England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE ORDER OF
MR JUSTICE HEDLEY

		Royal Courts of Justice Strand London, WC2
		28 February 2003

1. LORD JUSTICE THORPE: A consent order was made in ancillary relief proceedings on 28 October 1997, one term of which was that Mr Corbett should pay his former wife periodical payments at the rate of £22,000 per annum until remarriage or further order. I will refer to the parties to the appeal as husband and wife although of course the marriage has been long dissolved.
2. The wife has not remarried but the husband has, marrying a Miss Fuller-Good in July 2001. The husband is a businessman, as is his present wife. They operate in separate business fields. It seems that the present wife's practice is to build up a tax reserve during the course of the trading year with which to discharge the assessment that falls due for payment at the end of each January. When the husband's business encountered difficulties towards the end of the year 2001 his present wife lent him sums from her tax reserve to enable him to keep afloat. The documents in the core bundle before us include a letter written to the husband by his present wife on 12 January 2002 in these terms:

"This is to remind you that I have paid money from Blueprinting Excellence into our personal account. £5,000 in October ..... and £7,000 in December 2001. You have promised to pay this back when you sell the Abbeyville Road flat."

3. Each of them owned flats which they were occupying prior to their marriage. Their intent was that each of the separate flats would be sold and that they would acquire a matrimonial home jointly in replacement. The well laid plan foundered when the expectation of selling each of the independent flats prior to purchase of the shared home was disappointed, with the result that they went into the purchase of their shared home carrying liabilities for not only a fresh mortgage but mortgage obligations relating to their prior individual purchases. So, in the letter the promise to repay was from the anticipated proceeds of the sale of what had been the husband's pre-marital home.
4. The husband's financial difficulties inevitably impinged upon his performance of his obligation under the order of 28 October 1997. He and his two co-directors entered into an agreement with the company's bankers whereby all three elected to draw nil salary for the first three months of the year 2002. On 14 January the husband wrote to the wife explaining this circumstance and giving notice of his intention to suspend payments of maintenance. In the month of January, instead of paying the full monthly sum due, the husband paid only £500. The absence of any earned income during this first quarter led to a further advance to the husband from his present wife, this time in the sum of £15,000. The letter of 2 March recording the transaction states:

"I am lending you £15,000 from Blueprinting Excellence. Remember you have to pay this back so I can pay my company tax!!! When you finally sell that damn flat."

A further £9,000 was advanced in April and an additional £5,000 in May. All the while the husband was paying the wife the reduced monthly sums of £500.

5. The wife's solicitors wrote, reasonably enough, on 13 June in these terms:

"To the extent that you are able to pay more than £500 this would be much appreciated: otherwise, if you could send to her or via this firm a cheque for £500, I would be most grateful."

Her intentions were thus defined:

"She simply seeks to restore the level of maintenance as ordered by the court (by consent), failing which to negotiate either (a) an appropriate rate based upon your current financial circumstances or (b) payment of an appropriate capital sum in full and final settlement of her financial claims."

Nothing could have been more reasonable nor less belligerent than the terms of that letter.

6. The husband's reply of 24 June was to the effect that his income for the previous six months had been £4,800 of which he had paid £3,000 to the wife. He enclosed his cheque for £500. The final letter from his present wife to the husband in July was to this effect:

"Here is a letter to confirm the two final payments to you from my company Blueprinting Excellence - £9,000 in April ..... and £5,000 in June. I have now paid ..... "

and then the letter records all payments totalling £41,000. The letter ends with this sentence:

"This makes it as much as the agent says we'll get from the flat. Please pay me back."

7. In August the husband informed the wife's solicitors of some slight delay in the preparation of the company's accounts for the last year of trading, but recorded some improvement in the company's financial situation which permitted the monthly cheque to be doubled to £1,000. The first sign of understandable impatience on the part of the wife's solicitors was their letter of 25 September in which they gave notice that unless they received disclosure and proposals in regard to the future they would commence enforcement proceedings. The husband's response was a cheque in the sum of £700 for that month of September and, shortly thereafter, a letter enclosing his annual accounts with an offer of disclosure provided it should be mutual. Shortly thereafter the judgment summons under the Debtors Act 1869 was issued on 30 October in the sum of £11,757.19 which represented the difference between the sums paid during the 2002 year prior to issue less the sums paid.
8. On the following day, 1 November, the long awaited sale of the flat at Abbeyville Road was completed. There followed a regrettable attempt by the husband to withold from the wife's solicitors the information, to which they were fully entitled, as to the disposal of the proceeds. Applications for injunctions only failed because the transfer of the proceeds to the husband's present wife was effected before issue of application. This episode obviously went to the husband's discredit. There was a hearing of the judgment summons before Her Honour Judge Anwyl QC on 5 November. We have a transcript of that hearing. Counsel for the wife opened the case to the judge with full emphasis upon the decision of this court in Mubarak v Mubarak [2001] 1 FCR 193 and the need to ensure that the hearing of the summons would be compliant with the requirements of the European Convention on Human Rights. The judge identified the need to get at the underlying reality. She said during the course of the exchanges:

"If you genuinely, as may well be the case, are unable to adhere to the terms of that initial order, then the correct step for you to take is to apply to the court for that order to be varied, not simply to be saying, 'I cannot pay'."

