Family Court holds Mortgage Liability Indemnity Power

Published: 6th October 2017

After giving a judgement that was approved by the President of the Family Division, Sir James Munby, Mr Justice Mostyn has confirmed that the Family Court is able to dictate action in relation to mortgage payments. This includes instructing an individual to make the payments, as well as being able to seek compensation for any payments not made.

The Mortgage Liability Draft Consent Order

The matter came to light in a recent case, based in Southampton, which consisted of financial remedy proceedings following the separation of a married couple. This particular case saw the approval of a draft consent order, which was created with the specifics of transferring two separate yet jointly owned and mortgaged properties to the wife and husband, refused by district judges. The order stated that both individuals would do everything within their power to see through the release of their former partner from the mortgage on the property that they would obtain. This would therefore remove the other individual from their responsibility to make mortgage payments against that property, giving themselves sole responsibility for the repayments.

Mr Justice Mostyn’s Judgement

When making his judgement, Mr Justice Mostyn referred to a report published by the Financial Working Group in July 2014, which supports the claims regarding the order. Within his judgement, he said:

‘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.’

The Power of the Family Court

Within the Financial Remedies Working Group’s last report of 2014, the group echoed their views regarding the power that the court has, again making suggestions in support of and relating to the power that the court has regarding mortgage liability.

It is also important to note that the judge stated that these exact orders have been made on a regular basis over the last three years, before the issue within the aforementioned case. The judge ended the matter by saying that the High Court has the necessary powers to make the order, which means that the power to make future orders of this nature is also held by the family courts.

If you are thinking of separation or divorce and are concerned about your financial situation then K J Smith Solicitors can help. Our team of family law specialists have handled financial matters in divorce ranging from the straight forward to the highly complex.

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