In a previous article, we wrote about various enforcement options available to creditors to enforce a money judgment. In this article, we will delve into how Acclaim successfully managed to bring a debtor to court for questioning about their means and assets, ultimately leading to a resolution that satisfied both parties.

In the realm of debt recovery, challenges often arise when High Court Enforcement Officers (HCEOs) face obstacles in locating debtors and understanding their financial situation. In this matter, the claimant’s attempts to recover the debt through HCEOs proved fruitless. The debtor remained elusive, the HCEO was unable to make contact with the debtor at all. This lack of communication hampered any attempt to gain insight into the debtor’s financial circumstances and assets, thereby stalling the debt recovery process.

Recognising the need for a different approach, our advice to our client (the claimant) was to make an application to the court for an Order for the Debtor to Attend Court for Questioning (ODACQ). This strategic move aims to compel the debtor to attend court on a given date and disclose crucial details regarding their income, expenditure, and assets. The ODACQ procedure would provide the necessary framework for obtaining the much-needed information which can allow the claimant to make an informed decision on further steps for debt recovery.

Satisfied that this step would be needed to advance their efforts for collection of their money judgment, the claimant instructed Acclaim to proceed with the application for ODACQ.

Acclaim initiated the process by filing the appropriate application with the court. The court issued the order which was returned to Acclaim for service upon the debtor. On receipt of the sealed order which encompassed an appointment date and time that the debtor had to attend court, the order was served on the debtor personally, by use of a process server.

The ODACQ process, while not strictly an enforcement method, is a powerful tool in debt recovery. There are consequences when a debtor ignores the order to attend Court and fails to attend the allotted appointment. Failure to attend may be considered contempt of court. Contempt of court refers to any act or behaviour that disobeys or challenges the authority, integrity, or dignity of the court. In most cases where a debtor fails to attend, the court may issue a warrant for the debtor’s arrest. The debtor may also be required to pay additional costs associated with their failure to attend, such as court fees, and the claimant’s legal costs.

In this case, the debtor attended the court as directed, which was a crucial step, as it allowed Acclaim to finally engage with the debtor and gather essential information.

During the appointment, the court’s representative questioned the debtor regarding their means and assets, income, and expenditure. The debtor was legally obliged to provide truthful and comprehensive responses. The questions covered a broad range of information, from the debtor’s personal information, such as date of birth, housing status, employment status including place of work, employee name and salary and other financial information such as whether they have any savings accounts.

Fortunately, the debtor recognised the seriousness of the situation while at the court appointment for questioning. At this point, they voluntarily made an offer of repayment, signalling their willingness to cooperate and settle the debt.

The debtor’s attendance in court and the full disclosure of their financial situation proved to be a turning point in the case.

The offer, which was made by the debtor, was found to be acceptable to the claimant. The parties reached an agreement, and the judgment was varied by the court as a result, which subsequently was satisfied by the defendant in a reasonable time frame.

The strategic decision to pursue an Order for the Debtor to Attend Court for Questioning proved to be an effective and crucial step in this case where alternative enforcement had already been attempted and exhausted.

Late Payment of Commercial Debts (Interest) Act 1998 and how we utilise the legislation to assist our clients with cost neutral recoveries.

What is the Late Payment of Commercial Debts (Interest) Act 1998?

 

The Late Payment of Commercial Debts (Interest) Act creates a statutory right to claim interest on the late payment of certain debts arising under commercial contracts for the supply of goods or services.

For the legislation to apply, the debt must be:

• Arising out of a contract where the parties are businesses or public authorities; and,
• ‘Due’, subject to the terms of the contract

For the debt to be ‘due’, this will either be the agreed payment day expressed in the contract, or in absence of this clause, will be 30 days after the sum initially became due.

After these requirements have been met, Section 1 of the Act will allow the creditor to charge ‘statutory interest’. This interest is at the rate of 8 percent over base rate per annum.

The term “base rate” used above is defined in the Glossary to the CPR as the interest rate set by the Bank of England which is used as the basis for other banks’ rates. This is currently 4 percent, and as a result would mean that the current statutory interest rate would be 12 percent.

Where the 1998 Act applies, the claimant is also entitled to a small amount of statutory compensation for the inconvenience of having to recover the debt, this is in accordance with Section 5A. This compensation is applied to each invoice in the following categories:

(a)  for a Debt less than £1,000, the sum of £40;

(b)  for a Debt of £1,000 or more, but less than £10,000, the sum of £70;

(c)  for a Debt of £10,000 or more, the sum of £100.

