If you’ve ever been a party to litigation, you may well know that trial often isn’t the end of the matter.  Say you have a debt claim where you have claimed £100,000 against the judgment debtor.  You have a trial, and the judge agrees that you are owed the money (and hopefully your costs) and orders that the debtor pays you within 14 days.  If the debtor does pay, great.  But what if they don’t?

Unfortunately, you then need to bring further proceeding to enforce your judgment.  There are a number of potential options for enforcement, depending on whether you are dealing with a company or an individual.

Enforcement against an individual

Taking control of goods by writ of control

Taking control of goods (i.e. sending in the bailiffs) requires the issue of a court document.  In the High Court this will be a writ of control, in the County Court it is a warrant of control, which commands an enforcement officer to take control of and sell the debtor's goods (provided they are not exempt goods or do not belong to a third party) and raise funds to satisfy a judgment debt. Successful enforcement by writ of control can be done quite speedily, but it depends on the debtor having goods of sufficient value e.g. cars, televisions, jewellery, etc.  In our hypothetical case where you are owed £100,000, the debtor may not have sufficient assets to discharge the whole of the amount owed to you.

Charging order and order for sale

A charging order is a way of securing a judgment debt by imposing a charge over the debtor’s beneficial interest in land, securities and some other assets. It prevents them from being sold without settling the judgment debt, provided there is enough equity to satisfy the amount owed to you after the payment of prior creditors i.e. mortgage providers.

For the court to use its discretion to grant a charging order, it will examine whether enforcement by this method is proportionate. For higher value debts, this is normally a good option. However it is most effective where there is substantial equity in the property and the judgment debtor is the sole owner. If the property is jointly owned, you can only enforce against the debtor’s share.  For example, your debtor owes you £100,000 and they own a property 50:50 with their spouse.  The value of the property is £300,000 and there is a mortgage of £150,000.  The funds available would be the debtors 50% share in the net value i.e. £75,000 less the costs of sale.  In this scenario, there debtor does not have sufficient equity to satisfy the debt owed.

You also need to be aware of the debtors personal circumstances.  For example, if they co-own the house with their spouse and have young, vulnerable, or disabled people living in the property and who are reliant on the debtor allowing them to live there, particularly if the property is adapted for their needs, the court may decide that it would be unfair to force a sale.

You can often find out information about the debtors assets by obtaining an asset tracing report before issuing proceedings.

The process of obtaining a charging order can also be slow and a charging order itself does not realise the funds. To actually satisfy the debt, you would have to subsequently apply for a separate order for sale of the land. Alternatively you could simply await sale in due course by the debtor, but of course this may be many years later.

Bankruptcy

If you are owed more than £5000, you could apply to make the debtor bankrupt. After an order is made, the debtor’s assets would be collected by the trustee in bankruptcy and distributed amongst the creditors. However, this can be expensive and time-consuming, and ultimately may not lead to any recovery if the debtor has insufficient assets to satisfy their creditors. You also need to be aware of the rights of prior creditors.  For example, if bankruptcy involved selling a property, the mortgagor would be paid from the sale proceeds before the balance of the funds are distributed among the other creditors.

Attachment of earnings

An attachment of earnings order requires the debtor’s employer to pay a proportion of their earnings to the creditor.  The money is deducted at source by the employer, so there is little chance of the debtor failing to make payments.

However the amount of the repayment is set by the court on a scale, and is often a small percentage, particularly if the debtor is on a low income.  It can therefore take a very long time for debts to be repaid and is often not a particularly useful enforcement method if you are owed a large sum.  This is a method commonly used by government agencies e.g. to recover unpaid council tax.

Other methods

There are other less common forms of enforcement including third party debt orders which is seizing funds in the hands of a third party that are owed to the debtor. However this depends on there being a third party debt and it can be difficult to know whether this is the case. It is normally only useful if you know the bank account into which the debtor would have their salary paid, and the debt is less than the salary.

You can also, in appropriate cases, bring proceedings for contempt of court.  Contempt of court is a punishment for failure to comply with certain orders.  However, the consequences tend to be a prison sentence and/or fine, and therefore if your sole motivation is to have your judgment debt paid, this may not help you.

Enforcement against a company

Many of the methods of enforcement as against individuals are available for companies.  For example, you can take a charge over company-owned property, take control of goods or secure a third party debt order.  Third party debt orders are often more useful in enforcement against a company because they tend to be owed larger amounts e.g. you could seize funds owed by a customer who spends large amounts with the company.

Liquidation

Liquidation of a company is the equivalent of bankruptcy for an individual.  If a company owes you more than £750, you can ask the court to wind the company up, by appointing a liquidator who will collect in the company’s assets and pay their creditors. 

As with bankruptcy, this can be a slow and expensive process, so it is a good idea to ensure the company actually has sufficient assets to satisfy its debts before pursuing this option.

 If you require any assistance enforcing a judgment, please contact Charlotte Braham on 01494 893529.