The Art of Enforcing a Money Judgment: An Introduction

Many litigants make the assumption that winning a case in court, and being awarded judgment in their favour, brings the matter to a close. Sadly, that is only part of the battle. In most instances, the losing party will pay the sum due once the Court has issued their judgment. However, this is not always the case; there is always a risk that a judgment debtor will not pay the sum that judgment debt. This is especially common in cases with, for example, rent arrears. In those circumstances, turning a judgment into real payment can be problematic. It begs the questions: what happens next? what stages are available to a successful party to recover what they have been awarded?

It is critical to acknowledge that a Court will not automatically enforce any judgment or order. The onus is on the party with the benefit of the judgment or order to take enforcement steps.

There are a number of ways to enforce a County Court judgment ('CCJ'). This article provides an introduction on the ways a party can enforce debts which are owed under a court judgment. It breaks down the key enforcement options available and highlights practical considerations to help both legal professionals and non-lawyers understand how judgments are enforced in practice and how to choose the most effective route forward. There will then be future articles on these means of enforcement, which will go into greater detail on the case law and procedure for each.

As always, this post is not intended to be legal advice and should not be construed as such; it is for information and educational purposes only. Therefore, readers are always strongly encouraged to seek professional legal advice for their own matters.

This article will be limited to the five primary methods of enforcement listed below, which will be considered in turn:

• Third Party Debt Orders;

• Attachment of Earnings Orders;

• Charging Orders;

• Warrant of Control; and

• Bankruptcy Proceedings.

Third Party Debt Orders

A third party debt order is a method of enforcement which attacks money belonging to the debtor, but which is being held by a party not subject to proceedings. The most common example of this will be a bank or building society, which holds sums in a bank or building society account belonging to the debtor. This type of order is usually made to stop someone taking money out of such accounts. The effect of a third party debt order is that the sums within that bank account are essentially frozen by an order of the Court and seized and used to pay the debt which is owing. If the debtor has a bank or building society account, the bank or building society will freeze the account when it receives the order from the Court.

This method of enforcement may appear to be quite attractive at first glance. However, it is not without its practical difficulties. This is because an application for a third party debt order requires evidence to support it. That type of evidence (namely the existing of a bank account in the debtor's name and with the requisite sums) which would go with an application can be hard to find. As a result, the success rate of such orders tends to be relatively low.

There are further considerations to be had: the debtor will know about the order being made (having been given notice) and may stop paying money into the account. A further risk is that debtors can actively move funds between accounts if they receive notice. Both situations can frustrate enforcement; if the account is overdrawn on the day the bank or building society receives the Court order, the debt cannot be paid from the account.

Even if an application for this type of order fails, knowing that the debtor has a bank account into which their salary is being paid can be useful; this is because it could overlap with an attachment of earnings order, discussed below.

The requirements and procedure governing an application for a third party debt order (including interim and final orders) can be found in Part 72 of the Civil Procedure Rules. This regime will be examined in detail in a future post, and the link will be added retrospectively to this article.

Attachment of Earnings Orders

An attachment of earnings order involves a proportion of the debtor’s earnings being automatically deducted by their employer and paid to the creditor. This type of order is in effect until the judgment debt is paid. An attachment of earnings order is only available against individuals. It is also important to note that this method is only suitable if the debtor is employed; it is not appropriate for those who are either unemployed or self-employed. It is susceptible to practical problems: the order does become ineffective if the debtor changes employment or becomes self-employed. In those circumstances, a new order will need to be sought.

It is therefore good practice to obtain the necessary information as to the debtor’s employment to ensure that this route is a viable option. If this information is not known, a creditor can obtain an order for the debtor to attend questioning in court to give over the necessary information.

In terms of jurisdiction, an attachment of earnings order can only be made in the County Court. If the case was originally in the High Court, and judgment given there, then the matter can be transferred to the County Court. Once made, the order is sent to the debtor’s employer. It orders the employer to take an amount from the defendant’s earnings each pay day and to send that amount to the collection office at court. Those sums are then sent to the creditor when they are received.