Upon that basis the judge, very sensibly, adjourned the case over, urging the husband to take legal advice and to make application for variation. No doubt, Judge Anwyl anticipated that her advice would be taken. Unfortunately, it was not. No application for variation had been issued when the summons returned to the lists on 6 December. Only with the advantage of hindsight can it be said that it would perhaps have been better if Judge Anwyl had put the husband on terms to issue his application for variation within, say, a period of 24 hours and had gone on at once to give directions to ensure that that application was duly prepared for determination on the occasion of the return of the judgment summons.

9. On 6 December the case was listed in front of a judge of the Division, Mr Justice Hedley. The conduct of a judgment summons is not a responsibility that often comes the way of a judge of the Division. That the practice was quite unfamiliar to Mr Justice Hedley is made plain at two points of the transcript of the proceedings. For instance, at page 21 the judge said:

"Sorry, the judgment summons is a peculiarity of the London County Court that is not used anywhere else in the world as far as I know, certainly not in any provincial county court I have experience in. We gave them up years ago. So it is all slightly new country to me ..... "

and words to similar effect were recorded at page 26.

10. Mr Southgate who, on this occasion, presented the wife's case had an affidavit to rely upon sworn by the wife in support of her summons. The affidavit is comparatively brief. It proves the extent of the debt, namely the difference between the due sum of £1,833 per month and the various sums collected during the months of January to September inclusive. That constituted and established the arrears figure of £11,297. The only evidence to support the necessary proposition that this shortfall was the product of wilful neglect on the part of the payer came in paragraph 7 when she stated:

"I believe the respondent's standard of living has remained high. I am aware that in the last year he paid £4,000 in relation to the purchase of a property for our daughter Louise. The respondent remarried in June 2001 and I believe that his wife is successful. The respondent and his new wife purchased a new property shortly after they were married for a figure in excess of £450,000. The respondent and his new wife both owned their own flats prior to their marriage and I know that the respondent's Surrey flat has been placed on the market. I also know that he has taken holidays abroad in recent months and do not accept that he cannot meet my maintenance payments in full."

11. Before I come to Mr Southgate's opening, it is necessary just to record that the summons that had been issued, and which that affidavit supported, was in the hallowed form that had been provided within the schedule to the Family Proceedings Rules 1991 and designated Form N17. So, the form of the judgment summons was in these terms:

"You are hereby summoned to appear personally before one of the judges sitting in this division ..... to be examined on oath, touching the means you have or have had since the date of the said order to pay the said sum in payment of which you have made default and also to show cause why you should not be committed to prison for such default."

12. Mr Southgate's opening of the case included an elaboration of the circumstances to which his client had deposed in paragraph 7 and some embellishment by reference to a ski-ing holiday and a payment towards the wedding expenses of a daughter. Mr Southgate says his opening as a whole made it plain that he was content for the judge's determination to rest on what was common ground, which is another way of saying on what the husband had stated or conceded in his statement of 26 November. However I conclude that a reasonably objective appraisal of the three and a-half pages of Mr Southgate's opening shows that a firm case was being presented to the judge of a sophisticated man who was deliberately bent on evading his responsibilities to his former wife and the obligations imposed upon him by the consent order. At the end of the opening Mr Southgate informed the judge that Mr Corbett wished to give evidence, but the judge simply said:

"Well let us see what Mr Corbett wants to say."

Thereafter we read some 13 pages of exchange between Mr Southgate and the judge which, I think, can fairly be categorised as judicial cross-examination. The opening tone is perhaps somewhat abrasive and perhaps somewhat sceptical, but as the exchanges proceed it becomes increasingly apparent that the judge rests confidence in the husband's account.

13. The husband's basic account is clearly enough stated at page 20 of our bundle where Mr Corbett said in relation to his present wife:

" ..... she accrues that money and she lent it to our account on the basis that it would come back and I agreed with that and she wrote me three letters, and that is what I did with it. That money was put in our account and without that I would have gone into personal bankruptcy and [my former wife] would not have received anything, so indirectly she did benefit from that. I had an obligation to my wife to pay that back, or I am simply transferring the problem to her and her business which is not right."

