Step 9: Enforcement of court orders
Primary Content Source: Dorrien Peters, Adam Bradshaw and Ben Hunt (DLA Piper)
If a court has decided that someone must pay you an amount of money (you have 'obtained judgment against the defendant'), and you have not received a payment, you will want to 'enforce the judgment' to try and get your money. The court will not automatically enforce the judgment - you must ask it to.
There are a number of different methods of enforcement. You can ask the court for:
A warrant of execution;
An attachment of earnings order;
A third party debt order;
A charging order;
A bankruptcy or winding up order.
This guide will explain these methods in more detail. In order to choose the most appropriate method, you should consider whether:
You are likely to get your money and court fee from the defendant;
The defendant owes other people money or has other court judgments;
The defendant owns any goods or assets which can be taken and sold at auction;
The defendant is employed;
The defendant has other earnings, such as income from investments;
The defendant has a bank, building society or other account;
The defendant owns a property; or
Anyone else owes the defendant money.
These points are similar to those that you should consider at the outset of your dispute.
This is because there is little point in starting to pursue litigation if it appears that your opponent is unlikely to be able to pay any money owed under an eventual judgment.
The above information can be found by:
Instructing an enquiry agent to investigate the defendant;
Searching online;
Searching the Register of Judgments, Orders and Fines to see if the defendant has any outstanding or previous judgments or fines;
Obtaining a Land Registry search;
Applying to the court for an order to obtain information from the defendant about his financial position.
A warrant of execution gives court bailiffs the authority to take goods from the defendant's home or business. Bailiffs will try to either collect the money you are owed or take goods to sell at auction.
A warrant of execution will only help if the defendant has all the money you are claiming for on the warrant or enough goods at the address you give which could be sold to raise the money.
The bailiff will not take the defendant's goods if they are not worth enough to pay the warrant after the costs of taking and selling the goods.
Bailiffs cannot always remove the defendant's goods. For example, they cannot remove essential household items, tradesman's tools or goods subject to hire purchase or rental agreements.
It is the most popular method of enforcement. This is because it is often the quickest method and the procedure is relatively simple and straightforward. It is an administrative procedure and is the only method of enforcement that does not require a decision from the court.
A warrant of execution form is sent to court and the bailiff will then inform the defendant that a warrant has been issued and execution will follow.
If the defendant does not then pay, the bailiff will then attempt to collect the money or goods from the property.
You cannot ask the county court to issue a warrant if the amount you want the bailiff to collect is more than £5,000 (unless you are enforcing an agreement made under the Consumer Credit Act 1974).
However, a similar procedure can be followed in the High Court and an Enforcement Officer can be asked to collect the money or remove goods.
The procedure in the High Court is different and can be more complicated and expensive. You may want to get advice from a solicitor, law centre or Citizens Advice Bureau before you start this procedure.
How can the defendant oppose this method of enforcement?
The defendant can ask the court to suspend the warrant. For example, the court may agree to suspend the warrant if the defendant agrees to pay a certain amount each month.
If the defendant fails to comply with the terms of the suspension, the court will lift it and the bailiff will attend the property to collect the money or remove goods.
A defendant could attempt to obstruct the bailiff by claiming that his goods fall into the exempt categories of property that cannot be seized.
An attachment of earnings order is sent to the defendant's employer. It tells the employer to take an amount from the defendant's earnings each pay day and send it to the collection office.
The money is then sent to you. This continues until the whole debt is paid. The automatic deduction from the defendant's wages means that you do not have to rely on the defendant making payment.
The defendant must be employed by someone before you can issue an attachment of earnings order. An order cannot be made if the defendant is unemployed or self-employed. It also has no application to defendants who are firms or limited companies.
You can find out if the defendant is employed by applying to the court for an order to obtain information from the defendant.
To ask for an attachment of earnings order, you will need to complete a 'request for an attachment of earnings order' form and send it to court. The court will then tell the defendant to pay all the money owed or fill in a form giving information about his or her employment, income and outgoings. This is called a 'statement of means'.
The court will then use the statement of means to decide how much the defendant can afford to pay.
The officer will take into account how much the defendant needs to live on for food, rent or mortgage and essentials and to pay regular bills, such as electricity. This is called the ‘protected earnings rate’.
If the defendant earns more than the protected earnings rate, an order will be made.
This means that if the defendant is on a low wage, it may not be possible to make an attachment of earnings order.
If the court sets a low monthly deduction, it can take a long to pay off a large debt. In addition, no interest is payable on the debt while the order is in force.
If an attachment of earnings order is granted, you cannot use any other method of enforcement in conjunction without the court's permission.
How can the defendant oppose this method of enforcement?
The defendant can oppose the attachment of earnings order on the grounds that, if it were made, he/she would not be able to afford to pay his/her essential outgoings. For example, a defendant may make the argument that an order would unfairly impact upon his/her family or other dependents.
The defendant can ask for the court not to make an attachment of earnings order and, instead, propose a repayment plan. This is called asking for a suspended attachment of earnings order. If the court accepts the defendant's reasons for suspending the attachment of earnings order, the court won't start taking money directly out of his wages unless he/she does not keep up the repayments agreed to.
If a defendant's circumstances change, for example, if his/her income goes down or he/she has suddenly has to regularly spend more money on essential outgoings, the defendant can apply to the court to have the attachment of earnings order changed.
References:
By third party debt orders, sums owed to the defendant that are in the hands of a third party, such as a bank, are frozen and seized for your benefit. The court will then direct the independent third party to pay the outstanding sum directly to you.
A third party debt order is most frequently used to stop the defendant taking money out of his or her bank or building society account. The bank or building society then pays the money you are owed to you.