This is a popular method of enforcement; it is not expensive like other forms of enforcement, and it is easy to obtain. The exact percentage of an individual’s earnings which can be made subject to an order is a matter of the Court’s discretion However, the debtor must be left with at least 60% of their net earnings after the deduction. The Court may not, therefore, be able to make an order (or may only make an order to pay it back in small instalments) if the debtor’s living expenses are greater than the amount they earn. Getting an understanding of the situation is therefore imperative, and an order for questioning may prove useful to get all of the relevant information necessary.

Due to the nature of such an order, it does mean in practice that the creditor is likely to steady repayment over time, although these tend to be small payments. Consequently, it can take a long time to pay off a large judgment debt by this method.

The requirements and procedure governing an application for an attachment of earnings order can be found in Part 89 of the Civil Procedure Rules and the Attachment of Earnings Act 1971. Both of these regimes will be examined in detail in a future post.

Charging Orders

In a nutshell, a charging order enables the creditor to obtain a charge over a judgment debtor’s beneficial interest in land, securities or other assets. The effect of this is that the charge usually prevents the debtor from selling their land without paying the debt off beforehand. This does mean, however, that a creditor will not get their money until the debtor sells their assets; charging orders depend on the sale or refinancing of the property. In some circumstances, however, a creditor may be able to ask the Court for an “order for sale”, which in effect, forces the debtor to sell their assets and to satisfy the judgment debt.

When dealing with applications of for a charging order, the Court exercises its broad discretion. Due to the nature of a charging order being very onerous, there is a slow process for obtaining one, and the Court is unlikely to grant a charging order for a small debt. Therefore, if the creditor has a sum due to them which is at the lower end of the spectrum, they are likely to find it more difficult to satisfy the Court that this is the appropriate mechanism to enforce the debt.

Complications can arise in situations where there are joint owners. Due to those issues, it is usually helpful to ascertain whether the property is owned by the debtor and whether there is any equity after any existing mortgages or charges.

In contrast, a charging order is most effective when there is substantial equity in a property, and the judgment debtor is the sole owner.

The requirements and procedure governing an application for a charging order can be found in Part 73 of the Civil Procedure Rules. This will be examined in detail in a future post.

Warrants of Control

Taking control of the debtor’s goods is a popular method of enforcement. It is a somewhat speedy process compared to the other methods discussed in this article. This involves applying to the Court for either an enforcement officer or bailiff to enter the debtor’s property, take control of the debtor’s goods, and sell them to pay off the debt. A writ or warrant of control gives the enforcement officer/bailiff the authority to take goods from the debtor’s home or business. It is important to understand that enforcement agents do not have carte blanche to take anything they wish and they cannot always remove and sell the debtor’s goods. For example, essential household items and tradesman’s tools or goods under hire-purchase or rental agreements are protected. Furthermore, goods will not be seized if they are not worth enough to pay the warrant after the costs of taking and selling the goods.

Before starting this process, the creditor must have issued either a writ of control in the High Court, or a warrant of control in the County Court. Upon receipt of this, the court will decide whether this is the most appropriate method of enforcement and will determine whether the judgment debtor has goods of sufficient value to cover the debt.

There are some things to remember under this method of enforcement

• The County Court cannot issue a warrant of control if a creditor wishes to collect more than £5,000 unless it is an agreement under the Consumer Credit Act 1974. If a County Court bailiff is instructed, appointment delays are common and they may take longer to attend than enforcement officers in the High Court. There had been a previous attempt by Parliament to address delays (in the context of repossessions of properties using bailiffs) in the form of the Bailiffs (Warrants of Possession) Bill. That Bill, whilst demonstrating that there is an awareness of the delays and the wish to deal with the backlog, ultimately failed as it had not been progressed before the end of this Parliament year.

  
  

• For debts over £600 (excluding costs and interest), a creditor may transfer the judgment to the High Court for enforcement. This is generally faster and more effective than using County Court bailiffs. However, this route involves additional procedural steps and higher costs, which may not always be recoverable.

