Enforcing of money judgements

Question 1

Why is enforcement often necessary after obtaining a judgment, and what should be considered before beginning litigation?

Answer 1

Although a judgment signifies the court’s decision in favor of the judgment creditor, it does not guarantee automatic payment. The judgment debtor may fail to pay for several reasons, including:

• Lack of means to pay.
• Avoidance or unwillingness to pay.

Since the court does not enforce judgments automatically, it is up to the judgment creditor to pursue the payment. The question of enforcement should be considered before proceedings begin, as suing a party that cannot pay is akin to “throwing good money after bad.” Therefore, investigating the debtor’s assets and financial situation is essential before initiating legal action.

Question 2

What are the two main methods available to a judgment creditor for investigating the financial means of a judgment debtor?

Answer 2

The judgment creditor can gather information about the debtor’s financial means through two primary methods:

1. Instructing an enquiry agent: This is a faster option where a professional agent can locate hidden assets the debtor may be trying to conceal. However, it involves additional costs.
2. Applying for an order to obtain information: Covered under Part 71, this allows the court to issue an order for the debtor to attend court and answer questions under oath regarding their financial status, including the assets of a company they may control. Although slower, it is a formal legal method that incurs fewer costs compared to hiring an enquiry agent.

Question 3

What are the key steps involved in obtaining an order for a judgment debtor to provide information under Part 71?

Answer 3

The process for obtaining an order to obtain information involves the following steps:

1. The judgment creditor files a notice of application in court, providing the debtor’s details, the judgment amount, and listing any documents required at the hearing.
2. The order is personally served on the debtor, who can request payment of their reasonable travel expenses to attend the court within seven days.
3. The hearing is usually held in the County Court where the debtor resides or does business.
4. The debtor is questioned under oath by a court officer or a judge (if the creditor requests), with both standard questions and any additional questions requested by the creditor.
5. A written record of the responses is made, which the debtor reads and signs.
6. If the debtor fails to attend the hearing, the court may issue a committal order, typically suspended as long as the debtor complies with the order later.

Question 4

How does the process of taking control of goods work to enforce a judgment, and what are the limitations on what can be seized?

Answer 4

Taking control of goods, governed by Part 83, is a method where the debtor’s possessions are seized and sold to recover the amount owed under the judgment. Key aspects include:

• Who enforces it?
  In the High Court, it is carried out by a High Court Enforcement Officer (HCEO), while in the County Court, it is handled by bailiffs (enforcement officers).
• Powers:
  Enforcement officers cannot force entry into a debtor’s home but may use reasonable force to enter business premises if they believe debtor’s goods are inside.
• What may be seized?
  Goods commonly seized include motor vehicles, computers, furniture, banknotes, and even securities such as shares or bonds. Unusual assets like boats can also be seized.
  • What is exempt?
    The “necessary items exemption” protects essential items from seizure, including:
• Clothes, bedding, and furniture needed for basic living.
• Tools, computers, or vehicles needed for work, up to a maximum value of £1,350.
• Goods owned by other individuals (e.g., family members) or those under hire-purchase agreements cannot be seized.

Goods seized are either removed immediately or left on the premises under a controlled goods agreement until payment is made. If no payment is received, the goods are sold at public auction to settle the debt.

Question 5

What are the advantages and disadvantages of using enforcement officers to take control of goods?

Answer 5

Advantages:

1.	High Court Enforcement Officers (HCEOs), paid based on the amount collected, are typically more motivated to enforce payment effectively.
2.	In the High Court, interest continues to accrue on the debt, encouraging faster payment by the debtor.

Disadvantages:

1.	Officers generally cannot force entry into homes, allowing debtors to evade them by refusing entry.

2. Logistical challenges (e.g., hiding valuable goods like cars in garages) can limit recovery.
3. The low resale value of goods seized may result in the judgment creditor recovering only a portion of the debt.

Question 6

What is a charging order, and how does it function in the enforcement of a judgment?

Answer 6

A charging order under Part 73 allows the creditor to place a charge on the debtor’s land or securities (e.g., stocks, shares), similar to a mortgagee.

This secures the debt by ensuring that the creditor is paid when the asset is sold. The charging order can also apply to a beneficial interest if the debtor co-owns the property. However, the creditor must apply for an order for sale to recover money from the sale of the asset.

Charging orders are commonly used when the debtor lacks liquid (available) assets but owns valuable property or securities.

Question 7

What are the three stages involved in obtaining a charging order on land?

Answer 7

The process for obtaining a charging order on land involves three stages:

1. Interim Charging Order (ICO):

• The creditor files an application notice, listing the judgment debt, the land to be charged, and any other parties affected.
• A court officer may issue the ICO without a hearing.
• The creditor must serve the ICO on the debtor within 21 days, after which the debtor has 14 days to challenge the ICO.

2. Final Charging Order (FCO):

• If objections are raised, the court holds a hearing, and the FCO may be made, discharging the ICO or ordering a trial on disputed issues.

3. Order for Sale:
   * Once the FCO is granted, the creditor can apply for an order for sale, allowing the debtor’s land to be sold to satisfy the debt. This requires fresh proceedings.

Question 8

What are the key advantages and disadvantages of using a charging order to enforce a judgment debt?

Answer 8

Advantages:

1. A charging order secures the debt against the debtor’s property or securities, ensuring eventual payment if the asset is sold.
2. It may encourage the debtor to settle the debt early, as interest continues to accrue (unless covered by the Consumer Credit Act 1974).

