemnify her in respect of any liabilities in that regard.

A Deputy District Judge refused to approve the order on two occasions on the basis that the above provisions were outwith the powers of the court. A District Judge upheld the DDJ's objections in respect of the provisions of the order requiring a party to use his or her best endeavours to procure another party's release from a mortgage and, in any event, to indemnify him or her in respect of the same.

Mr Justice Mostyn came to the clear view that the objectionable terms of the order were fully within the power of the court to order. Drawing on the conclusions of the Financial Remedies Working Group (of which he was a member), Mostyn J held that the court plainly had the power to order one party to make mortgage and/or other household payments and to indemnify the other against non-payment:

• under s 31(E)(1)(a), MFPA 1984, in any proceedings in the family court, the court may make any order which could be made by the High Court if the proceedings were in the High Court; 

• the High Court has the power to order or decree an indemnity as part of its equitable jurisdiction (Salomon v A Salomon and Co Ltd [1897] AC 22);

• the award of an indemnity represents a legal right in favour of the person indemnified. The court can award an injunction in support of a legal right. To order someone, who has been ordered to indemnify the other in respect of a mortgage, to use their best endeavours to keep up the payments, is of the nature of an injunction in support of a legal right;

• put another way, the power to order A to make payments to B includes the power to order A to make payments on behalf of B;

• it was necessary to spell out the power in Family Law Act proceedings, because the wider direct power does not exist in those proceedings;
• it would be anomalous if the power to order payment of outgoings only existed in Part IV proceedings, but not in financial remedy proceedings;

• it was necessary for the court to have these powers if only to cover the position where a party was not prepared to give the necessary undertakings or was refusing to participate in proceedings; and

• s.30 MCA 1973 gives the court the power when making a property adjustment order to direct that the matter be referred to one of the conveyancing counsel of the court to settle a proper instrument to be executed by all necessary parties. This instrument in question could contain terms which furnished all necessary indemnities and obligations to pay instalments in relation to a mortgage secured on the property.

Mostyn J confirmed that his judgment had been handed down with the approval of the President. 

Summary by Ben Wooldridge,  barrister, 1 Hare Court

_________________

This judgment was delivered in private.   The judge has given leave for this version of the judgment to be published on condition that (irrespective of what is contained in the judgment) in any published version of the judgment the anonymity of the parties and members of their family must be strictly preserved.   All persons, including representatives of the media, must ensure that this condition is strictly complied with.   Failure to do so will be a contempt of court.

Case No: S015D13985
Neutral Citation Number: [2017] EWHC 2379 (Fam)
IN THE FAMILY COURT

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 28/09/2017

Before :

MR JUSTICE MOSTYN

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Between :

 CH Applicant
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 WH Respondent

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Judgment
Mr Justice Mostyn:
1. As long ago as 13 February 2017 a draft final consent order concluding the financial remedy proceedings between the parties was submitted to the Family Court at Southampton. But the order has not been made. Deputy District Judge Underhill has twice refused to approve it, which refusal has been upheld and confirmed by District Judge Sparrow, on the ground that certain of its provisions are outside the power of the court to order.  

2. The matter has been referred to me by the wife's solicitors. I have allocated the proceedings within the Family Court to High Court judge level pursuant to rules 14 and 15(2) of the Family Court (Composition and Distribution of Business) Rules 2014 (S.I. 2014 No. 840) and have approved the order as I am perfectly satisfied that the objectionable terms are fully within the power of the court to order.

3. At paragraphs 15 and 16, the draft order provided for two jointly owned properties to be transferred respectively to the wife and the husband. These properties were mortgaged. The draft order provided that each party must use his or her best endeavours to procure the release of the other party from the mortgage on the property that he or she received and, in any event, must indemnify that other party against liability thereunder. Deputy District Judge Underhill was of the view that this order was not within the power of the court to make. On 13 April 2017, he stated: "paragraphs 15 and 16 need to be recitals, the court cannot order pursuant to the Matrimonial Causes Act". On 6 July, 2017 he stated: "the Mostyn precedents do not overrule the requirements and parameters of the Matrimonial Causes Act. The court can only make an order that complies with the Matrimonial Causes Act." On 28 July 2017 an officer writing on behalf of District Judge Sparrow stated: "District Judge Sparrow has upheld Deputy District Judge Underhill's previous 2 decisions, in that there is no power set out in the Marital (sic) Causes Act 1973 to order someone to use best endeavours to procure release from a mortgage".

