third party debt order

In today’s tough job market more and more people find are laid off from their long time jobs, trying to make ends meet for themselves and their families through the benefits system. Amongst them are single parents who are obliged to pay child support for their children through a Court child support order. The consequences of failing to meet the monthly payments can often be jail time and it is increasingly becoming a huge cause of concern to them. There seems to be a myth that when someone is unemployed it can be used as an excuse by them not to pay child support or reduce the child support by the amount they used to be paid by their last job. Nevertheless, the obligation to make maintenance payments is a very strict one and considered by society non negotiable since it concerns the farewell of the child and the Court will not accept as a ground for reduction or even termination of the maintenance order an allegation or even a finding on the evidence of unemployment on its own. The reason for this is that unemployment is not a legal ground for reducing or terminating ( if the obligor leaves bellow subsistence levels ) if it is voluntary. There have been countless cases where the obligor remained voluntarily unemployed while he chose to pursue a lifestyle living on unemployment benefits. What the Courts really assess when they make a decision on child support payment is the obligor’s earning capacity. Earning Capacity in law means a person’s capability or power to acquire money by contributing a person’s talent, skills, training, and experience. Thus someone who is voluntarily unemployed, meaning he has not made any genuine efforts to find alternative work according to his skills will be presumed by the Court that he is capable of earning as much as he used to earn while he was working or work he could take up based on his skills. Thus, it is very important that the obligor provides the Court with evidence of efforts to sought of any kind and still fails to be hired, or that he either has tried to pursue a clientele in running his own enterprise and was unsuccessful and therefore he is considered involuntarily unemployed meaning he does not have an earning capacity. Of Course the more evidence the easier it will be for the court reduce the child support instead of having a blank picture as to what the earning capacity of the obligor is and thus just imputing an imaginary earning based on the above factors which is not exhaustive. Do not forget that the obligor has to prove his case and not the other way round. So it is important to consider these things and play the unemployment card correctly.

What are the rights of a mortgagee against an unsecured creditor regarding the rent of the land.

When a mortgagee accepts land as security he is conveyed an estate in land. According to the decision in

Four-Maids Ltd v Dudley Marshall (Properties) Ltd[1957] 2 All ER 35.” The mortgagee may go into possession before the ink is dry on the mortgage unless there is something in the contract, express or by implication, whereby he has contracted himself out of that right. I te has the right because he has a legal term of years in the property or its statutory equivalent. If there is an attornment clause, he must give notice. If there is a provision that, so long as certain payments are made, he will not go into possession, then he has contracted himself out of his rights. Apart from that, possession is a matter of course.” A Mortgagee provided that there is no contrary provision in the contract and mortgage documents refusing him the right to take possession without defaulting on the loan, is entitled at any given time to assert his right of possession over the land, making himself entitled to the rents and profits generated by his security as well as exercise his right to sell the land and realize his security in order to satisfy the debt owed to him by the mortgagor.

A mortgagee may commonly permit the owner of the mortgaged land known as the mortgagor to receive rent before he asserts his right of possession. That means that the tenant will be paying rent to the landlord with the consent of the mortgagee. This usually happens when there is already a tenant occupying the premises when the land was mortgaged see . When the landlord receives rental income he may dissipate that income in any way he wants, however what should not be confused is to treat this arrangement as being the same with that of giving a floating charge over the assets of a company so that the he may charge or mortgage or even assign the rental income without the consent of the mortgagee. The fact that the landlord – mortgagor receives the rent does not constitute the rent a floating charge. if the landlord mortgages or assigns this income stream to a third party the party’s right to the rental income will be subject to the mortgagees prime right who has an estate in land.

