Enforcement of judgments - Methods of enforcement

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Overview

Obtaining a court judgment is just the beginning of the debt recovery journey. When debtors don't pay voluntarily, creditors need to choose from various enforcement methods to collect what's due. This guide delves into different techniques, their legal rules, and practical uses, specifically designed for SQE1 FLK1 exam candidates. Knowing these methods is vital for efficiently managing legal tasks as a solicitor in England and Wales.

Legal Framework and Jurisdiction

The Civil Procedure Rules (CPR) 1998, especially Parts 70-74, govern judgment enforcement in England and Wales. These rules set procedural standards and empower courts to manage proceedings effectively.

Enforcement responsibilities are split between the County Court and the High Court:

  • County Court: Handles judgments up to £5,000, using 'warrants of control'.
  • High Court: Manages judgments over £5,000, employing 'writs of control'.

Since April 2014, judgments from the County Court for £5,000 or more can be shifted to the High Court for enforcement without seeking permission, easing the process for larger claims.

Methods of Enforcement

1. Taking Control of Goods

Creditors can seize and sell a debtor's non-essential assets to settle debts. Governed by the Tribunals, Courts and Enforcement Act 2007 and the Taking Control of Goods Regulations 2013.

Key Points:

  • Exempt goods: Essential household items and primary tools of trade up to £1,350
  • Notice requirements: At least 7 days' notice before entry
  • Entry rules: Peaceful entry between 6 am and 9 pm

Example: A creditor seeking £10,000 from an electrician might repossess non-essential assets, like a second car, but essential work tools would be exempt.

2. Charging Orders

Charging orders place a lien on a debtor's property or securities, creating a security interest for the creditor. Governed by the Administration of Justice Act 1985 and the Charging Orders Act 1979.

Steps:

  1. Interim charging order application
  2. Notice to debtor and relevant parties
  3. Final charging order hearing (if contested)
  4. Registration with Land Registry

Legal Note: In Nationwide Building Society v Wright [2009], the court noted a charging order doesn't automatically allow property sale—an additional order under CPR 73.10C is required.

3. Third-Party Debt Orders

These direct funds owed to the debtor by a third party to the creditor. Governed by the Tribunals, Courts and Enforcement Act 2007.

Steps:

  1. Interim order application
  2. Notice to third party and debtor
  3. Final order hearing

Example: For a debtor's joint account, the court considers equal ownership, possibly limiting the order to 50% of the balance.

4. Attachment of Earnings Orders

This permits a creditor to have a debtor's employer deduct a portion of the salary to repay the debt. Governed by the Attachment of Earnings Act 1971.

Features:

  • Only for employed debtors
  • Protected earnings ensure basic income
  • Employer compliance required

Update: The Attachment of Earnings (Amendment) Rules 2023 improved processes, utilizing HMRC data for employment verification.

Insolvency Processes as Enforcement Tools

Though not typical enforcement methods, insolvency proceedings can pressure debt recovery.

Bankruptcy (for individuals)

Threshold: Debts of £5,000 or more Process:

  1. Statutory demand (often required)
  2. Bankruptcy petition
  3. Bankruptcy order
  4. Trustee appointment

Considerations: Bankruptcy can prompt negotiation due to severe consequences, but creditors should evaluate potential returns against costs and risks of limited asset realization.

Compulsory Liquidation (for companies)

Threshold: Debts of £750 or more Key Stages:

  1. Statutory demand (if necessary)
  2. Winding-up petition
  3. Winding-up order
  4. Liquidator appointment

Legal Note: The court in Re a Company (No. 001573 of 1983) stated winding-up should not enforce a genuinely disputed debt.

Cross-Border Enforcement

Cross-border enforcement has shifted notably post-Brexit.

EU Judgments

Before Brexit, the recast Brussels Regulation streamlined EU judgment enforcement. Now, enforcement depends on:

  1. When proceedings started
  2. UK's potential Lugano Convention re-entry

New cases may rely on bilateral treaties or common law, increasing challenges and costs.

Hague Convention on Choice of Court Agreements

This convention supports enforcement of judgments based on exclusive court clauses. The UK's post-Brexit membership provides some continuity.

Example: A UK company with a contractual English jurisdiction clause may still enforce a judgment in EU states under this convention, with few refusal grounds.

Conclusion

Understanding judgment enforcement methods is key for SQE1 FLK1 exam success and effective legal practice. Critical points include:

  1. Choosing the right method based on debtor's finances and debt nature.
  2. Distinct processes in County Court and High Court.
  3. Legal frameworks and recent changes.
  4. Insolvency as a recovery strategy.
  5. Cross-border enforcement challenges, especially post-Brexit.
  6. Balancing recovery efforts with debtor protections.

By understanding these elements, future solicitors can enhance their skills for both the SQE1 FLK1 exam and real-world legal challenges.