Enforcement of Judgments: Key Considerations for Judgement Creditors in England and Wales

Obtaining a judgment in England and Wales is often viewed as the conclusion of a dispute. In reality, obtaining a judgment is often only the beginning of the recovery process and  judgement creditors must still take active steps to enforce a judgment debt owed by a judgement debtor. Strategic enforcement planning can be critical to achieving meaningful recovery.

For businesses, lenders, insolvency practitioners and commercial parties, understanding available enforcement mechanisms and the procedural issues that can arise is essential to assessing if litigation is a commercially viable option.

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What Is a Money Judgment or Order?

A money judgment or order is a judgment or order of the court requiring a judgement debtor to pay a sum of money to a judgement creditor.

While there is a general presumption that the courts should assist judgment creditors in recovering judgment debts through prescribed enforcement procedures, the burden ultimately falls on the judgement creditor to pursue enforcement and to identify assets against which recovery can be made.

A judgment debt will ordinarily become enforceable once payment falls due under the relevant order. If payment is not made voluntarily, the judgement creditor can seek to enforce the debt using one or more available enforcement methods.

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Methods of Enforcement Available to Judgement Creditors

Practice Direction 70A, paragraph 1.1, sets out the principal enforcement methods available to judgment creditors, including:

• Writs and Warrants of Control: a writ of control (High Court) or warrant of control (County Court) authorises enforcement agents to take control of and potentially sell a judgement debtor’s goods to satisfy a judgment debt.
• Third Party Debt Orders: a third party debt order enables a judgement creditor to intercept money owed to the judgement debtor by a third party, most commonly funds held in a bank account.
• Charging Orders, Stop Orders and Stop Notices: a charging order secures a judgment debt against a judgement debtor’s property or certain investments. Significantly, a charging order can, in theory, be obtained even where there has not yet been a default in payment. In practice, however, such applications are uncommon. The absence of default is likely to be a significant factor considered by the court when exercising its discretion. Further, and in any event, a charging order does not itself produce payment. A judgement creditor would ordinarily need to apply separately for an order for sale, which may be difficult to obtain where the judgement debtor is not otherwise in payment default.
• Attachment of Earnings Orders: in County Court proceedings, judgement creditors may seek an attachment of earnings order directing deductions from an individual judgement debtor’s salary.
• Appointment of a Receiver: in appropriate cases, the court may appoint a receiver over assets or income streams belonging to the judgement debtor.

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Preliminary Considerations Before Enforcement

Before commencing enforcement action, judgement creditors should carefully assess several practical and procedural issues.

• Has the Judgment Been Properly Served? The judgement creditor should ensure the judgment or order has been properly served.
• When Must the Judgement Debtor Pay? The general rule is that payment must be made within 14 days of judgment unless the order specifies a different timeframe.
• When Should Enforcement Begin? A judgement debtor should ordinarily be given an opportunity to pay voluntarily. Enforcement action is generally appropriate where the judgement debtor has failed to pay the judgment debt in full, or has defaulted on an instalment, by the due date.
• Does the Judgement Debtor Have Recoverable Assets? Asset tracing and recovery strategy should be considered from the pre-action stage and kept under review throughout proceedings. Judgement creditors should, in particular consider whether the judgment commercially worth enforcing, what assets the judgement debtor holds and which enforcement mechanism is best suited to those assets? Judgement creditors should consider making enquiries through:
  
  • HM Land Registry
  • Companies House
  • The Insolvency Service
  • the Register of Judgments;
  • online and media searches;
  • the Gazette;
  • enquiry agents; and
  • applications for third party disclosure orders where appropriate.

Judgement creditors should also consider whether interim relief, in the form of freezing injunctions or preservation orders may be necessary to prevent dissipation of assets.

• Using Multiple Enforcement Methods: in some cases, judgement creditors may use more than one enforcement method simultaneously to maximise recovery prospects.
  
  • Insolvency Considerations: a judgement  debtor’s insolvency position can significantly affect enforcement strategy.
  • Bankruptcy and Liquidation: where an individual judgement debtor becomes bankrupt or a corporate judgement debtor enters liquidation, the judgement creditor’s status within the insolvency hierarchy becomes critical. If the debt is unsecured, recovery may rank behind secured creditors, preferential creditors and insolvency expenses. As a result, recoveries may ultimately amount to only a fraction of the debt owed.
  • Statutory Restrictions on Enforcement: insolvency can impose restrictions on commencing or continuing enforcement proceedings against the judgement debtor or their property. Judgement creditors should also consider whether a moratorium might apply, including under the Debt Respite Scheme contained in Practice Direction 70B.
  • Insurance Considerations: in some circumstances, a responsive insurance policy may exist. It may therefore be possible to pursue recovery directly against insurers under the Third Parties (Rights Against Insurers) Act 2010, subject to the terms of the relevant policy.

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Procedural Issues Judgement Creditors Should Consider

• Challenges to the Judgment: a judgement creditor should assess whether the judgement  debtor intends to appeal the judgment or apply to set aside or vary the judgment.
• Stay of Enforcement: the court may order a stay of enforcement; however, stays are not granted automatically and are unlikely absent evidence of real prejudice to the judgement debtor if enforcement proceeds. The court will balance the interests of justice between the parties. Where a stay is granted the debt remains due and payable but enforcement action is suspended. Importantly, interest will usually continue to accrue unless the court orders otherwise. Such orders are relatively uncommon and may require payment into court or escrow arrangements. An appeal without a stay will not ordinarily prevent enforcement. On applications to set aside judgment, the grant of any stay remains discretionary and will generally require good reason.
• Limitation and Delay: enforcement proceedings within existing proceedings are generally not subject to limitation periods applicable to fresh claims. Nevertheless, judgement creditors should avoid unnecessary delay, which may affect recovery of interest or attract procedural criticism.
• Tomlin Orders: Proceed with Caution: parties should exercise caution when settling proceedings by way of Tomlin Order. While parties may apply to enforce agreed settlement terms within existing proceedings, difficulties can arise where substantive settlement terms appear only within a confidential schedule to the Tomlin Order rather than in the body of the order itself. In those circumstances, the settlement terms are not directly enforceable as court orders, and a further application to court may be required before enforcement action can be taken.

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Legal Costs

The recovery of legal costs arising from enforcement action is a separate and often complex issue and is not addressed in this article.

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How To Get In Contact

If you require advice on enforcement of judgements and are interested in finding out how we can help, please contact our Dispute Resolution team on +44 (0)204 600 9907 or email info@culbertellis.com.