One of the most frustrating parts of litigation is obtaining a court judgment against your opponent and then having to enforce it when your opponent fails or refuses to pay the judgment debt.
There are a number of options available to judgment creditors to try to enforce the judgment they have obtained.
Before you commence proceedings
Before embarking on potentially expensive and time-consuming litigation against an individual or company, a claimant should carry out some basic due diligence on their opponent to see if they have sufficient assets to be able to pay any judgment that may be awarded against them by the court.
Obtaining a County Court or High Court judgment can only be considered a success if you are successfully able to recover the monies which a court orders your opponent to pay.
If they cannot pay, then you may have incurred a lot of time and money for little or no recovery.
There are a number of free or low-cost searches which can be carried out relatively quickly, without having to employ the services of any third parties.
Own knowledge or third-party knowledge
You may have an idea of whether your opponent has any assets if you are in business with them. You may have visited your opponent’s house or business premises and would therefore be aware of what they may own or what other assets may be available to you.
If you do not have a relationship with your opponent, you may know someone who has dealt with them in the past. Consider making enquiries of other individuals or companies who may have dealt with your opponent.
Checks on social media or other websites
Searching your opponent’s Facebook, LinkedIn, Instagram, or other social media websites can often reveal a bit more information about their lifestyle and again may provide you with further information about assets they may have.
It can provide you with information about their current employers, which may assist you in a possible attachment of earnings claim.
Even a basic internet search may reveal information about your opponent which you were unaware of. Review sites can be useful to look at as they may show that your opponent has a history of poor payment or has had similar claims against them (to your own claim) in the past.
HM Land Registry searches
If you know where your opponent lives, you can carry out a search at HM Land Registry to check if they own their property, whether it is jointly owned and whether it is subject to a mortgage or any other charges.
You can also check some of the free valuation sites (Zoopla, Rightmove) to check the previous sale price of a property and how much it may be worth now.
Whilst you may not be able to find out how much money is owed on a mortgaged property, the rise in the property’s value may give you an indication as to whether there might be equity in the property.
Bankruptcy searches and insolvency checks
At HM Land Registry you can also carry out a bankruptcy search against your opponent to see if he or she is the subject of any ongoing bankruptcy proceedings.
This then allows you to contact the Court where the proceedings are taking place, which can provide you with details of the petitioning creditor. In turn, you can then find out how much money they might owe to other creditors.
As an alternative to a Land Registry check, it is also worth checking the Individual Insolvency Register to see if your opponent is subject to any insolvency restrictions, such as bankruptcy or an Individual Voluntary Arrangement.
In relation to companies, you can search the Insolvency Notices section of the London Gazette to find out whether any winding-up petitions have been presented against the debtor company.
Companies House searches
Where your opponent is a limited company, you should carry out a search for that company at Companies House. This will reveal the details of the directors, but also the last set of filed accounts, which might provide clues as to the solvency of the company.
Check for any orders, fines or judgments
Registry Trust (via their website at trustonline.org.uk) maintain a Register of existing court judgments, orders or fines against an individual or company in England and Wales. Here you can see if your opponent has any recently satisfied or outstanding court judgments.
Once I have obtained a judgment, what steps can I take to enforce it?
Once you have a judgment and have decided that the debtor has sufficient funds to satisfy the debt, there are a number of routes which are open to a judgment creditor to try to recover the monies owed under the judgment.
Before it can be enforced, the judgment debt has to become due. A judgment is usually payable within 14 days of the date of judgment, but the order may provide for different payment terms or payments by way of instalments, so you need to check if the payment date has expired.
It is worth noting that a judgment creditor has six years from the date of judgment to commence enforcement proceedings. Most creditors will try to enforce as soon as possible, but in circumstances where you know a debtor will be in receipt of funds in the near future or after a year or two, it may be worth waiting before commencing enforcement action.
What are my enforcement options?
