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Enforcement and the powers of the family court: VS v RE [2018] EWFC 30

Michael Horton, barrister at Coram Chambers explains the jurisdiction of the family court in relation to enforcement proceedings and highlights considerations which impact on the drafting of recitals to consent orders.

Michael Horton
,  barrister, Coram Chambers

Enforcement is tricky.  It must be, because the Law Commission has said so.  Its report, Enforcement of Family Financial Orders, Law Com 370, was published in December 2016.  It recommended reform, given that the rules governing the enforcement of family financial orders are difficult to access and understand, and are inefficient.  In this article, I examine the decision of Mostyn J in VS v RE [2018] EWFC 30 relating to the enforcement of a charging order.  The family court is supposed to have the same powers as the High Court, by virtue of s 31E(1) of the Matrimonial and Family Proceedings Act 1984.  What is the extent of the powers conferred by s 31E(1), and does this provision really enable the family court to 'enforce' a charging order?

In VS v RE, the respondent was ordered to pay a lump sum to the applicant, and to pay costs, in a Schedule 1 claim.  The order was made by a High Court judge.  The respondent did not pay, and so the applicant applied to enforce.  The judgment tells us the applicant sought a host of charging orders, that eventually an order was made by Mostyn J dealing with the means of payment of the sums due, but otherwise gives us very few details.

The bulk of the judgment deals with a bugbear common to Mostyn J and Munby P – proceedings being issued in the High Court when they should have been issued in the family court.  The substantive Schedule 1 proceedings had apparently been issued in the High Court.  This had been done because the proceedings had been started with an application before a High Court judge for a freezing order.  Mostyn J rightly pointed out that this is not permitted.  The High Court and the family court both have jurisdiction in proceedings under Schedule 1 to the Children Act 1989, but FPR rule 5.4 provides that, where both courts have jurisdiction, the proceedings must be issued in the family court save in very limited circumstances.  There is no right to choose to issue in the High Court.  The mere fact that a freezing order is sought does not change that position.

On 28 February 2018, Munby P issued guidance on the jurisdiction of the family court and High Court: President's Guidance (Jurisdiction of the Family Court: Allocation of cases within the family court to High Court judge level and transfer of cases from the family court to the High Court). In the event of complexity, the case should be allocated to a High Court judge sitting in the family court.  In particular, where a freezing order is sought, the application should always be heard in the family court, but may be allocated to a judge of High Court level (para 24 of the guidance).

So much for the main proceedings.  What justification was there for the enforcement proceedings to be in the High Court?  The issue of the enforcement application in the High Court was said to be justified with reference to the following provisions in the rules and Practice Directions:

(i) FPR rule 40.4(1), which provides that an application for a charging order must be made to the family court or to the High Court, as appropriate;

(ii) FPR PD40A, para 4.1, which states that the High Court and the county court (subject to the limit of county court's equity jurisdiction) can enforce a charging order by an order for sale.  The paragraph cross-refers to CPR rule 73.10C; and

(iii) CPR rule 73.10C.

The relevant provisions of CPR rule 73.10C are (with my emphasis added):

(1) Subject to the provisions of any enactment, the court may, upon a claim by a person who has obtained a charging order over an interest in property, order the sale of the property to enforce the charging order. ...

(3) Subject to paragraph (2) a claim for an order for sale under this rule should be made to the court which made the charging order, unless that court does not have jurisdiction to make an order for sale.

(4) The claimant must use the Part 8 procedure.

(5) A copy of the charging order must be filed with the claim form.

Counsel for the applicant relied on FPR PD40A para 4.1 and CPR rule 73.10C, and submitted that only the High Court or county court could order a sale of property which was the subject of a charging order.

Mostyn J disagreed.  His Lordship held:

(a) the apparent choice of court in FPR rule 40.4(1) in which to apply for a charging order was subject to FPR rule 5.4, which as we have already seen, provides that where both have jurisdiction, proceedings must be issued in the family court;

(b) it would be absurd that the family court had no power to order a sale of property to enforce the charging order.  That would mean the family court had less power than the divorce county courts it replaced.  It would also be absurd that the family court could order interim sale under the Married Women's Property Act 1882, an order for sale after a final hearing under s 24A of the Matrimonial Causes Act 1973, but no power to order a sale to enforce a charging order;

(c) the family court had power to order a sale of property subject to a charging order under s 31E(1)(a) of the Matrimonial and Family Proceedings Act 1984.

