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Court of Appeal decision brings reassuring clarity for judgment creditors

The Court of Appeal recently heard an appeal from the Central London County Court, in which a judgment debtor (“L”) appealed a decision than an application to pay a judgment debt by installments had been refused – Diana Loson v Brett Stack, Newlyn Plc [2018] EWCA Civ 803.

Background  

 The underlying facts relate to a disputed parking ticket, which had led to L being ordered to pay the Claimant bailiffs (“S”) costs totaling £5,000 (“First Costs Order”).   L then applied for a stay and/or a variation of this Costs Order (“L’s Application”) pending an application made by S to add a party to the proceedings. L’s Application was not dealt, which is said to have been through no fault of L.   However, S then served L with a statutory demand, based upon L’s non-repayment of the Costs Order.   When L’s Application was heard, it was dismissed and L was ordered to pay further costs, in the sum of £3,000 (“Second Costs Order”).

On 30 September 2015, L filed a further application (“Variation Application”), seeking to vary both the First Costs Order and the Second Costs Order, allowing her to repay the total of £8,000 (plus interest) in monthly installments of £50.   L’s Variation Application was made pursuant to Civil Procedure Rule 40.9A (which allows applications to be made for the variation of payments due in respect of County Court judgments and orders). S was served with notice of the Variation Application and objected to the offer of installments. On 7 December 2015, S served a Bankruptcy Petition against L, based upon the non-payment of the Firsts Costs Order.

When the Variation Application was heard by the County Court in February 2016, the District Judge determined that allowing L to repay both costs orders by installments would not be an obstacle to the presentation of a bankruptcy petition.   S objected to the request to pay by installments, as it meant that the £8,000 owed to it would take some 13 years to repay. L was granted the order to pay by installments (“Instalment Order”), which S appealed.

Appeal Decisions

His Honour Judge Luba QC heard S’s appeal in July 2016.   HHJ Luba considered that the County Court had “failed to properly balance the interests of the judgment creditors” against the interests of L – instead, basing the decision to allow the Instalment Order purely on what L could afford to pay. Accordingly, HHJ Luba set aside the Instalment Order, a decision that was then appealed by L.

The Court of Appeal judgment highlights that the Court of Appeal disagreed that making an Instalment Order did not impact upon S’s ability to issue a Bankruptcy Petition against L.  It highlighted that through making an instalment order, the debts owing to S were no longer “due and payable” – and one of the pre-requisites for bringing a bankruptcy petition is that the judgment debtor has no reasonable prospect of paying their debts as they fall due.

Whilst the Court of Appeal expressed sympathy for L, it agreed that HHJ Luba had been right to set aside the Instalment Order.   In a case where a judgment debtor cannot really afford to pay anything towards a costs order, the Court considered that it could not “interfere with the judgment creditors’ right to seek enforcement of the judgment by whatever means are available to them”.

Conclusion

Whilst the sums in question in this matter are low value, the outcome of the appeal sends an important message.

Judgment debtors are warned that, in order for the Court to grant an installment order, it must be “presented with a realistic repayment schedule backed up by evidence that the creditor can be expected to receive the amount of principal and any interest within a reasonable period of time”.   Therefore, the interests of the judgment creditor are perhaps more important than parties to such a matter might have previously expected.   Where a judgment debtor cannot really afford to pay anything, they can perhaps expect to see a Court unwilling to interfere in a judgment creditor’s ability and desire to seek enforcement of a judgment by whatever means possible.

© Copyright 2022 Squire Patton Boggs (US) LLPNational Law Review, Volume VIII, Number 117
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About this Author

Garon Anthony Litigation Attorney Squire Patton Boggs Birmingham, UK
Partner

Garon is a partner in the Litigation Practice Group. He advises clients across the full range of commercial dispute issues, including cyber liability/data breach, professional negligence, banking, pensions and insurance.

Garon regularly acts for clients who are subject to investigations or disciplinary proceedings by national and international regulators, including most recently the Financial Conduct Authority, the Financial Reporting Council and the Dubai Financial Services Authority.

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Helen Cain, Squire Patton Boggs Law Firm, Litigation Attorney, Birmingham, United Kindgom
Associate

Helen joined the Litigation team in 2014, having completed her training with the firm. Helen has a broad range of experience in general commercial litigation, pensions disputes and financial services litigation.

She has experience in advising on a wide range of matters of both a contractual and tortious nature, including breach of contract, misrepresentation, debt recovery and professional negligence.

Helen regularly acts for a diverse client base including PLCs, SMEs and individuals. Helen also has experience of acting...

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