In a terse and succinct judgment approved by the President, Mr Justice Mostyn has made it clear that the Family Court has the power to order one party to indemnify the other in respect of a mortgage liability (CH v WH [2017] EWHC 2379).
In CH v WH [2017] EWHC 2379 the parties owned two properties. Both properties were subject to mortgages. The parties reached an agreement whereby one property was to be transferred to the Wife and the other to the Husband. The parties submitted a consent order for the approval of the Family Court in Southampton. 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.”
On two separate occasions, the Deputy District Judge refused to approve the order. Approval was refused on the grounds that the draft order contained provisions which lay outside of the Court’s powers. Namely, the Court’s power to order an indemnity. In their frustration, the Wife’s solicitors referred the matter and Mr Justice Mostyn allocated the case to the level of High Court Judge pursuant to the Family Court Rules 2014. Mostyn J himself subsequently approved the order and gave judgment making it plain that the Family Court could indeed order an indemnity.
Crucially, the draft order submitted on behalf of the parties had contained the indemnities within the body of the order and not as an undertaking in the preamble. There is a sub-text here. The “Mostyn precedents” contain provision for mortgage indemnities within the body of the order. This is in contrast to the well-established practice of providing for an indemnity in respect of the mortgage as an undertaking in the preamble to the order.
Indeed, in response to the submitted draft, the Deputy District Judge wrote, “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.” In other words, the DDJ refused to approve the order on the basis that he had no power to so order under the MCA 1973. Such provision needed to be included as a recital and not in the body of the order.
In retrospect, it is no surprise that the matter came to the attention of Mr Justice Mostyn. The author of the precedents clearly had a different view and pulled no punches in saying so (“to my knowledge, over the last three years the orders in questions have been made routinely until this problem has arisen in Southampton”; paragraph 7 of the judgment).
Mostyn J set out his reasoning as follows (paragraphs 5 – 6 of the judgment):
“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.”‘
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.”
He acknowledged that there is nothing in sections 23 -24 of the MCA 1973 which would empower the Court to order a party to be solely responsible for a mortgage and would, therefore, have to be dealt with by undertakings. That said, he suggested that section 30 of the MCA 1973 could be applied. Nevertheless, this was not the principal basis of his conclusion. Paragraph 9 of the judgment reads,
“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.”
The judgment concludes with a warning,
“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.”
