Interest and Surcharge on Arrears on Maintenance

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 -

Phase 1: From commencement of arrears of maintenance to the date of enforcement proceedings; and
Phase 2: From commencement date of enforcement order onwards.

Major Assumptions for the Scenario

Please note that the scenario adopts the following assumption -

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 arrears of maintenance 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, i.e. 1 May 2005. However, the payee can seek payment of the arrears of maintenance 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. 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

The Ordinance has commenced operation 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 days	*(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 -

interest;
surcharge;
costs;
any sums from time to time falling due under the original maintenance order; and
amount of maintenance in arrears payable as ordered by the court.

As the payee has not applied for a surcharge on the arrears of maintenance or proceedings to enforce the maintenance order in this case, (entries 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 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 days	*(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 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 days	*(c)*
Interest rate on judgment debt for the period from 1 Jun - 30 Jun 2005 (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 days	(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 -

Outstanding interest as of 17 July: $26 (entry L)
Outstanding maintenance (accrued on and after 1 May 2005) : $3,809 (entry m)
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, i.e. 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 August 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 -

payments for interest accrued in the period 1 May - 17 July 2005;
surcharge on arrears of maintenance accrued from 1 May - 17 July 2005;
costs of the judgment summons proceedings; and
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 arrears of maintenance 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 days	*(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 $3,000 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 days	*(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) is left.
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: 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.