Enforcing a Judgment

Monday 8th February 2010

The Court has decided the case and judgment has been made in your favour. Now you need to enforce the judgment against the debtor (also known as the judgment debtor).

Updating information on the debtor

Before instigating proceedings it is advisable to gather in as much information as possible about the person or company who you intend to claim against, as it is important to ascertain whether they are "good for the money". As defendant it is also sensible to consider the claimant's financial position, as judgment may be made in your favour.

At the end of the substantive proceedings this information should be updated. The following steps should be considered:

• company search and accounts;
• Land Registry search and search of the Land Charges Register;
• status report from an enquiry agent; and
• orders to obtain information from judgment debtors.

Depending on the circumstances, different searches and approaches will be appropriate.

Once the updated information has been received the appropriate method of enforcement can be considered.

The Tribunals, Courts and Enforcements Act 2007 ("the Act") will make procedural changes to many methods of enforcement. However, the relevant sections of the Act have not yet come into force.

Methods of Enforcement

Execution against goods

As suggested by its title, this method of enforcement involves seizing and selling a debtor's goods and/or assets in order to raise funds to satisfy the judgment debt. This will of course only be relevant if debtor has any assets.

Advantages

• releases cash;
• relatively quick and inexpensive;
• costs can (in theory at least) be recovered from the debtor's (if they have sufficient assets); and
• the embarrassment of bailiffs arriving at a person's or company's premises and identifying goods to remove may prompt a debtor to make payments when they have previously not been forthcoming.

Disadvantages

• if recovery is not successful the creditor would be liable to pay the bailiffs' fees; and
• if another party owed money by the debtor presents an insolvency petition (i.e. a winding up or bankruptcy petition), before the execution against goods is complete any proceeds received from this process must be surrendered as they will form a part of the insolvent estate.

Charging Orders

A charging Order can be obtained against land (freehold or leasehold), a debtor's interest in land, and stocks and shares. Although this does not in itself produce payment, the creditor then effectively become a mortgagee and may be able to try to force sale of the property to release the judgment debt. Taking that step involves making an application to the Court to sell the property, which creates more expense and delay, but in the meantime you have the benefit of security.

If an application is made it is possible for a person to object to a charging Order being made, and the Court would then decide the issue at a hearing.

Advantages

• the cost of obtaining a charging Order can be added to the judgment debt;
• the judgment debt is secured and the judgment creditor will rank as a secured creditor if the debtor is wound up; and
• interest is not suspended or terminated when a charging Order is applied for or obtained and the threat of an application for a charging Order may prompt payment.

Disadvantages

• the Order does not itself release cash;
• in order to satisfy the judgment debt an application for sale must be made to the Court be made. It is at the Court's discretion to grant the Order;
• if there are any prior charges against the asset there is a danger of exhausting equity in the property (e.g. if it is already mortgaged); and
• full recovery of the costs involved in applying for an order of this kind is rarely achieved.

Third Party Debt Order (previously known as a garnishee Order)

This type of Order is made on the basis that a third party (for example their bank) owes the judgment debtor money. A judgment creditor can obtain a third party debt order direct against that third party. It is useful (where possible) to keep copies of documents which contain bank details, e.g. copy cheque.

Advantages

• the money moves directly from the third party debtor to the judgment creditor without going through the hands of the judgment debtor; and
• the process realises cash.

Disadvantages

• an interim Order must be obtained and served at a time when the third party is in debt to or holds money for the judgment debtor (for example, in relation to a bank, where the bank account is in credit);
• an order cannot be obtained in respect of a joint bank account or other jointly held monies or assets;
• if an application is unsuccessful the judgment creditor must bear the costs of the third party.

Attachment of Earnings Orders

This type of Order is not often suitable for commercial disputes. If granted the Order allows for monies to be deducted directly from the debtor's salary by their employer, who forwards the money to the Court. This method is only available against employees and not the self employed.

Advantages

• the money passes directly from the employer to the judgment creditor, albeit via the Court; and
• the threat of an application is sometimes enough to prompt payment due to the embarrassment which it could cause.

Disadvantages

• an Order will only be granted against an employed judgment debtor;
• the Court will take other financial commitments (including other debts) into amount when assessing the amount to be deducted, so payments may be very small;
• there is a protected level of income, so if someone is dependent on overtime or seasonal work there may be no payments at some times;
• interest does not accrue on the judgment debt; and
• if a judgment debtor changes jobs the whole process must begin again.

Appointment of receiver by way of equitable execution

The Court has the power to appoint a receiver by way of equitable execution and may do so where previous attempts to enforce a judgment have failed. In practice this is an expensive method of enforcement which is rarely used, but could be useful if the judgment debtor has a life interest in land or a trust fund or against a legacy payable under a Will.

Advantages

• releases cash;
• the receiver takes the money before it reaches the judgment debtor; and
• a receiver can reach property which other methods of enforcement can not.

Disadvantages

• the process is very expensive, as further proceedings are required and the receiver must also be paid. It is only suitable for very large debts; and
• it may take some time to money to be released.

Freezing injunction in aid of execution

If a judgment debtor intends to remove their assets from the jurisdiction (being England and Wales) or to deal with them with the intention of frustrating the judgment debt, the judgment debtor's assets can be frozen so that they may be taken in execution. This method of enforcement must only be used when there is a real threat that assets will be dispersed and is viewed as an emergency procedure.

Advantages

• the judgment debtor's assets are frozen so that enforcement procedures may be applied.

Disadvantages

• as with any emergency action, the application is costly; and
• the Court will require the judgment creditor to provide undertakings, which can be onerous, e.g. as to any damage suffered by the judgment debtor if the order is granted.

Enforcement against assets outside of the jurisdiction

The judgment of a Court in England and Wales may be enforceable in Scotland, Northern Ireland and countries outside of the UK.

Insolvency proceedings

Alternatively, a statutory demand could be served on the debtor, which if unsatisfied is a ground for issuing a winding up petition against a company or a bankruptcy petition against an individual. The presentation of a petition may also prevent another creditor from enforcing its judgment against the debtor's available assets. Serving a statutory demand or a petition can be an effective means of formally requesting payment but is not technically a method of enforcement.

Conclusions

The intention of this guide is to set out the options available where judgment has been granted in your favour.

Ashfords LLP is regulated by the Solicitors Regulation Authority. The information in this note is intended to be general information about English law only and not comprehensive. It is not to be relied on as legal advice nor as an alternative to taking professional advice relating to specific circumstances. Links to other sites and resources provided by third parties are included for your information only. We have no control over the content and accept no responsibility for them.