The requirements and procedure governing enforcement by taking control of goods is governed by Schedule 12 and regulations issued under the Tribunals, Courts and Enforcement Act 2007. The procedural rules for obtaining a writ or warrant of control can be found in Parts 83 - 85 of the Civil Procedure Rules. Both of these regimes will be examined in detail in a future post.

Bankruptcy/Insolvency Proceedings

Insolvency proceedings involve either bankruptcy or liquidation. There is a difference in that:

• Bankruptcy proceedings can be brought against an individual if there is a debt of over £5,000. In bankruptcy proceedings, an individual’s assets will likely form their bankruptcy estate. That is vested in, realised by and distributed to the individual’s creditors by a trustee in bankruptcy. The Court has general control of every bankruptcy and has wide powers available to it. A debtor is often discharged from their liability to repay their bankruptcy debts on the first anniversary of their bankruptcy order, unless their discharge has been suspended.

• Liquidation proceedings, on the other hand, can be brought against a company. In those circumstances, the debt only has to be over £750. Liquidation is a procedure through which the assets of a company are realised and distributed to creditors in satisfaction of the debts that they are owed. Following the end of liquidation, the company is dissolved.

As can be appreciated by the general outline given, bankruptcy proceedings should only be used as a last resort; they are expensive and time-consuming.

A previous blog post on the bankruptcy timeline generally, including the procedure and the requirements of such an order, has previously been written on Newell Legal and can be found here. Note: the article does not refer to liquidation.

Analysis & Comments

• Enforcement strategies should always be tailored to the debtor’s asset profile rather than approached as a “one size fits all” exercise; what works in one instant may not work in another. As can be seen from above, there are different mechanisms are effective against different forms of income and assets. For example, debtor with a property is better targeted with a charging order compared to an individual who has significant sums in the bank but rents a property. In the latter situation, a third party debt order is likely to be preferable. Indeed, enforcement against individuals and businesses are likely to raise different practical considerations.

• Early information gathering is often decisive. The practical success of enforcement frequently depends more on identifying assets which can be targeted, rather than on the availability of enforcement remedies. Therefore, timing can materially affect recovery prospects. Certain remedies, for example third party debt orders, may be less effective if debtors are given the opportunity to dissipate or move assets. This creates further practical issues.

  
  

• Given the suite of options available to creditors, there is a practical question which should be considered: whether they require immediate recovery or longer-term security? For example, a charging order against a property may secure financial recovery where short-term payment is unlikely.

  
  

• Enforcement proceedings can create commercial and reputational pressure (particularly on commercial bodies or practitioners such as traders) which can encourages settlement before substantive recovery action is completed.

• There is an additional element to the commercial dynamic to be considered: a creditor should always consider whether it is necessary or appropriate to spend further financial resources on potential recovery. Therefore, it is helpful to have a cost-benefit analysis undertaken at each step of the process; creditors should assess whether likely recovery justifies the legal costs, court fees and management time associated with enforcement action. Sadly, in some cases, those costs will not justify further steps.

  
  

• There may be circumstances whereby a debtor's financial position is unknown, either by wilful refusal to engage/avoid the judgment or lack of information being freely available. In those cases, the use of multiple enforcement methods provides a safeguard: they may be used sequentially or simultaneously where appropriate.

  
  

• Orders which obligate debtors to attend Court and to provide information about their assets and finances are painfully underutilised but are a potentially valuable enforcement tool when it comes to information gathering.

  
  

• Special consideration must be had for cross-border enforcement; this requires careful planning post-Brexit, particularly where assets or the other parties are located outside the jurisdiction.

  
  

• Critically, as above: a judgment does not guarantee recovery. The onus is on the benefiting party to take steps. Even if such steps are taken, it is not outside the realm of possibility that there is nothing to enforce against.

  
  

• Overall, effective enforcement is ultimately a combination of procedural tools, asset intelligence and commercial strategy.

Please note that our posts are not intended to constitute legal advice and should not be construed as such; they are merely discussions for educational purposes. Therefore, readers are encouraged to seek professional legal advice for their own matters.