Notwithstanding the fact that the mortgagee has this unqualified right to the land and interests in land he cannot claim the rental income from the tenant when the tenant has already paid rent when it is due according to the lease see DE NICHOLLS v. SAUNDERS AND ANOTHER. – (1870) L.R. 5 C.P. 589,. The reason is that the tenant might not know that the land is mortgaged since he has been living in the premises previously. More importantly it would be unjust for the tenant to be held accountable for paying the rent to the landlord while the landlord has not asserted his right to possession by notifying him and having to pay the same amount over twice. Similarly an unsecured creditor who serves a third party debt order or otherwise known as a garnishee order to the tenant in order to satisfy a judgment debt owed to him by the mortgagor, will give to the tenant a good receipt of the rent moneys in law unless the tenant has notice by the mortgagee of payment of the rent to him. If payment to the unsecured creditor has already been made by the tenant who received no notice by the mortgagee of payment of the rent to him then the mortgagee cannot claim that money neither from the unsecured creditor nor the tenant. see Wood v Dunn (1866) LR 2 QB 73, 7 B & S 94)

” In an action by plaintiffs as trustees, under a deed of assignment according to Bankruptcy Act 1861 (c 134) (repealed), to recover a debt due from defendants to the assignor, it was alleged and admitted upon the record that a garnishee order for payment of the debt was served upon defendants before they had notice of the deed, and before the registration of it, and that they paid the debt to the judgment creditor in order to avoid execution, and because they could not otherwise avoid it: Held this payment was a good defence to the action, as being compulsory, and under the sanction of a court of competent authority.”

Though he can sue the tenant if having received notice of the mortgagee’s demand of payment by virtue of his security he had outrightly handed the rent to the unsecured creditor.

see Wood v Dunn (1866) LR 2 QB 73, 7 B & S 94)

“Semble: if the garnishee has notice of a trust deed or bankruptcy before the time for showing cause against the ex parte order had elapsed he would be bound to show cause, and if he were to pay to the judgment creditor, instead of showing cause, the assignees could recover the debt from him.”

As was masterfully explained in 693 Vacuum Oil Company, Limited v Ellis Ellison, Claimant; Howard, Garnishee

“when the third party order is issued it merely displaces the right of the mortgagor to receive the rent with the rights of the creditor ” Howard could have discharged himself of his liability in respect of rent by paying it to Mrs. Ellis, the mortgagor. The intervention of the judgment creditors displaced Mrs. Ellis’s right to receive it as between her and them, and, as between the latter *709 and the second mortgagee”

So if the tenant has not received notice by the mortgagee to receive the rent he merely pays the rent not to the mortgagor but to the unsecured creditor who merely replaced the former’s rights through a legitimate court order. The unsecured creditor has not been granted a security or has priority over the debt, this is indicated by the fact that up to the moment of payment to the creditor of the rent due the mortgagee can still give notice of possession or of payment of the rent to him by virtue of the mortgage. When payment is made though to the creditor, the mortgagee is no more allowed to seize the rent from the creditor than he would be allowed to claim it from the landlord, had there been no order in place. The payment of the rent is being treated as debt paid by the mortgagor to the creditor. In case the creditor levies execution and the money is paid to the sheriff and the sherriff receives notice by the mortgagee of payment of the rent to him before he hands the money over to the creditor, the mortgagee is entitled to the payment provided that he gives notice to the sheriff before he pays the money over to the creditor, see Collingridge v. Paxton (1851) 11 C. B. 683.

” WILLIAMS, J . I am also of opinion that this rule must be made absolute . The only question is , whether money and bank-notes seized under a fi. fa , and remaining in the hands of the sheriff’ , can be considere d as [689 ] the property o f the execution – creditor . It is plain that they could not be so but for the 12th section of the 1 (a & Viet . c . 11 0 ; an d the words of that section do not, in my judgment, alter the property . So far from its being necessary , in order to give effect to the statute , to put upon it the construction contended for by Mr . Phipson , it seems to me that it would lead to great inconvenience.

The best choice afforded to a tenant faced with a dilemma over to whom payment of the rent needs to be made, is to pay the money into to court. When the money is paid into court it seems that the mortgagee will no longer be able to give notice to the tenant or to the court of his right to be paid rent and if he has not given proper notice up until that point, the court may find that the unsecured creditor is entitled to that money and pay it to him out of court. see 693 Vacuum Oil Company, Limited v Ellis Ellison, Claimant; Howard, Garnishee.