So, you have won at trial, and you have your judgment order in your favour – Great! But what do you do next?
Litigation is, by its nature, very stressful and time-consuming for all the parties involved, therefore when you get a result in Court it is natural to think that the hard work is done, and it is simply the case to wait for the losing party to pay up.
Unfortunately, this is not always the case and sometimes the losing party fails to comply with the judgment order. As a result, the winning party will need to take further action to enforce the terms of the judgment order.
How to enforce a judgment order
Why do losing parties fail to comply?
This could be due to several issues, however, in practice, it is usually that the losing party simply cannot afford to pay the judgment debt. If this is the case, then it is a tricky decision for the winning party to make as to whether they incur further costs of pursuing it.
In other cases, it is simply that the losing party doesn’t want to pay and is content to drag out the recovery process so that you incur as much cost as possible.
Unfortunately, this is part of the litigation risk – even if you are successful in Court.
What can you do to enforce a judgment order?
The Civil Procedure Rules afford winning parties several options they can pursue to enforce a judgment debt i.e., a judgment where there is a monetary award made in favour of one party, the judgment creditor, whether that be damages, compensation, or costs, against another, the judgment debtor.
Each method of enforcement is different which allows the judgment creditor some flexibility depending on the circumstances of the case and the financial circumstances of the judgment debtor.
We have briefly set out the different options below:
1. Writ of Control and High Court Enforcement – Civil Procedure Rule 83
This is perhaps the quickest method of enforcement and can be used in tandem with other methods of enforcement. Additionally, the costs are relatively low to get it off the ground and are recoverable from the judgment debtor in the event a recovery is made.
Depending on the monetary value of the judgment, you can either:
- If the amount owed is less than £600 then you can apply for a Warrant of Control from the County Court and enforce this through a County Court Bailiff;
- If, however, the debt is £600 or more you can apply to transfer the claim to the High Court to obtain a Writ of Control and enforce this through a High Court Enforcement Officer.
The process of applying for a warrant or writ of control does not involve a Court decision and is essentially an administrative exercise. Once the Warrant or Writ has been obtained then this allows the Bailiff or High Court Enforcement Officer to attend the judgment debtor’s address and take control of and sell their goods to recover the amount of the judgment debt.
2. Order to obtain information – Civil Procedure Rule 71
To try and ascertain the judgment debtor’s financial circumstances a judgment creditor can apply for an order from the Court to obtain information from them.
This is done by making a formal application to the Court to request that the judgment debtor attends a hearing where they will be questioned regarding their finances whilst under oath. As part of the application, the judgment creditor will submit a list of questions they want to be asked of the judgment debtor usually in relation to their income, expenditure, and assets.
Depending on the answers they provide, it may help what to do next with regard to further enforcement options available to the judgment creditor, which we refer to below.
The judgment debtor is usually questioned by a Court clerk, rather than a Judge. However, the judgment creditor can request that the hearing takes place in front of a Judge if they think it is necessary – although the reasons for doing so must be set out in the application.
If the judgment debtor refuses to attend, or answer the questions under oath, then the Judge can make an order for them to be imprisoned for contempt of Court – such an order is suspended in the first instance to allow the judgment debtor another opportunity to attend Court to be questioned at a rescheduled appointment.
3. Charging Order – Civil Procedure Rule 73
A Charging Order is a method of securing the judgment debt against any property, land security, or assets in which the judgment debtor has an interest. The purpose of this is to stop the judgment debtor from disposing of any assets without paying the judgment debt.
Once a Charging Order has been granted, the judgment creditor can pursue an order for sale if they wish, which will allow them to sell the asset to pay the judgment debt.
The process to obtain a charging order is quite slow and can be costly. In the first instance, an application must be made to the Court, as part of the application the judgment creditor must show that:
- It has a valid judgment debt; and
- The judgment debtor has an interest in a property and/or an asset, which the judgment debt can be secured against.