Along with the statutory compensation, Section 5A(2A) of the Act will allow the claimant to recover Reasonable Costs where the costs of recovery to the Claimant are not met by the statutory compensation. For example, if the compensation amounts to £100 but the costs incurred by the claimant hiring Solicitors amounted to £150, the claimant would claim £50 reasonable costs to make up the difference.

How Acclaim use this Act to help you

Here at Acclaim, we use the 1998 Act to minimise the client’s exposure to legal costs. By applying the 1998 Act, Acclaim are able to offer clients a cost neutral recovery.

This procedure is implemented by us at the beginning of a claim when setting up the new matter. We will calculate all interest, and compensation owed to our clients, when setting up the claim. This ensures that throughout the entirety of the claim, the correct costs are being included and specifically set out to all parties, this includes our experts carefully and concisely explaining all costs in the Particulars of Claim leaving no stone unturned and making sure that our clients will recover all the costs that they deserve.

 

Acclaim have the necessary expertise and experience in these matters and are able to assist you during the process of recovering commercial debts.

Contact

If you require assistance with debt recovery, or are interested in finding out more about our services, then you can contact a member of our team below:

Matt Perry

Associate

Recoveries Manager

Tel: 0113 2258847

Email: Mattperry@acclaim.law

 

Sean Thornhill

Recoveries Executive

Tel: 0113 2258853

Email: Seanthornhill@acclaim.law

 

Dan Hirst

Partner

Tel: 0113 2258815

Email: Danhirst@acclaim.law

 

What is a Summary Judgment?

Summary judgment is a procedure where a court makes a judgment against a party on the whole of a claim or on a particular issue. The main factors that will be taken into account by the court are whether:

• A claim, issue or defence has no real prospect of success; and,
• There is no other compelling reason for a trial

Where a defendant files a defence to a debt claim, and the above factors apply, summary judgment is a procedure which we can use to dispose of the case without a trial. When an application is made for summary judgment, the burden of proof lies with the applicant. The usual principles are that if a matter proceeds to trial, burden is on the balance of probabilities (i.e. 51% would succeed), whereas with an application for summary judgment, that threshold is slightly higher as there must be ‘no real prospect’.

Case Study

Acclaim recently acted for a claimant who was owed a substantial sum for unpaid invoices, for goods which they supplied to the defendant on credit terms. The defendant had breached those terms of credit and despite the claimant’s efforts, payment was not forthcoming.

The claimant instructed Acclaim to issue court proceedings.  Proceedings were issued in the County Court Business Centre on behalf of the claimant. The defendant filed a defence which claimed that the goods that were supplied, were incorrectly supplied. This was the first notification or indication of a dispute that the claimant had received.

The defence was brief and provided no further details to allow the claimant to investigate the issues raised. A request for further information was therefore necessary and so the claimant instructed Acclaim to make such request, which was made pursuant to CPR Part 18. The defendant failed to respond to the request for further information.

The matter was allocated to the appropriate track and a trial window was arranged. The trial was due to take place some 6 months following the allocation. Consideration was therefore given as to the prospects of success for summary judgment.

It was advised to the claimant that on the basis of the defence (or lack of) and on the evidence that they had in support of their claim, that an application for summary judgment would be the right course of action and that in doing this, it would bring a conclusion to the matter sooner than waiting for the trial date.

The other benefit of doing such application at this time is that the proceedings would be stayed for the purposes of hearing the application, which mean that the parties didn’t need to take the steps directed by the court on the track, such as disclosure or witness evidence.

Acclaim prepared the application and a substantive witness statement in support of the application on behalf of the claimant, which provided the background giving rise to the debt and the evidence possessed by the claimant. The application was allotted to a hearing 3 months later. As with such applications, CPR 24.5(1) states that if the respondent to an application for summary judgment wishes to rely on written evidence at the hearing, they must file the written evidence at least 7 days before the summary judgment hearing. The defendant did not file any written evidence but did proceed to turn up to the hearing.

At the hearing, Acclaim submitted that the defendant did not have a real prospect of successfully defending the claim on the basis that the defence did not dispute receiving the goods. Further, the defendant did not raise any dispute with the claimant regarding invoices or any goods in accordance with the contractual clauses of the claimant’s terms of business.

