|
Following
is a hypothetical scenario to illustrate the steps
in calculating the interest and surcharge on arrears
of maintenance. This hypothetical scenario reflects
a typical maintenance arrears case which consists
of two phases -
Major
Assumptions for the Scenario
Please note that the scenario adopts the following assumptions
-
(a) Interest Rates on Judgment Debts determined by
the Chief Justice for the following periods are-
|
Date |
Interest Rate on Judgment Debts |
|
1.1.2005 - 31.3.2005 |
8.069% |
|
1.4.2005 - 30.6.2005 |
8.000% |
|
1.7.2005 - 30.9.2005 |
8.250% |
Phase
1: From commencement of maintenance arrears to date
of enforcement proceedings
Maintenance Order Issued on 18 January 2005
The maintenance payer is ordered by the court to
pay the payee, his ex-wife, periodical payments at
the rate of $2,000 per month commencing from 1
February 2005 and thereafter on the first day of
each and succeeding month.
(a) Payment made in
the Period
The payer has not paid the full amount and has not
paid punctually since 1 February 2005. Upon maintenance
payee’s application, a judgment summons was issued
against the payer and was heard on 17 July 2005.
Payments due to the maintenance payee and payments
made by the payer from 1 February 2005 to 17 July
2005 are as follows -
|
Date |
Maintenance due to the Payee |
Payment made by the Payer |
|
1.2.2005 |
$2,000 |
0 |
|
14.2.2005 |
- |
$1,500 |
|
1.3.2005 |
$2,000 |
0 |
|
1.4.2005 |
$2,000 |
$1,000 |
|
1.5.2005 |
$2,000 |
0 |
|
10.5.2005 |
- |
$1,000 |
|
1.6.2005 |
$2,000 |
$1,200 |
|
1.7.2005 |
$2,000 |
0 |
|
Total |
$12,000 |
$4,700 |
(b) Detailed
Calculations of Outstanding Maintenance and Interest
thereon
Balance Sheet
In this part,
Balance Sheet A
is
applicable. Throughout the illustration, we indicate
an entry by reference to the relevant column, for
example, (entry c) refers to an entry under column
(c), and against the date concerned on the balance
sheets, unless otherwise specified.
1 February 2005 to 30 April
2005
The ordinance has no retrospective effect. The
maintenance payee is only entitled to seek interest
on arrears of maintenance accrued since the
commencement date of the ordinance, which is assumed
to be 1 May
2005. However, the payee can seek payment of the
maintenance arrears accrued, including those in
the period 1 February 2005 to 30 April 2005.
Please see Table
1 for the Balance Sheet as of close of 30
April
2005, the day before the commencement date. Assuming
that the Interest and Surcharge on Arrears of Maintenance
Ordinance 2003 comes into operation on 1 May 2005,
only arrears of maintenance since that day will
attract interest. The maintenance payee should do,
therefore, separate sets of calculation for arrears
of maintenance in the two periods (i.e. before and
after the commencement of the Ordinance). Hence,
the Balance Sheet separates the calculations for
arrears accrued before the commencement date (entries
i and n) from the calculations for arrears accrued
on and after the commencement date (entries h and
m). This arrangement is to ensure that the former
is not being taken into account in the interest
calculation for arrears of maintenance accrued since
1 May 2005 (entries b to e).
1 May 2005
We assume the Ordinance commences on 1 May 2005.
On that day, a maintenance payment of $2,000 is
also due (entry f). Please see Table
2 for the Balance Sheet as at 1 May 2005.
As the payer fails to make payment by end of 1 May
2005, the maintenance payee can claim interest accrued
on the outstanding maintenance of $2,000 automatically.
Outstanding maintenance accrued from 1 May 2005
onwards should be recorded as entries h and m.
10 May 2005
The payer pays the payee $1,000 (entry i).
Calculation of Interest and Outstanding Payments
Step 1: Calculate interest for the period from the
last due date of maintenance payment or the date
when the payer made payment (whichever is later)
to the current date
The maintenance payee is entitled to interest on
the $2,000 maintenance in arrears (entry b) since
1 May 2005, i.e., 9 days in total (from 1 -
9 May 2005).
|
Item |
Amount |
Entry |
|
Amount of outstanding maintenance (i) |
$2,000 |
(b) |
|
Number of days (ii) |
9 |
(c) |
|
Interest rate on judgment debt for the period
from 1 May to 9 May 2005 (iii) |
8.000% |
(d) |
|
Interest amount = (i) x (ii) x (iii) / 365 |
$4
(to the nearest dollar) |
(e) |
Step 2: Put the Payments due
/ Interest generated on the current date onto the
Balance Sheet
In an arrears of maintenance case, payment from
the maintenance payer may go towards the discharge
of the following items -
(a) interest;
(b) surcharge;
(c) costs;
(d) any sums from time to time falling due under
the original maintenance order; and
(e) amount of maintenance in arrears payable as
ordered by the court.