Provided the above can be satisfied then an interim charging order will be awarded to the judgment creditor and a date will be set for the hearing for granting a final charging order.
The hearing is usually dealt with on the papers, provided the judgment debtor doesn’t contest the application.
If the application is contested, then a hearing will be listed to allow the judgment debtor an opportunity to put forward their case to the Judge. Provided the application is accepted, the Court will grant a final charging order over the judgment creditor’s property.
Once granted it does provide a higher level of security, particularly if it can be attached over a property where there is sufficient equity to re-pay the judgment debt.
4. Attachment of Earnings Order – Civil Procedure Rule 89
An attachment of an Earnings Order is a method of recovery by taking an amount of money each month directly from the judgment debtor’s employer which is deducted from their monthly salary.
The money is paid into Court and then paid out to the judgment creditor.
This method is only available if the judgment debtor is in paid employment. If they are unemployed then this option is not available to a judgment creditor.
As with the other enforcement options, the judgment creditor must make a formal application to Court for such an order. When considering such an application the Court will make two assessments with regard to the amount of money the judgment debtor will need to pay per month:
- Normal Deduction Rate – what the Court this is a reasonable repayment amount for the judgment debtor to pay each month; and
- Protected Earnings Rate – the amount the Court believes is necessary for the judgment debtor to live.
Depending on the outcome of these assessments, the Court will then make an order for an amount to be paid by the judgment debtor, each month. If the judgment debtor’s income falls below the Protected Earnings Rate, then such an order will not be made by the Court.
5. Third-Party Debt Order – Civil Procedure Rule 72
If it is the case that the judgment debtor is owed money from a third party then a judgment creditor may apply to Court for a Third-Party Debt Order, which would result in the third party paying the debt due to the judgment debtor, directly to the judgment creditor.
The process is to make an application to Court, without notifying the judgment debtor, providing evidence to demonstrate that there is a debt due from a third party. Upon receipt of the application, the Court will issue an interim order which stops the third party from paying the debt owed to the judgment debtor, and attending Court for a hearing.
At the hearing, the Court will then, provided there is good reason to do so, make a final Third-Party Debt Order which requires the third party to pay the sum equal to the judgment debt directly to the judgment creditor.
6. Insolvency proceedings
If the above options are unavailable to the judgment creditor, or attempts have been made to enforce the judgment which were unsuccessful, then they can consider the following insolvency proceedings:
- Bankruptcy Petition – if the judgment debtor is an individual, then you can issue a Bankruptcy Petition against them on the basis that they are unable to pay their debts as and when they fall due.
- Winding-up Petition – if the judgment debtor is a corporate entity such as a limited company, then the judgment creditor may issue a winding-up petition, again on the basis that the judgment debtor is unable to pay its debts as and when they fall due.
Unlike the other enforcement options, the end goal with insolvency/bankruptcy proceedings is to either bankrupt the individual or wind up the company, as they have no money. It is therefore usually accepted by the judgment creditor that they will not recover the judgment debt.
However, provided that a Bankruptcy Order/Winding-up Order is obtained from the Court then further investigations will be carried out by the appointed insolvency practitioner as to any assets that the judgment debtor may have but did not disclose in the proceedings. Insolvency Practitioners have wide-ranging powers to investigate the affairs of the judgment debtor, to root out any potential assets. However, they act for the benefit of all the creditors of the individual/company, and not just the judgment creditor.
This can therefore result in some recovery being made. However, any recovery will be shared between all creditors of the individual or the company. Therefore, you will usually receive pence in the pound, rather than the full amount of the judgment debt.
Hopefully, you do not find yourself in a position where consideration of the above is necessary. However, it does happen from time to time, and it is important to remember that there is still work to be done after a judgment has been awarded in your favour.
How can Nelsons help
Craig Bennett is an Associate in our expert Dispute Resolution team.
If you have any queries about the subjects discussed above, please do not hesitate to contact Craig or another member of the team in Derby, Leicester, or Nottingham on 0800 024 1976 or via our online enquiry form.
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