4. The draft order also went on to provide that the wife would resign as a director of a company and would transfer her shares in it to the husband. It provided that she had no claim against the company and that the husband would indemnify her in respect of any liabilities in that regard. Deputy District Judge Underhill was of the view that this order also was outwith the power of the court, but that objection appears to have fallen away upon the matter being reconsidered by District Judge Sparrow.

5. The order in respect of the mortgages derives from the standard form of financial order approved and adopted by the Financial Remedies Working Group in its first report of 31 July 2014. At para 84 of that report it was stated:

'A number of those responding to the consultation process queried whether, in relation to mortgage payments and other household outgoings, the court had power to direct one party to make such payments and/or indemnify the other against non-payment. Such obligations have traditionally been included as undertakings, but their inclusion as directions in the draft standard orders implied that the court had such powers when undertakings were not offered. Mostyn J has expressed the following view in justification of this inclusion:-

"Under the new s31E(1)(a) MFPA 1984  in any proceedings in the family court, the court may make any order which could be made by the High Court if the proceedings were in the High Court. The High Court has power to order or decree an indemnity. This is an equitable remedy originally vested in the Court of Chancery which was subsumed into the High Court by the Supreme Court of Judicature Act 1873. It was the very relief initially ordered in Salomon v A Salomon and Co Ltd [1897] AC 22 (but which was later set aside by the House of Lords as offending the rule about the separate legal personality of companies). As to mortgage and other outgoings in my view the power to order A to make payment to B plainly includes the power to order A to make payments on behalf of B.  The greater includes the lesser. It was necessary to spell out the power to order the payment of mortgage and other outgoings in Part IV FLA 1996 proceedings (see s40(1)(a)) because the wider direct power does not exist in those proceedings. It would be anomalous if the power to order payment of outgoings only existed in Part 4 but not FR proceedings. It is necessary in my view for the court to have these powers if only to cover the position if someone is not prepared to give the necessary undertakings or is not participating in the proceedings."'

6. Following the receipt of comments pursuant to further consultation the Group in its final report dated 15 December 2014 specifically reiterated and maintained its recommendation.

7. Since that time, to my knowledge, over the last three years the orders in questions have been made routinely until this problem has arisen in Southampton.

8. It is elementary that the court cannot make orders outside its powers: see Livesey v Jenkins [1985] AC 424 at 444G, where Lord Brandon stated that there was nothing in section 23 or 24 of the Matrimonial Causes Act 1973 which directly empowered the court to make the order requiring the wife, following the transfer of the matrimonial home to her by the husband, to be solely responsible for the mortgage and all other outgoings on it. Such a provision, he said, should have been incorporated in undertakings. It is certainly true that the literal words of section 23 and section 24 do not provide for the court to be able to make consequential or supplementary provisions of this nature, in contrast to the terms of section 24A(2), which explicitly grants such a power when making an order for the sale of property. However, section 30 gives the court power when making a property adjustment order to direct that the matter be referred to one of the conveyancing counsel of the court for him to settle a proper instrument to be executed by all necessary parties. While this provision is now virtually obsolete it cannot be disputed that the instrument in question could contain terms which furnish all necessary indemnities and the obligations to pay instalments in relation to a mortgage secured on the property. So I do not agree that the provision in question is outside the "parameters" of the Matrimonial Causes Act.

9. But that is not my main reason for disagreeing with the approach taken by the district judges in Southampton. My main reason is set out in the report of the Financial Remedies Working Group, set out above, with which, unsurprisingly, I agree. The basic mistake made by the judges in Southampton is to assume that their powers are confined to the four corners of the Matrimonial Causes Act. The Family Court has all the powers of the High Court. The High Court unquestionably has the power, as part of its equitable jurisdiction, to order an indemnity. If awarded, that represents a legal right in favour of the person so indemnified. The court can award an injunction in support of a legal right. To order someone who has been ordered to indemnify the other party in respect of a mortgage to use his or her best endeavours to keep up the payments on that mortgage is of the nature of an injunction in support of a legal right. In my opinion, this provision is squarely within the power of the High Court to order, and is therefore within the power of the Family Court.

10. In my judgment, these sterile, technical objections to orders in these terms must cease. They have caused needless delay and have no doubt increased costs and caused other inconvenience.

11. That concludes this judgment, which the President has seen and which he approves.