As the payee has not applied for a surcharge on
the maintenance arrears or proceedings to enforce
the maintenance order in this case, (b), (c) and
(e) are not applicable. The outstanding interest
as at 10 May 2005 is $4 (entry g), and the maintenance
in arrears in the period from 1 May 2005 to 10
May 2005 is $2,000 (entry h). The resulting Balance
Sheet is set out in Table
3.
Step
3: Discharge outstanding items by deducting payment
from the maintenance payer
 |
Interest: The $1,000 payment first goes towards discharging
the interest of $4 (entry g). This leaves ($1,000
- $4 =) $996 available for meeting other outstanding
items.
No interest remains outstanding (entry l).
|
|
Outstanding
maintenance payment(s) accrued on and after
1 May 2005: The remaining sum of $996 is able
to cover part of the maintenance in arrears
of $2,000 (entry h).
($2,000 - $996 =) $1,004 of the maintenance
remains outstanding (entry m).
|
|
Outstanding
maintenance payment(s) accrued before 1 May
2005: Since the payment made by the payer has
been exhausted after discharging the required
payments in respect of interest and outstanding
maintenance accrued after 1 May 2005, the assumed
commencement date of the Ordinance, the outstanding
sum of $3,500 (entry i) remains unsettled at
close of 10 May 2005 (entry n). |
Please refer to Table
4.
1 June
2005
|
Another
payment of $2,000 in maintenance is due (entry
f). |
|
The payer
makes a $1,200 payment (entry i). |
Calculation
of Interest and Outstanding Payments
Step 1: Calculate interest for the period from the
last due date of maintenance payment or the date when
the payer made payment (whichever comes later) to
the current date
The payer last made payment on 10 May 2005. Interest
accrued on maintenance in arrears in the period 1 - 9
May 2005 has been computed on 10 May already.
Interest for the period 10 - 31 May 2005, 22 days
in total, would be on the basis of the maintenance
in arrears in the period, i.e. $1,004 (entry b).
|
Item |
Amount |
Entry |
|
Amount of outstanding maintenance (i) |
$1,004 |
(b) |
|
Number of days (ii) |
22 |
(c) |
|
Interest rate on judgment debt for the period
from 10 May - 31 May 2005 (iii) |
8.000% |
(d) |
|
Interest amount = (i) x (ii) x (iii) / 365 |
$5
(to the nearest dollar) |
(e) |
Step
2: Put the Payments due / Interest generated on the
current date onto the Balance Sheet
Please see Table
5 .
Step
3: Discharge outstanding items by deducting payment
from the maintenance payer
Amount of payment made by the payer : $1,200
|
Interest: The $1,200 payment will first discharge the
$5 interest (entry g). This leaves ($1,200 -
$5 = $1,195) available for meeting other outstanding
items.
No interest is outstanding (entry l).
|
|
Outstanding
maintenance payment(s) accrued on and after
1 May 2005: The remaining sum of $1,195 is
able to cover in part the maintenance in arrears
of $3,004 (entry h),
which includes the $1,004 carried forward from
10 May 2005 (entry b) and the $2,000 due on the current date (entry
f).
($3,004 - $1,195 = $1,809)
in payment under the maintenance order (entry
m) remains outstanding. |
|
Outstanding
maintenance payment(s) accrued before 1 May
2005: Since the payment made by the payer has
been exhausted after discharging the required
payments in respect of interest and outstanding
maintenance accrued after 1 May 2005, the assumed
commencement date of the Ordinance, the outstanding
sum of $3,500 (entry i) remains unsettled (entry
n) at close of 1 June 2005. |
Please see Table
6 .
1 July 2005
|
Another
payment of $2,000 from the maintenance payer
is due (entry f). The payer fails to pay up. |
Calculation of Interest and Outstanding
Payments
Step 1: Calculate interest for
the period from the last due date of maintenance payment
or the date when the payer made payment (whichever
comes later) to the current date
Maintenance payment is last due on 1 June 2005. This
is also the date when the payer last made payment.