Depending on the amount of the debt and the debtor’s assets, there are a number of options which creditors may wish to consider:
Taking control of goods
This is possibly the quickest and most popular method of enforcement. Once a debtor has failed to pay a judgment, you can then instruct a court official to attend the debtor’s premises and to seize control of goods, which the court official will then sell to raise funds to satisfy your judgment.
In the High Court, this is usually done by a High Court Enforcement Officer (via a Writ of Control) and in the County Court, by a county court bailiff under a Warrant of Control. The enforcement officer will usually recover their costs from the debtor too.
- If the debt is less than £600.00, then the enforcement has to remain with the County Court bailiff.
- Any debts of over £600.00 may be transferred to the High Court for enforcement by the High Court Enforcement Officers, who are often seen as more effective (and less busy) than the County Court bailiffs.
- If the judgment is over £5,000, then it must be transferred to the High Court for enforcement.
Third-party debt order
If you know that a third-party is holding money on behalf of a debtor, then it is possible to apply to the court to request that those monies are frozen and, if a final order is made, that the third party is ordered to pay the judgment sum to you from those frozen funds. This can be useful if you know the debtor receives a salary into a bank account, and you know the details of that account.
Attachment of earnings
In a similar way to the above, if a debtor is employed, it may be possible to make an application whereby a proportion of the debtor’s salary is deducted and paid by the employer directly to the creditor. This is only available in the County Court and for individual debtors.
Charging orders
Where a debtor owns property, preferably free of any mortgages, charging orders can be a good way of enforcing the debt owed to the creditor.
However, you need to be aware that if the property is jointly owned, then you may only be entitled to a charging order over the debtor’s share of any equity in the property.
The charging order prevents the debtor from selling the property without paying what is owed to the creditor first. Charging orders are only appropriate if there is sufficient equity in the property to pay off the judgment debt.
However, judgment creditors need to be aware that obtaining a charging order does also not mean that the property will automatically be sold so the creditor can be paid.
A separate application for an “order for sale” is required and courts can be reluctant to order someone to sell their property, especially when it is occupied by the debtor’s family and dependents.
Order to obtain information from the debtor
If you do not know what assets a debtor has and are therefore unsure as to which of the above methods of enforcement may be the most appropriate, it may be a sensible first step to make an application for the debtor to attend court so that they can be questioned about their assets.
Questioning takes place before a judge or court official and the debtor has to provided information about their income, employment, wages, bank/building society accounts and any other relevant financial information which may then assist a creditor in determining which method of enforcement may be most appropriate.
Insolvency-based enforcement – Bankruptcy petitions and winding-up petitions
Courts do not like creditors using traditional insolvency-based forms of enforcement to recover debts. However, they are frequently used to exert pressure on debtors to pay or refinance.
A statutory demand should be first served on the debtor, setting out the details of the judgment, providing the debtor with 21 days to pay the debt or make acceptable arrangements to pay,
If they fail to do so, then non-payment following a statutory demand is seen as good evidence to a Court that the debtor is unable to pay their debts as and when they fall due and allows the creditor to present either a bankruptcy petition (on an individual) or a winding up petition (on a company).
You can only present a bankruptcy petition or winding up petition if the debt owed meets the following thresholds:
- For a bankruptcy petition, the debt has to be £5,000.00 or more;
- For a winding up petition, the debt has to be above £750.00.
Bankruptcy petitions and winding up petitions should not be used where the debt is disputed or where the debtor may have a counterclaim or right of set-off, which reduces the amount owed to below the above thresholds.
If a bankruptcy order or winding-up order is made, then an insolvency practitioner will be appointed to collect the debtor’s assets and to distribute them amongst all outstanding creditors.
If an individual or company is legitimately in financial difficulties, then the likelihood of a complete recovery of the sums owed to the creditor under the judgment is rare.
How Mackrell LLP can help
We advise judgment creditors on the most effective enforcement strategy and act for debtors and opposing the above.
This article is for general information only and does not constitute legal advice. It reflects the law of England and Wales at the date of publication. Specific legal advice should be taken on your particular circumstances before taking, or refraining from, any action. Please contact Mackrell LLP to discuss your matter.