A third party debt order can also be sent to anyone who owes the defendant money, such as a trade customer or a tenant of the defendant.
Obtaining a third party debt order is a two stage process. Firstly, an application is made for an interim third party debt order. If the judge is satisfied with the information provided, the judge will make an interim third party debt order which is sent to the third party.
A copy is not sent to the defendant until seven days after it has been sent to the third party.
This is to ensure that the third party 'freezes' the money before the defendant becomes aware of the order and is able to do anything to avoid it, such as removing money from the bank account.
The interim order will include a hearing date at which the judge will decide whether or not to grant a final third party debt order directing that the money that has been frozen be paid over to you.
The defendant can oppose the application at the hearing.
It can be difficult to obtain a third party debt order as it is necessary to provide evidence that a defendant is owed money by a third party or has a bank account.
The money held by the third party must also be held solely for the defendant. This means that you cannot apply for a third party debt order against a joint bank account unless the debt is owed by all the account holders.
The debt must also be owed within the UK.
Third party debt orders can be used alongside other methods of enforcement.
How can the defendant oppose this method of enforcement?
The defendant may claim that he is insolvent. The court is unlikely to make a third party debt order if the defendant is insolvent because this would mean that you are given preference over other creditors of the defendant.
The defendant may oppose the order on the grounds that the money is in a joint bank account and the other account holder does not owe the debt.
The defendant may claim that the making of the order will cause significant hardship to him/her or his/her family.
The defendant may claim that the third party would be unfairly prejudiced by the making of a third party debt order. For example, if requiring the third party to make the payment would result in the insolvency of that third party, the court is unlikely to make the order.
References:
A charging order is an order of the court placing a 'charge' on the defendant's property, such as a house or a piece of land. The charge will be the amount you are owed. The charging order will not normally get you your money immediately but it may safeguard your money for the future.
A charge on the property means that if the property is sold, the charge usually has to be paid first before any of the proceeds of the sale can be given to the defendant.
You should note, however, that a charging order does not compel the defendant to sell the property. In some circumstances, you may be able to ask for court for an 'order for sale' forcing them to sell the property.
Alternatively, you can simply wait for the owners to sell the property in due course or for another of the defendant's creditors to apply for an order for sale.
If there are already other charges on the property when your charge is registered (for example, a mortgage), then those charges will be paid first before yours.
After a sale, there may not be sufficient funds to satisfy the judgment debt in full, or at all, if there are several prior charges.
Charging orders are a most effective method of enforcement when there is substantial equity in a property and the defendant is the sole owner.
The method is less satisfactory if there is limited equity in a property or it is jointly owned or used as a family home. This is because an application for a charging order calls for the court to exercise discretion and it will be looking to see that enforcement by this method is proportionate.
Therefore, the court may not choose to secure a small judgment (for instance, £100), when this could be enforced by another method.
You can get evidence about the defendant's property and ownership by obtaining information on land or property held at HM Land Registry.
Similar to a third debt order, obtaining a charging order is a two stage process.
Firstly, an application is made for an interim charging order. If the judge is satisfied with the information provided, the judge will make an interim charging order. You should then register that interim charging order against the defendant's property at Land Registry.
The interim order will include a hearing date at which the judge will decide whether or not to grant a final third party debt order directing that the money that has been frozen be paid over to you.
The defendant can oppose the application at the hearing. If a final charging order is granted, this too should be registered against the defendant's property at the Land Registry.
How can the defendant oppose this method of enforcement?
The defendant may claim that there is very little or no equity in the property which means that you will not get your money back if it was sold and therefore a charging order would be ineffective. This may be because the value of the property is low or there are other charges, such as mortgages or other secured loans, already over the property.
The defendant may have more than one creditor who may have agreed to allow the defendant to pay their debts by instalments rather than asking for a charging order. The defendant may argue that the court should not grant you a charging order if none of his other creditors think it's necessary, especially if the others are owed more money.
The defendant may argue that there other people living in the property such as children, older people or someone with a disability, who would be severely disrupted if the home had to be sold. This may be more of a problem if you eventually apply for an order for sale.
The defendant may argue that there are other more suitable ways to pay back the debt than through a charging order. The defendant may prefer to pay the debt back by way of an attachment of earnings order.
References:
Making an individual bankrupt or putting a company into liquidation is one way to recover money owed to you.
The court can make a bankruptcy order against an individual who fails to pay their debts.
A bankruptcy order makes sure that the assets of the bankrupt are shared out fairly among the creditors and imposes certain restrictions on the bankrupt.
The court can grant a winding-up petition and order compulsory liquidation of a company that fails to pay its debts.
Liquidation is a process in which a liquidator is appointed to 'wind up' the affairs of a limited company.
At the end of the process, the company ceases to exist. Its assets are sold and any money owed to the company is collected in.
The funds are then distributed amongst its creditors.
However, these methods should be approached with caution.
If such an order is granted, you will simply stand in line behind any of the defendant's secured creditors and together with all the defendant's other unsecured creditors.
There is no guarantee that the defendant will have enough assets to satisfy all of the creditors' debts and you may only end up with a fraction of the money owed to you.
Furthermore, pursuing insolvency proceedings is complex and very expensive.
Instead, insolvency proceedings should be used as a last resort.
The threat of insolvency proceedings can be used as a means of compelling the defendant to pay the money owed.
The defendant may be prepared to go to greater lengths to pay a debt to avoid the risk of bankruptcy or liquidation.
The principal argument that a defendant who wishes to oppose a bankruptcy or winding up petition will use is that it is a disproportionate step and that there are more appropriate means of paying back the debt.
The court will be keen to avoid taking the drastic step of ordering bankruptcy or liquidation if there is a possibility that a debt can be repaid by other means.