The payee is entitled to interest accrued on maintenance
in arrears (i.e. $1,809) (entry b)
in the period 1-30 June 2005 (30 days in total).
|
Item |
Amount |
Entry |
|
Amount of outstanding maintenance (i) |
$1,809 |
(b) |
|
Number of days (ii) |
30 |
(c) |
|
Interest rate on judgment debt for the period
from 1 Jun - 30 Jun 05 (iii) |
8.000% |
(d) |
|
Interest amount = (i) x (ii) x (iii) / 365 |
$12
(to the nearest dollar) |
(e) |
Step
2: Put the Payments Due/Interest generated on the
current date onto the Balance Sheet
Please see Table
7.
Step
3: Discharge outstanding items by deducting payment
from the maintenance payer
The payer has not made any payment. No outstanding
items can be discharged.
The outstanding payments in respect of interest (entry
l) and maintenance (entries m and n) as at that day
remains unchanged. In other words, the following items
remain in arrears: -
|
$12
interest (entry g) |
|
outstanding
maintenance accrued on and after 1 May 2005:
the $1,809 carried forward from 1 June 2005
(entry b) and the
$2,000 due on the current date (entry
f), totaling $3,809 (entry
h) |
|
$3,500 outstanding maintenance accrued before 1
May 2005 (entry i) |
Please see Table
8.
17 July 2005 : Date of Hearing of the Judgment Summons
When the payee asks the court to enforce the maintenance
order, he or she needs to present to the Judge the
amount of maintenance in arrears and interest thereon
as at the date of hearing. Hence,
the payee should first calculate the latest amount
of interest and maintenance in arrears before the
hearing.
Calculation of Interest and Outstanding
Payments
Step 1: Calculate interest
for the period from the last due date of maintenance
payment or the date when the payer made payment (whichever
comes later) to the current date
The payer last made payment on 1 June 2005. Interest
accrued on maintenance in arrears in the period 1 - 30
June 2005 was calculated on 1 July already.
Interest for the period 1 - 16 July 2005, 16 days
in total, would be on the basis of the outstanding
maintenance in the period (limited to those
accrued since 1 May 2005, the commencement date of
the Ordinance), i.e. $3,809 (entry
b).
|
Item
|
Amount
|
Entry
|
|
Amount of outstanding maintenance (i) |
$3,809
|
(b)
|
|
Number of days (ii) |
16
|
(c)
|
|
Interest rate on judgment debt for the period
from 1 Jul - 16 Jul 2005 (iii) |
8.250%
|
(d)
|
|
Interest amount = (i) x (ii) x (iii) / 365 |
$14
(to the nearest dollar)
|
(e)
|
Step
2: Put the Payments due / Interest generated on the
current date onto the Balance Sheet
Please see Table
9 .
Step 3: Discharge outstanding items by deducting payment
from the maintenance payer
The payer has not made any payment. No outstanding
items can be discharged.
The outstanding payments in respect of interest (entry
l) and maintenance (entries
m and n) as at that day remains unchanged.
In other words, the following items remain in arrears:
-
|
$26
interest (entry g) |
|
outstanding maintenance accrued on and after 1
May 2005: the $3,809 carried forward from 1 July
2005
(entry h) |
|
$3,500 outstanding maintenance accrued before
1 May 2005 (entry i) |
Please see Table
10.
Calculation of Interest and Maintenance in Arrears
of the whole period (1 February 2005 - 17 July 2005)
As mentioned earlier, the payee needs to present to
the Judge the amount of maintenance in arrears and
interest as at the date of hearing. Columns l to n
of the last row of Table 10 now provide such information
-
(a) Outstanding interest as of 17 August: $26
(entry l)
(b) Outstanding maintenance (accrued on and after
1 May 2005) : $3,809 (entry m)
(c) Outstanding maintenance (accrued before 1 May
2005) : $3,500 (entry n)
Total sum of outstanding maintenance = $3,809 + $3,500
= $7,309
Surcharge
The maintenance payee may claim arrears of maintenance
of the whole period, i.e., 1 February 2005 - 17 July
2005. However, the maximum surcharge payable will
be 100% of the total outstanding maintenance accrued
on and after the commencement date of the Ordinance,
which is assumed to be 1 May 2005, and the sum is
therefore $3,809.