Disadvantages:

1. If there are prior charges (e.g., mortgages), the creditor may recover little or nothing from the sale.
2. Payment could be delayed for years if the asset is not sold, especially if other residents (such as children) would be affected by the sale.
3. Charging orders are not effective if the debtor has no beneficial interest in the property.

Question 9

How does a third party debt order work, and what are its advantages and disadvantages in enforcing a judgment?

Answer 9

A third party debt order (under Part 72 of the Civil Procedure Rules) allows the creditor to recover money owed by the debtor by freezing and taking funds that are held by a third party. The most common example is freezing a bank account where the debtor holds credit. Other examples include trade debts or payments owed to the debtor by a customer.

The process involves:

1. Application without notice to the debtor: The creditor applies to the court without informing the debtor. The application must provide details about the third party holding the funds, such as the bank name, branch, and account number.
2. Interim order: The court makes an interim order to freeze the debtor’s funds in the hands of the third party (e.g., a bank). At this stage, no money is transferred to the creditor yet, but the debtor’s account is frozen, preventing them from accessing the funds.
3. Final order hearing: A hearing is held no less than 28 days after the interim order. At the hearing, the court considers any objections, and unless there is a valid reason not to, the court makes the order final, requiring the third party to transfer the funds to the creditor to satisfy the judgment debt.

Advantages:

• The element of surprise is key, as the debtor is unaware of the application until the funds are already frozen, making it difficult for them to transfer or hide assets beforehand.

Disadvantages:

• The third party debt order is only effective if the debtor’s account is in credit on the day the order is served. If the account is empty or overdrawn, the order will not succeed.
• The order must apply to an account held solely in the debtor’s name. If the account is jointly held with another party, the application will fail.

Question 10

What is an attachment of earnings order, and how does it work in the enforcement of a judgment debt?

Answer 10

An attachment of earnings order compels the debtor’s employer to deduct regular payments from the debtor’s wages and send them to the court to satisfy the judgment debt. This method only applies if the debtor is employed and earning a wage (it does not apply to self-employed individuals).

Procedure:

1. The creditor applies to the County Court Money Claims Centre (attachment of earnings orders cannot be issued by the High Court).
2. The debtor is notified of the application and must either:
   * Pay the debt in full, or
   * Submit a statement of means (income and expenses).
3. The court officer will issue the order and determine how much should be deducted from the debtor’s wages each pay period. The order will specify:
   * The normal deduction rate: the amount to be deducted.

• The protected earnings rate: the minimum amount the debtor needs to live on. No deductions are made if the debtor’s earnings fall below this rate in a given week.

Advantages:

• Payments are automatic as long as the debtor remains employed.

Disadvantages:

• If the debtor loses their job, payments stop, and the creditor must start the process again if the debtor becomes re-employed.
• The court may set a low deduction rate, meaning the debt might take a long time to be fully repaid.

Question 11

What factors affect the enforcement of an English judgment in another jurisdiction, and how do different systems impact this process?

Answer 11

Enforcing an English judgment in another jurisdiction depends on the specific laws and agreements between countries. The process is simplified in some jurisdictions but more complex in others. Key points:

1. Scotland and Northern Ireland:
   
   • Enforcement is relatively straightforward under the CPR (Part 74). The creditor needs to:
   • Obtain a certificate confirming the judgment details.
   • Apply to the appropriate court in Scotland or Northern Ireland within six months to have the judgment registered for enforcement.
2. Commonwealth Countries:

• Under the Administration of Justice Act 1920 and the Foreign Judgments (Reciprocal Enforcement) Act 1933, English judgments can be enforced in Commonwealth countries like Australia and Pakistan.
• The judgment must be final and registered within 12 months (1920 Act) or six years (1933 Act).

3. Other Countries (including EU Member States post-2021):

• If the 2005 Hague Convention applies, the judgment will be enforced and recognized in that country if an exclusive choice of court agreement exists between the parties.
• Otherwise, the judgment creditor must comply with the common law rules of the foreign jurisdiction. This often requires the creditor to issue new proceedings in the foreign country, significantly increasing time and costs.

Practical considerations:
Before beginning litigation, a claimant should assess whether enforcement in a foreign country is realistic and practical. In some cases, it may be better to start the claim directly in the country where enforcement will be required.

Question 12

What practical considerations should be taken into account before attempting to enforce a judgment in a foreign jurisdiction?

Answer 12

Before pursuing legal action where foreign enforcement may be necessary, the claimant should consider:
1. Realistic chances of enforcement:

• How feasible will it be to enforce the judgment in the debtor’s home country?
• What is the legal system of the foreign country, and are there agreements in place (e.g., the Hague Convention)?

2. Time and cost:
   * Enforcement may require new proceedings in the foreign jurisdiction, significantly increasing both cost and time.
3. Starting litigation abroad:
   * In some cases, it may make more sense to start the claim in the debtor’s country rather than obtaining an English judgment first and then attempting to enforce it abroad.

Question 13

How can a judgment be enforced in Scotland and Northern Ireland, and what is the required procedure?

Answer 13

Enforcing a judgment in Scotland and Northern Ireland is relatively straightforward under Part 74 of the Civil Procedure Rules. The creditor must:

1. Obtain a certificate confirming the judgment details, including the date, sum awarded, and interest or costs.
2. Apply to the relevant court in Scotland or Northern Ireland to have the judgment registered within six months.

Once registered, the judgment can be enforced using local methods in Scotland or Northern Ireland.