In doing so, His Lordship referred to para 15 of the President's Guidance of 28 February 2018:

'Section 31E(1)(a) of the 1984 Act provides that "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."  This does not permit the family court to exercise original or substantive jurisdiction in respect of those exceptional matters, including applications under the inherent jurisdiction of the High Court, that must be commenced and heard in the High Court. It does, however, permit the use of the High Court's inherent jurisdiction to make incidental or supplemental orders to give effect to decisions within the jurisdiction of the family court.'

Mostyn J therefore held that the power to order the sale of a property subject to a charging order was a 'supplemental order giving effect to the substantive order.'  Where the family court had made a charging order, any application to enforce it should also be made to the family court.  His Lordship concluded by saying that this case was 'a classic example of lawyers rushing off to the High Court at the first sign of complexity.  This is a practice that must cease.'  The President had seen the judgment in draft and approved its terms.

Mostyn J is rightly punctilious about the incorrect use of the High Court as opposed to the family court.  However, with the greatest of respect,  I venture to suggest that His Lordship's conclusions, and each limb of the reasoning at (a) to (c) above, are incorrect.

First, the court to which a person must apply for a charging order is determined not by FPR rule 5.4, but by s 1 of the Charging Orders Act 1979.  Subject to some important exceptions, the effect of that section is that you must apply for a charging order to the court which made the judgment you are seeking to enforce.  Accordingly, FPR rule 40.4(1), which provides that the application for a charging order must be made to the High Court or family court, as appropriate, is entirely apposite.  Section 1(2)(b) of the 1979 Act relates to a High Court maintenance order or an order for costs made in family proceedings in the High Court.  Such an order may be enforced by way of charging order in either the High Court or the family court.  FPR rule 5.4 would appear to operate here, and require an application for a charging order to enforce such an order to be made to the family court.

Secondly, the old divorce county courts did in fact have limited jurisdiction to enforce a charging order.  The reason is this.  A charging order creates an equitable charge over the property. The equitable charge so created must be enforced by separate proceedings.  Where the amount secured by the charge exceeded the county court's equity limit, the claim to enforce the charging order had to be made to the High Court.  Paras 4.1 to 4.3 of CPR PD73 explain all this: in particular, para 4.1A: 'A claim under rule 73.10C is a proceeding for the enforcement of a charge, and section 23(c) of the County Courts Act 1984 provides the extent of the county court's jurisdiction to hear and determine such proceedings.'  The equity limit used to be £30,000, so that a great many charging orders had to be enforced in the High Court, but it was increased to £350,000 with effect from 22 April 2014.

Thirdly, s 31E(1) of the 1984 Act does not help.  If an application to enforce a charging order were made within the existing proceedings, the family court would have the power to order a sale of property subject to a charging order: the High Court could make the order, and the family court has all the powers of the High Court if the proceedings were in the High Court.  But the application to enforce the charging order is not made within the existing proceedings.  It is 'a claim'.  The Part 8 procedure (required by CPR r 73.10C(4)) is a procedure for starting a new civil claim.  A claim form (see r 73.10C(5)) is what starts a new set of proceedings.  So a claim to enforce a charging order is an entirely separate set of proceedings.  Although Mostyn J did not cite sub-paragraphs (4) and (5) of CPR rule 73.10C in his judgment, the words in sub-paragraphs (1) and (3) emphasised above (which His Lordship did cite) make this  clear, as do paras 4.1 to 4.3 of CPR PD73.

This should not be a surprise.  The family court has no general property or equity jurisdiction.  It has no general jurisdiction to enforce a charge, whether created by a charging order or otherwise.  In addition, where A has obtained a charging order over B's interest in property owned by B and C; A cannot use CPR rule 73.10C, but must make a separate claim under the Trusts of Land and Appointment of Trustees Act 1996.  Of course, the family court has no jurisdiction under the 1996 Act.