Moreover, it was pointed out to the judge that when the claim was raised, the defendant made a partial payment. As a result, it was submitted that this indicates that the defendant had no issue with goods, as set out in their defence and before the defence was filed the defendant at no point raised any disputes.

Further, we submitted that the defendant has not rejected or returned the goods to the claimant, therefore, they have accepted the goods by keeping them. Also, the claimant relied on Section 35(4) Sale of Goods Act 1979, which states that because the defendant did not raise any issues within a reasonable time to the claimant, they were deemed to have accepted the transaction and therefore owe the claimant the outstanding invoices.

In dealing with the two limbs to be considered by the court in such applications, it was submitted that the defendant’s defence did not have sufficient merit for the claim to proceed to trial nor do they have a defence which is better than merely arguable or realistic and they have no evidence to support their position. On that basis, the claimant submitted that the defendant does not have a real prospect of successfully defending the claim and there are no other compelling reasons why the issue should be disposed of at trial. The defendant was given the opportunity to set out their position, where they continued to claim that they disputed that the goods delivered were correct.

The judge pointed out to the defendant and stated that looking at the file, the defendant filed a very brief defence and that there is no evidence from them to support their allegations, in particular evidence that they have queried the goods previously and refused or returned them.

The judge concluded the hearing and stated that she had considered all the evidence and noted, that within the defence goods were supplied and that the claimant’s terms and conditions do state that if there are any disputes then notification was to be made to the claimant within 10 days.

Further, she stated that the invoices raised by the claimant stated that any discrepancy is to be notified within 7 days. She further pointed out that there is no evidence that any discrepancy was raised and noted that the defendant has not returned the goods. She accepted the claimant’s submission in that in Section 35(4) Sales of Goods Act 1979 if the defendant did not raise any issues within a reasonable time to the claimant, they were deemed to have accepted the transaction.

As a result, the judge struck out the defence and made a judgment in favour of the claimant for the full balance as requested and awarded costs in favour of the claimant.

Just because a defendant has filed a defence to your claim, doesn’t necessarily mean the defence has merit compelling you to proceed to trial.

Acclaim have the necessary expertise and experience in litigated matters and are able to provide you with advice on your matter.

If you require assistance with debt recovery, or are interested in finding out more about our services, then you can contact a member of our team below:

Matt Perry

Associate Recoveries Manager

Tel: 0113 2258847 Email: Mattperry@acclaim.law

Sean Thornhill

Recoveries Executive

Tel: 0113 2258853 Email: Seanthornhill@acclaim.law

Dan Hirst

Partner

Tel: 0113 2258815 Email: Danhirst@acclaim.law

The Third Parties (Rights Against Insurers) Act creates a statutory right for third parties to an insurance contract to claim against insurance companies where the insured has gone insolvent. Its main aims were to address the shortcomings of the 1930 Act, an example of one of those shortcomings being that in the 1930 Act the third party first had to establish the insured’s liability in separate proceedings. This is no longer the case as the third party only needs to bring one set of proceedings now. Another is that a claimant had to restore a dissolved company to the register of companies and obtain permission from the court to bring proceedings against them.

When using this act, our clients can essentially step into the shoes of the insured and have the insured’s right to claim transferred to them. For example, if your business is in the leasing of vehicles, and your customer has hired or leased a vehicle from you on their own insurance policy, and during that hire period the vehicle is damaged beyond economical repair and the hirer becomes insolvent before you are paid for the damages, you can then have their rights in their insurance contract transferred to you and claim on their vehicle insurance for compensation.

For this legislation to apply the insured/policyholder must be dissolved, not just in liquidation or administration.

The Act can be applied to any form of insurance a defendant may have had in place at the time liability arose which might cover the type of claim, this is not limited solely to vehicle insurance for repair costs.

 

How Acclaim use this Act to help you

Here at Acclaim, we use the Act to help our clients gain compensation where they thought they would have no other option due to the insured being insolvent.

Acclaim work with several clients in the motor trade business, who before the assistance of Acclaim, used to write off these types of insolvent cases.

In assisting you with claiming under the Act, Acclaim will first write to the insurer on your behalf, setting out your rights and their liability to you under the Act. To ensure we have enough information to hand from the outset, we will serve notice on the insurer to provide us with full information relating to their policy with the insolvent debtor. This allows you to make an informed decision on next steps in the event indemnity is initially refused.