The judge said in response:

" ..... you have chosen to defy the order of the court in preference to sorting out such obligations as you may have with your wife? That is your choice, but you have to live with the consequences of that choice, do you not?"

He continued:

"You are a sensible adult. You know perfectly well that court orders can be enforced. If you choose to ignore them you can hardly be heard to complain if the court then chooses to enforce it, can you?

Mr Corbett's response was:

"I did not ignore it wilfully as is suggested."

That passage gives a reasonable summary of the case Mr Corbett presented to the judge over those 13 pages.

14. The judge undoubtedly accepted Mr Corbett's good faith. So much is plain from what he said in response to Mr Corbett's observation:

" ..... that is why I did it because I had an obligation to [my present wife]."

"I unreservedly accept that, Mr Corbett. I entirely accept what you say about that."

And similar observations are to be found on the following page and in the terms of the judgment subsequently delivered.

15. In that judgment the judge found the essential facts at page 28 as follows:

"There is outstanding a debt of £11,297 inclusive of interest and costs. Mr Corbett borrowed from his wife for living expenses ..... Mr Corbett sold his property; he decided to have paid the £40,000 into his wife's account in defraying the loan because it was said to be needed for a tax bill."

On those findings the judge concluded that the essential ingredient of wilful neglect had been made good and that he really had no alternative but to impose some form of imprisonment on Mr Corbett.

16. Throughout the later exchanges between Mr Corbett and Mr Justice Hedley, and indeed throughout his judgment, the judge's essential compassion shines out, as does his realisation of the futility of imprisoning Mr Corbett. The Debtors Act 1869 is a blunt instrument of enforcement of little value to the payee if it results in the reduction of the payer's earning power as a consequence of imprisonment. Ultimately, he made an order for one month's imprisonment suspended conditional on Mr Corbett discharging the arrears by 31 January 2003.
17. That order attracted a notice of appeal of 20 December and a helpful chronology and a comprehensive skeleton argument settled by Mr Henry Oliver. In that skeleton argument Mr Oliver's essential submission is that the manner in which the proceedings on 6 December were conducted were essentially the manner in which judgment summonses under the Act had been conducted since the 19th Century until the advent of the Human Rights Act. He says that the case of Mubarak in this court might just as well not have been decided for all the influence it had upon the conduct and determination of this judgment summons. He says that the form of the judgment summons was plainly not compliant with the standard set by this court in Mubarak v Mubarak. He said that the hearing was conducted in such a way so as to ignore all the guidance in Mubarak v Mubarak. He says that the presumption of innocence was plainly disregarded; the burden of proof was reversed against Mr Corbett and the judge had no regard to the provisions of Rule 7.4 (9) of the Family Proceedings Rules, which vested in him a discretion in a case such as this to investigate whether the original order required variation or suspension and empowered him to make a new order. By and large, I regard Mr Oliver's criticisms to be well founded.
18. There are inevitable risks of incurable procedural deficiencies if guidance given by this court as to Rule amendments vitally required in order to make the process of the court Human Rights Act compliant is not acted on for a period of over 24 months. The wife's solicitors are not to be criticised for issuing the process in the form which they did. Indeed they were required to issue in that form by the rules as they stood at that date. The responsibility for the deficiency lies with the system which is seemingly unable to introduce urgently required rule changes more expeditiously.
19. My sense of gratitude to Mr Oliver for his excellent skeleton argument is considerably magnified by his research last night that has brought before the court the Family Proceedings (Amendment) Rules 2003, which introduced a raft of changes in waiting. The amendments relevant to this appeal are achieved by Rule 11 which makes amendment to Rule 7.4 of the Family Proceedings Rules 1991 and which introduces by schedule 1 a new form M17 to replace the old form that was adopted in this case.
20. Amidst the explanatory notes to these amendment rules is this:

"Rules 11 to 13 make various amendments to the procedure for judgment summonses in Rule 7.4 to 7.6 of the Family Proceedings Rules 1991 following the Court of Appeal's judgment in Mubarak v Mubarak. Rule 18 makes consequential amendments to Form M17."

21. It is necessary to set those amendments within the context of the 1991 Rules. Part VII is entitled "Enforcement of Orders". Chapter 1 is entitled "General". Chapter 2 is entitled "Judgment Summonses". The first rule within that chapter is Rule 7.4. It is headed "General Provisions". Amongst its general provisions are sub-rule (9), the rule highlighted by Mr Oliver in his skeleton argument. It is to this effect:

"On the hearing of the judgment summons the judge may -

.....