So, para 4.1 of FPR PD40A is entirely correct.  It is only the High Court and the county court that can order a sale of property subject to a charging order.  Part 40 and PD40A were drafted with some care and scrutinised by the Family Procedure Rules Committee before they became law in April 2016.  The first draft of the new rules submitted to members of the Committee for consideration included a rule equivalent to CPR rule 73.10C, providing that the High Court and family court could order a sale of property subject to a charging order.  This provision was removed from the rules before they were made, because it was generally accepted within the Committee that the family court had no power to make this order.

The ambit of s 31E(1)
As the President's Guidance makes clear, s 31E(1) of the 1984 Act cannot expand the original substantive jurisdiction of the family court.  Any attempt to argue that the family court can determine a bankruptcy petition, because if the proceedings were in the High Court, the High Court could deal with the bankruptcy, would be a leap too far.  What s 31E(1) means is this.  If the family court has jurisdiction to entertain substantive proceedings, its powers within those substantive proceedings are the same as if those substantive proceedings were proceeding in the High Court.  So the family court can issue a bench warrant to secure the attendance of a judgment creditor at an enforcement hearing, just as the High Court can.  But it cannot entertain substantive proceedings outside the carefully prescribed limits on its jurisdiction in family law legislation.

This raises two potential headaches.  The first relates to intervener claims.  The family court has no ToLATA jurisdiction.  Yet judges in the family court are happy to determine property claims of third parties who intervene in the financial remedy proceedings.  This headache is cleared by the decision of the Court of Appeal in Tebbutt v Haynes [1981] 2 All ER 238.  The court there held that the court had jurisdiction when determining an application under s 24 of the Matrimonial Causes Act 1973 to determine the rights and interests of any third parties who had intervened in the application to claim an interest in the subject property, as it was fundamental to the s 24 jurisdiction that the court should know over what property the court was to exercise its discretionary powers of adjustment.

The second headache is harder to cure.  Financial remedy consent orders often include recitals containing agreements by the parties which take effect as contracts.  The consent order will give liberty to apply as to implementation.  But how can the family court, which has no contract jurisdiction, enforce the terms of a contract, albeit one recited to a financial remedy order?

In civil proceedings, most settlements are effected by a Tomlin order.  This form of order stays the proceedings, save for the purpose of carrying into effect the schedule to the order (which contains the contract by which the proceedings have been compromised), and usually provides that the parties have permission to apply for that purpose without the need to issue fresh proceedings.  This is entirely unobjectionable, as the civil court has jurisdiction in contract matters. Strictly speaking, the enforcement of a contract scheduled to a Tomlin order is a new cause of action and a new claim.  It is a benevolent legal fiction that allows enforcement within the existing proceedings rather than insisting on a new claim form (and issue fee).  Foskett describes the structure of a Tomlin order as representing 'something of a compromise between competing legal and practical considerations' (Foskett on Compromise, 8th edition, para 9-24).

For the family court to be able to enforce contractual recitals to financial remedy orders, we must fall back on s 31E(1) of the 1984 Act again.  After all, if the proceedings were in the High Court, the High Court could make orders to enforce these contractual recitals.  On that basis, the family court can do so too.  This is probably right, but not beyond doubt.  The same point that arose in VS v RE also arises: what are 'the proceedings'?  If the proceedings to enforce a financial remedy contractual recital are, in reality, a new set of proceedings, s 31E(1) would not help.  But if parties to civil litigation are afforded the facility of enforcing without issuing a new claim, there is no reason why parties to financial remedy litigation should not also have this facility.  I suggest that, to minimise the risk of any enforcement issues, financial remedy consent orders should contain express provision that the parties have permission to apply to carry into effect the terms of any contractual recitals, and may do so without the need to issue fresh proceedings but by application notice within the existing proceedings.

Michael Horton is a senior junior at Coram Chambers and specialises in financial remedy and ToLATA cases.  He edits the ToLATA chapter in Rayden & Jackson on Relationship Breakdown, Finances and Children.  His book, Compromise in Family Law: Law and Practice, was published by Lexis Nexis Family Law, in December 2016.  He has been a member of the Family Procedure Rules Committee since November 2014.

28 June 2018