A claimant who relies on the Act has a right pursuant to s.11 and Sch.1 of the Act to serve notice on an insurer requesting information about matters including the terms of the insurance and what they have said to the insured about the insurance.  The Act provides a statutory time-limit of 28 days for the insured’s response to the notice.

 

Sch.1, 1(3) of the Act states that the following is the information that falls within the scope which can be requested under the notice:-

(a) whether there is a contract of insurance that covers the supposed liability or might reasonably be regarded as covering it;
(b) if there is such a contract:-
(i) who the insurer is;
(ii) what the terms of the contract are;
(iii) whether the insured has been informed that the insurer has claimed not to be liable under the contract in respect of the supposed liability;
(iv) whether there are or have been any proceedings between the insurer and the insured in respect of the supposed liability and, if so, relevant details of those proceedings;
(v) in a case where the contract sets a limit on the fund available to meet claims in respect of the supposed liability and other liabilities, how much of it (if any) has been paid out in respect of other liabilities;
(vi) whether there is a fixed charge to which any sums paid out under the contract in respect of the supposed liability would be subject.

 

Legal update under the Act

In BAE Systems Pension Funds Trustees Ltd v Royal & Sun Alliance Insurance plc and others [2017] EWHC 2082 (TCC), the High Court considered an application to join an insurer as co-defendant under the Third Parties (Rights Against Insurers) Act 2010. It looked at what effect a coverage dispute between the insurer and the insured has on the application of the Act.

The claimant (BAE) applied, under the Third Parties (Rights Against Insurers) Act 2010, to join the respondent insurer (RSA) as co-defendant to a claim arising out of the design and construction of a property. RSA insured the third defendant, who was responsible for the design and construction of the steel fibre reinforced concrete slab at the property. The third defendant company had been placed in administration and the administrators informed BAE of the existence of the insurance policy.

O’Farrell J considered that section 2(1) of the Act was engaged, even where there was a dispute as to whether or not the policy covered the claim in question.

O’Farrell J referred to the wording of section 2(1) of the Act and found that the claimant need only claim that it has such rights and did not have to establish those rights first. (Nonetheless, before it receives an indemnity the third party must prove the insured and insurer’s liability.)

The decision is important as it confirms that a coverage dispute will not prevent an insurer from being joined to proceedings under the Act. Depending on the nature of the coverage dispute, insurers may consider applying to strike out the claim against them or applying for coverage to be determined as a preliminary issue. Claimants should therefore be cautious of bringing proceedings against insurers where there is a potential coverage issue and should first be confident of an arguable case in relation to coverage under the policy, as it is likely insurers will apply for the claim to be struck out.

Obtaining a Judgment for damages and/or costs might only be the first step in the legal process to getting your money back. Following entry of a money Judgment either payable forthwith or following a defaulted instalment on the Judgment order, where the Judgment order remains unsatisfied, there are various enforcement steps that can be taken.

Choosing the right step or steps to take depends on the Judgment debtor’s circumstances and what information is available on the Judgment debtor. It is therefore important to obtain as much information on the Judgment debtor as possible. Sometimes, this might be available to you prior to taking action against the debtor, or it might be necessary to start a particular enforcement step to try to obtain information from the Judgment debtor where it has not previously been disclosed or found.

In this article, we take a look at some of the enforcement options available to a creditor once a Judgment order has been obtained.

 

Taking control of goods by warrant or writ of control

Taking control of goods by either a warrant or writ of control is the most frequently used enforcement option.

As soon as a Judgment order is obtained, either the County Court Bailiff (“CCB”) or High Court Enforcement Officers (“HCEO”) can be instructed.  Generally speaking, the HCEO is instructed on debts over the threshold limit of £600.00.

Once a warrant or writ of control is issued both the CCB and HCEO will look to enforce payment of the outstanding debt by levying upon goods/chattels that belong to the Judgment debtor, that have a value sufficient enough to clear the debt and or make sufficient in roads into the debt. The officers will take control of the goods and sell at public auction.