Issuance of Order to Enforce the
Maintenance Order
We assume that the Judge makes a committal order against
the maintenance payer and a surcharge order in favour
of the payee. The committal order is suspended on
the condition that -
in addition to the current
monthly maintenance of $2,000, the maintenance payer
pays -
|
arrears
of maintenance of $ 7,309 (accrued from 1
February
2005 to 17 July 2005) |
|
surcharge
of $3,000 |
by monthly instalments of $1,000 for each respective
item on the 1st day of each month commencing 1
August
2005.
The arrears of interests of $26 (accrued from 1 May
2005 to 17 July 2005) and costs of $1,000 should also
be paid on 1 August 2005.
Phase
2: From commencement date of the enforcement order
onwards
(a) Payment made in the Period
The maintenance payer fails to fully comply with the
Court’s enforcement order. He makes the following
payments in September and September 2005.
|
Date
|
Amount of Payment
|
|
10.8.2005
|
$3,000
|
|
1.9.2005
|
$6,035
|
(b) Detailed Calculations of Outstanding Maintenance
and Interest thereon
Balance Sheet
In this phase, Balance Sheet B is
applicable. As in the case of Balance Sheet A, we
indicate an entry by reference to the relevant column,
for example, (entry c) refers
to an entry under column (c), and against the date
concerned on the balance sheets, unless otherwise
specified.
The table in Balance Sheet B has extra columns to
accommodate the following items arising from the order
to enforce the maintenance order -
(a) payments for interest accrued in the period 1
May - 17 July 2005;
(b) surcharge on arrears of maintenance accrued from
1 May - 17 July 2005;
(c) costs of the judgment summons proceedings; and
(d) payments for amount of maintenance in arrears
accrued from 1 February 2005 - 17 July 2005 (known
as “amount of maintenance in arrears payable”).
Other than these, the calculation methodology in Balance
Sheet B is essentially the same as that in
Balance
Sheet A.
1 August 2005
|
The
following payments are due -
|
|
$26
---- interest in arrears accrued from 1 May
to 17 July 2005 (entry f)
|
|
$1,000 ---- first instalment of the $3,000
surcharge (entry g)
|
|
$1,000
in costs (entry h)
|
|
$2,000 in maintenance (entry i)
|
|
$1,000 ---- first instalment of amount of
maintenance in arrears payable (entry
j)
|
Calculation of Interest and Outstanding Payments
Since this is the first day that the new order of
the Court comes into effect, no maintenance is overdue
and no interest would be generated.
The payer does not make payment to discharge any of
the due payments. The payments due (entries f to j) are equal to the outstanding amounts of all items
before payment (entries k to p) and after payment
(entries s to x).
Table 11
shows the Balance Sheet as at 1 August 2005.
10 August 2005
The payer pays $3,000 (entry q).
Calculation of Interest and Outstanding
Payments
Step 1: Calculate interest for the period running
from the last due date of maintenance or the date
when the payer made payment (whichever comes later)
to the current date
The payee is entitled to interest on the maintenance
arrears of $2,000 since the due date of 1 August
2005 (entry b).
(IMPORTANT NOTE: Only sums falling
due from time to time under the original maintenance
order attract interest.)
The interest for the period 1 to 9 August 2005
comes to -
|
Item |
Amount |
Relevant
entry |
|
Amount of outstanding maintenance (i) |
$2,000 |
(b) |
|
Number of days (ii) |
9 |
(c) |
|
Interest rate on judgment debt for the
period from 1 Aug to 9 Aug 05 (iii) |
8.250% |
(d) |
|
Interest amount = (i) x (ii) x (iii) / 365 |
$4
(to the nearest dollar) |
(e) |
Together with the $26 in arrears of interest accrued
from 1 May - 17 July 2005 (entry f for 1
August 2005), the maintenance payer is liable to pay the
payee ($26 + $4) = $30 in interest (entry k for 10
August 2005).
As payments for surcharge, costs, maintenance and
maintenance in arrears payable (accrued from 1
February
2005 - 17 July 2005) are due on the first day
of the month, the outstanding amount of the above
items on the current date (entries l to p for 10
August 2005) would be the same as the
outstanding payments carried forward from the last
transaction day, 1 August 2005 (entries t to x for 1
August 2005).
Step 2: Put the Payments Due/Interest
generated on the current date onto the Balance Sheet
Please see Table
12.
Step 3: Discharge outstanding items by deducting payment
from the maintenance payer
|
Interest:
The payment of $3,000 can fully cover the
accrued interest of $30 (entry k)
($4 being interest in the period from 1 to 9
August 2005 plus $26, being arrears of interest
in the period from 1 May 2005 to 17 July 2005). Thus, no interest remains outstanding
(entry s).
