As a creditor will you be forced to accept payment of a judgment by instalments? A landmark decision is reached which is welcome news for creditors.

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Have you obtained a  Court Judgment or Order that a judgment debtor is seeking to pay by monthly instalments? Are you concerned that the court will require you to accept these instalments and prevent you being able to enforce the judgment?

The Court of Appeal recently made a welcome decision that provides clarity and a precedent when a judgment debtor (“L”) sought to pay a judgment debt by instalments – Diana Loson v Brett Stack Newlyn Plc [2018] EWCA 803.

In recent years we have seen legislation that provides protection for debtors. In particular the new debt Pre-action Protocol and change to the enforcement rules has resulted in a creditor being required to jump through significant hoops and a forced delay in being able to issue court proceedings if the debt is owed by an individual to include a sole trader.

The ruling of Diana Loson v Brett Stack Newlyn Plc [2018] EWCA 803 finally gave some welcome news to creditors seeking to recover a debt.

Background
The claim arose from a disputed parking ticket which L’s husband was issued with whilst driving her car. L’s husband appealed the fine to the Parking Adjudicator but was unsuccessful. L’s husband on learning that his appeal had been unsuccessful, challenged the outcome by issuing proceedings for judicial review. The High Court, refused permission for judicial review but despite this, L’s husbands refused to pay the parking ticket. Due to non-payment, Camden Council issued a warrant of possession for the vehicle and bailiffs were instructed to enforce the possession order. The bailiff located the vehicle which was L’s as it was her car that had received the ticket whilst being driven by her husband.

Whist the bailiffs were in the process of clamping the car, L, who had been shopping at the time, returned to her car. L alleged damage to her car and pleaded with the bailiffs not to take the car until her husband had chance to pay the fine. The bailiffs stated that when L returned to the car she was uncooperative and there was no prospect of payment. L issued proceedings in the County Court against the bailiffs, she sought an injunction to restrain them from disposing of the vehicle and a claim for loss of use. L was unsuccessful and ordered to pay Brett Stack Newlyn Plc’s (“S”) costs of £5.000.00.

L responded by making an application for a stay and a variation of the cost order. Prior to L’s application being deal with by the court, S served L with a statutory demand for failing to make payment of the cost order within the required timeframe.

L’s application was later heard and was dismissed with a further cost order totalling £3,000.00. L therefore was required to pay £8,000.00 plus interest to the claimant for costs. L responded to the second cost order with an application pursuant to Civil Procedure Rule 40.9A which allows a debtor to make an application to vary payments on court judgments and orders. An application sought to make payment by monthly instalments of £50.00. S objected to the proposed rate of instalments and proceeded to serve a bankruptcy Petition for failure to pay the first cost order.

Despite the objections of S as L’s proposal for payment would take in excess of 13 years for the debt to be repaid, the District Judge granted an order that L be able to pay the cost order by instalments. The Judge stated allowing the judgment to be paid by instalments would not prevent S being able to present a bankruptcy petition. S appealed the decision which was heard before Honour Judge Luba QC.

Appeal dismissed
Honour Judge Luba considered that that County Court did not balance the interests of the judgment creditors against the interest of L and that to base the decision purely on what L was able to pay was incorrect. Accordingly Honour Judge Luba set aside the instalment order which triggered an appeal from L.

The Court of Appeal disagreed that an instalment order would not prevent S’s ability to issue a bankruptcy petition. A debt must be due and owing before a bankruptcy petition can be presented and an instalment order would mean this was not the case.

The Court of Appeal sympathised with L but agreed that the decision to set aside the instalment order by Honour Judge Luba was correct. The court considered that it could not “interfere with the judgment creditor’s right to seek enforcement of the judgment by whatever means are available to them”

Conclusion
This Judgment provides welcome news to creditors and a warning to debtors that for a court to grant an instalment order, a Judgment debtor must present the court with a “realistic repayment schedule backed up by evidence that the creditor can be expected to receive the amount of principle and an interest within a reasonable period of time”

This is a stark warning to judgment debtors who cannot afford to pay a judgment within a reasonable time frame that a court will be unwilling to prevent a judgment creditor enforcing a judgment.

Comment
On numerous occasions we have conversations with judgment debtors who claim to have received advice that all they have to do is “offer £1 a week and the judgment creditor has to accept this”. Whilst this has never been the case, it is often the case that the lower courts do make low repayment orders frequently and can make a creditor think twice before issuing proceedings to recover a debt.

This judgment offers clarity that even if a judgment debtor can’t pay as opposed to won’t pay, a creditor is entitled to their money and the court should not intervene with the creditor’s right to take enforcement action. This decision will allow creditors to be more assertive and will enable them to pursue bankruptcy in instances where a Trustee in Bankruptcy may have power to recover from the creditor’s estate.

This case has highlighted a further important point that women should think twice before lending their husband their car!

Do you need to oppose a judgment debtors application to vary a judgment to pay by instalments?  Contact us to see how we can help.

Telephone: 0333 2200244 or  Email:DebtFast@debenhamsottaway.co.uk