(b) where the order is for ..... periodical payments and it appears to him the order would have been varied or suspended if the debtor had made an application for that purpose, make a new order for payment of the amount due under the original order, together with the costs of the judgment summons, either at a specified time or by instalments."

22. There follows, as Rule 7.5, provisions which are specific to judgment summonses in the High Court of which the present is an example. But there is nothing within Rule 7.5 that is of direct bearing on the outcome of this appeal.
23. The amendments to these chapters affected by these amendment rules are long overdue. Clearly from 24 February, when they came into force, all practitioners will adopt the new Form M17 and will apply the rules as amended. It is manifest that the plain intention of the amendments is to ensure that hereafter the adoption of the judgment summons as a means of enforcement will not unwittingly lead to breach of the payer's human rights. Clearly practitioners will have to have close attention to the continuing application of Ord. 52 of the Civil Procedure Rules and to the standards that Mubarak v Mubarak seeks to set. It is important that the adoption of the new Form M17 should not dilute or obscure the need to give the respondent to the summons clear particularity of the case that he has to meet before responding to the process.
24. Where does this leave us in relation to the present appeal? The first inevitable conclusion, in my judgment, is that the whole process was manifestly not compliant with the respondent's rights under the Convention and the Act. Manifestly the process did not meet the standards that this court had set in its decision in Mubarak v Mubarak.
25. My second conclusion is that the judge unwittingly misdirected himself as to the options open to him on disposal. His attention was not drawn to the provisions of Rule 7.4 (9) and he plainly overlooked the opportunity to proceed down that alternative path. I am also persuaded that the judge failed to perceive that a respondent to a judgment summons has not only the opportunity to establish a case for prospective reduction of his obligation, but also the opportunity to achieve retrospective reduction by combining with his application for variation an application for remission of arrears. On a reading of the transcript of proceedings and judgment, I am persuaded that the judge concluded that in respect of the months, January to September inclusive, the mere fact that they had not been challenged by way of application to vary led to the result in law that they were absolutely due. The variable rather than the absolute quality of this past obligation was not drawn to the judge's attention and it is clear from his judgment that he did not himself perceive it. He has finally made the confident assumption that the completion of the sale of the Abbeyville Road flat left Mr Corbett without any legal obligation in relation to his present wife in addition to his moral obligation to repay her. Whether the judge was right in that assumption is an issue that, in my opinion, requires more profound investigation.
26. For all those reasons it is plain to me that the order made by the judge on 6 September cannot stand and must be set aside.
27. What this case vitally requires is a realistic reappraisal of the husband's past, present and continuing obligation to make periodical payments to the wife. That permits some degree of generalisation. This is a classic case of a relatively high earner in a relatively high risk business field who feels the impact of adverse trading conditions, in this case as a consequence of the 9-11 New York disaster. Well advised, such a husband issues his application to vary in advance of the cessation of the income flow or at least as soon as it impacts. That enables the court to back-date the outcome of the realistic appraisal of present and continuing liability to the date of issue of the process. That is a much more satisfactory mechanism than a late issued application accompanied by an application for remission of arrears.
28. If the payer neglects to issue that vital variation application then the payee has really no option but to enlist one of the remedies of enforcement of which the most historic is the application under the Debtors Act 1869. But in a case such as this the essential issue for proof is not the neglect but whether or not the neglect is wilful. In this instance there was really no dispute on the mathematics. The only question was whether or not the husband had wilfully breached the consent order and wrongfully given priority to his obligation to his present wife. That issue had necessarily to be pre-determined before there could be any committal under the Debtors Act 1869.
29. So it does seem to me, as a matter of pragmatic management, that the court must ensure that the application for variation, which includes a full investigation not only of means but also of motivation and good faith, precedes the determination of the summons under the Debtors Act 1869. That application for variation is a freestanding process invoked by the payer, and its preparation and determination can safely be conducted within the framework of the other provisions of the Family Proceedings Rules 1991.
30. Once that essential issue has been determined, if it has been determined in such a way as to satisfy the court of the payer's good faith and responsibility, then inevitably the Debtors Act process falls away. If, on the contrary, the court is not satisfied of the payer's good faith and responsibility then the Debtors Act process can come into immediate play. It does seem to me that that is a more realistic way of approaching these problems and a way that would have relieved Mr Justice Hedley of the uncertainties and misgivings which he expressed during the course of the hearing.
31. The judgment of this court in Mubarak was given on 20 December 2000. The rule amendments to reflect that judgment came into force some 26 months later on 24 February 2003. The family justice system really does require swifter response. I note that amendment to the Debtors Act 1869 itself was achieved much more rapidly, the Civil Procedure (Modification of Enactments) Order 2002 being made on 28 February 2002, and being brought into force on 25 March 2002.
32. In concluding my judgment in Mubarak v Mubarak I drew attention to the 1998 report of the Lord Chancellor's Ancillary Relief Working Group on the modernisation of enforcement remedies in family proceedings. After the passage of another two years and more, the Lord Chancellor's Department has successfully completed a consultation of interested professional bodies on the sub-committee's proposals. Now a ministerial decision is awaited on whether the sub-committee's proposals should be put out to public consultation. The sub-committee's broad proposal is that there should be but one route to enforcement, namely the issue of an enforcement summons to a district judge who would be empowered to apply whatever power or remedy seemed most likely to yield satisfaction and conclusion. The implementation of this proposal would conclude the need and the right to resort to the Debtors Act 1869 in family proceedings. That would represent improvement without a price. I hope that these long awaited reforms will be swiftly implemented. The present appeal serves to illustrate the benefits that might be anticipated.
33. LORD JUSTICE POTTER: I agree. I would only observe that I have some sympathy both for the wife and the judge in this case.
34. So far as the wife is concerned, the husband had simply stopped fulfilling the periodical payment order and by the time the matter was before the judge there was some £11,000 of arrears outstanding without any application for variation having been made, despite the fair and sensible advice to do so given to him by Judge Anwyl and despite the fact that on 8 November 2002 the wife's solicitors had written a letter to him by way of follow-up to what the judge said. Having observed that the judge had adjourned the matter to enable the husband to file with the court and serve on it a statement detailing his financial circumstances, the letter continued:

"The learned judge made it clear that such statement should include the difficulties with the company, any steps taken to improve the company's fortunes and the position of the company as it was in January and as it stands today. This statement should be supported by evidence, for example, your trading accounts, a letter from the company's bankers and bank statements, your tax returns, P60s, salary slips, details of investment or other income and a summary of your assets."

Later the letter stated:

"During the course of the hearing you informed the court you have now accepted an offer for the sale of your flat in Weybridge. No further details were given. In view of the lack of current information available to us regarding your finances we would ask that you forthwith provide your conveyancing solicitors with irrevocable instructions in writing to communicate to us immediately (in the first instance by telephone to our Miss Birtles and thereafter in writing) ..... "

There then followed details of the information requested and a further request was made that the husband should ask the solicitors to provide -

"irrevocable instructions in writing to give an undertaking to this firm to retain the net proceeds of sale in a designated interest bearing deposit account on your behalf and not to release the same ..... without the consent of this firm or order of the court ..... "

35. The husband's reaction conveyed to the solicitors in a telephone call on 20 November, recorded in an attendance note, was as follows. He stated that he was not going to respond to the letter, he was not answerable to the solicitors who were not the law and he would account to the judge on 6 December. He made it clear that he would not provide any information requested in the letter which he said he considered to be patronising and rude. The following passage follows in the note:

"PHM [the solicitor] explained that all that was required here was a simple authority and instruction on his part to his conveyancing solicitors to inform us as to whether contracts have been exchanged and, if so, the contractual completion date. If the completion date was after 6 December there was no difficulty. In the event that the completion date was prior to 6 December then we would be inviting him to agree that the net proceeds of sale be placed in an escrow account pending the outcome of the hearing on 6 December. PC [the husband] said that the approach Margaret Corbett and her advisers were adopting would end in disaster for her."

A little later it was noted:

"PC said that he would produce documentation in relation to the affairs of the company but this would be for the judge's eyes only. He would not provide any of this information to PHB or to Margaret Corbett. Similarly, he had no authority on behalf of his wife to disclose any information in relation to her financial circumstances."

36. Once the matter was before the judge it became apparent from the husband's own evidence that the sale had been completed, that he had received net proceeds of £40,000 and had paid them straight to his present wife in repayment of her earlier loans without a penny being paid over to his former wife.
37. In the light of the history as I have recounted it, which was known to the judge on the material at the time, it was hardly surprising that she was inclined to make a finding of wilful default on the basis that receipt of those monies afforded the opportunity to meet the arrears, or at least some of them, but the husband had nonetheless ignored such opportunities and had adopted a total lack of frankness in that respect. Having said that however, it is clear, as Lord Justice Thorpe has indicated, that in a variety of ways the procedural requirements dictated by Mubarak v Mubarak and the subsequent practice directions were not applied in this case. I therefore agree that for the reasons given by Lord Justice Thorpe, the appeal must be allowed.
38. LORD JUSTICE TUCKEY: I agree with both judgments.

Order: Appeal allowed