After
discharging the interest, ($3,000 - $30 =)
$2,970
is available for meeting other charges.
|
|
Surcharge:
The sum of $2,970 can fully cover the $1,000 instalment for surcharge (entry
l). Thus, no surcharge remains
outstanding (entry t).
($2,970 - $1,000 =) $1,970 is left.
|
|
Costs:
The sum of $1,970 can fully cover the $1,000
(entry m). Thus, no
costs remain outstanding (entry
u).
($1,970 - $1,000 =) $970 is left.
|
|
Outstanding
maintenance payment(s) accrued on and after
1 May 2005: The sum of $970 is insufficient
to settle the outstanding maintenance of $2,000
(entry n).
[$2,000 (total sum of outstanding maintenance)
- $970 (remaining sum available) =] $1,030 of
the outstanding maintenance payment remains
unsettled (entry v).
|
|
Outstanding
Maintenance Payment(s) accrued before 1 May
2005: There is no outstanding payment for
this item.
|
|
Maintenance
in arrears payable: This item of $1,000 (entry
p) remains in arrears since the
payment made by the payer has been exhausted
after discharging the required payments in respect
of interest, surcharge, costs and part of the
outstanding maintenance. As of close of 10
August,
the outstanding sum of $1,000 remains unsettled
(entry x). |
Table 13
shows the Balance Sheet as at 10 August 2005.
1 September 2005
|
The following new payments are due - |
|
$2,000
in maintenance (entry i)
|
|
$1,000 ---- second instalment
of the $6,000 surcharge (entry g) |
|
$1,000
---- second instalment of the maintenance in
arrears payable (entry j) |
The
$1,000 in costs and $26 in interest ordered by the
court at the hearing on 17 July 2005 have already
been settled by the payer on 10 August 2005.
The payer pays $6,035 that date (entry q).
Calculation of Interest and Outstanding
Payments
Step 1: Calculate interest for
the period running from the last due date of maintenance
or the date when the payer made payment (whichever
comes later) to the current date
The payer last pays on 10 August 2005.
The maintenance payee is entitled to interest accrued
on the outstanding maintenance in the past 22 days,
i.e. 10 - 31 August 2005. Interest on the outstanding
maintenance in the period 1 - 9 August 2005
was computed on 10 August already.
The interest for the period is -
|
Item |
Amount |
Relevant entry |
|
Amount of outstanding maintenance (i) |
$1,030 |
(b) |
|
Number of days (ii) |
22 |
(c) |
|
Interest rate on judgment debt for the
period from 10 Aug to 31 Aug 2005 (iii) |
8.250% |
(d) |
|
Interest amount = (I) x (ii) x (iii) / 365 |
$5
(to the nearest dollar) |
(e) |
Step 2: Put the Payments due/Interest
generated on the current date onto the Balance Sheet
Please see Table
14 .
Step 3: Discharge outstanding items
by deducting payment from the maintenance payer
|
Interest: The available
fund of $6,035 (entry r) first pays off the
$5 in interest (entry k)
for the period from 10 to 31 August 2005. No interest (entry
s) remains outstanding.
After discharging the interest, ($6,035 -
$5 = $6,030) is available for settlement of
other items.
|
|
Surcharge: The remaining sum of $6,030 can fully cover the surcharge instalment
of $1,000 which has been outstanding (entry
l) since 1 August 2005. No surcharge remains
outstanding (entry t).
After paying off the surcharge, ($6,030 -
$1,000 = $5,030) remains.
|
|
Costs
: There are no outstanding costs (entry
m). |
|
Outstanding Maintenance Payment(s)
accrued on and after 1 May 2005: The remaining
sum of $5,030 can fully cover the outstanding
maintenance of $3,030 (entry n). No maintenance
remains outstanding at close of the day (entry
v).
After paying off the outstanding maintenance,
($5,030 - $3,030 = $2,000) is left.
|
|
Outstanding Maintenance Payment(s)
accrued before 1 May 2005: There is no outstanding
payment for this item. |
|
Maintenance in arrears payable
(accrued in the period 1 February 2005 to 17
July 2005): The remaining sum of $2,000 covers the
overdue repayments of maintenance in arrears
of $2,000 (entry p) in full.
No repayment of maintenance in arrears is
overdue (entry x) as of close of the day.
|
Table 15
shows the Balance Sheet as at 1 September 2005.
|
A HYPOTHETICAL SCENARIO
|