When the officers levy upon goods, they take an inventory of the goods and obtain Walking Possession. However, items that are levied upon and taken away and sold at auction may have a far less value at auction than they would have if they were sold in the open market. Therefore, goods may sometimes be in effect worthless as the value that they may obtain at auction may not even cover the costs of the removal and sale. Items such as computers and televisions can date quickly so their second-hand value drops dramatically. Any items that are located must be owned solely by the Judgment debtor and free of finance, in particular motor vehicles. Both the CCB and HCEO will look at all types of property, from motor vehicles to livestock and antiques.

Both the officers hands are tied when any goods located with a value less than £1,350 which are claimed to be tools of the trade, this is where goods are claimed to be needed to be a part of the debtor’s living, i.e. a builder would need his tools and van to enable him to carry out his job, in this case these would be exempt from being levied upon, if however the value of the goods are valued over £1,350 then the officer can remove surplus goods after the exemption value. It is worth noting that tools of the trade cannot be claimed by partnerships or limited companies. It is up to the officer to use their knowledge to determine what value they may fetch at an auction.

The main obstacle that officers will face is that they are not able to force entry into a residential property to levy upon goods, though they are into a commercial property, but if the business operates from a residential address, they are not able to force entry into this property.

The officers will in the first instance attempt to obtain payment in one go by either levying upon goods where possible and or through negotiation with the Judgment debtor. The officer will then, if the situation deems it, look to obtain payment via a series of instalment payments.

 

Attachment of Earnings Order

An Attachment of Earnings Order (“AEO”) can be obtained following the entry of a money Judgment against an individual(s) who is in paid employment. We are unable to make an Attachment application against anyone who is self-employed.

The level of repayment is decided by the court, though it is worth noting that this will not necessarily be a large value. An AEO order provides that a proportion of the Judgment debtor’s earnings is deducted by their employer and paid to the Judgment creditor in instalments, until the Judgment debt is satisfied. Any payments ordered by the court to be paid under the AEO are to be made direct from the Judgment debtor’s wages which are collected by the court.

Automatic deduction from wages means that you do not have to rely on the debtor making payment.

If you aren’t sure if the Judgment debtor is employed, we can instruct an enquiry agent to find out for you. We can also make enquiries via the Attachment of Earnings Index. (Each business centre of the County Court is obliged to keep an index of the names of Judgment debtors within their district who have an AEO order registered against them.) So, if the Judgment debtor has or had another AEO against them, this information may be held on the Index.

 

Orders To Attend For Questioning

It is worth noting that this is not an enforcement method, more of a fact-finding mission, though offers of repayment can be made on the back of this action.

The application for an Order for the debtor to Attend Court for Questioning (“ODACQ”) is made to the County Court without notice to the judgment debtor. The case is then transferred to the local court for the Judgment debtor. The matter will be allocated a date and time for which the Judgment debtor is to attend court for questioning. Generally speaking, 8 to 10 weeks after the application is made a date will be given, though this will vary from court to court.

An order is made and must be personally served upon the Judgment debtor. We partner with several process servers who can arrange service upon the debtor within 72 hours.

At court the Judgment debtor is required to give answers orally on oath to a court officer. Failure to comply with the order will result in the matter being referred to a judge, who may commit the judgment debtor for contempt of court, so if the Judgment debtor fails to attend court on the allotted day (and service has been effected), this may lead to a committal order being issued and a warrant for the Judgment debtor’s arrest to be applied for (though this is withdrawn should the Judgment debtor subsequently comply).

As referred to already, this is a good fact-finding exercise as the Judgment debtor (should they attend the appointment) will complete an in depth income and expenditure form which will gather information from their employment status to whether they are a home owner, this will allow you to consider alternative enforcement if necessary, such as an Attachment of Earnings (referred to above) or obtaining a charging order over the Judgment debtor’s property (referred to below).

This process isn’t just aimed at a Judgment debtor who is an individual (including sole traders), it can also be used to order an officer of a company to court for questioning as to the debtor companies means and assets, and the same procedure as above applies in respect to service and their requirement for attendance and consequences of failure to attend.

 

Charging Order            

A Charging Order is an order securing a charge over a Judgment debtor’s beneficial interest in land, securities or certain other assets. This prevents the Judgment debtor from selling the land without settling the debt first, provided that there is enough equity left for the Judgment creditor after payment of prior creditors.

For a court to use its discretion to grant a charging order, it will examine whether enforcement by this method is proportionate. Therefore, the court may choose not to secure a low value Judgment where if could be enforced by another method.

A charging order is most effective when there is substantial equity in a property and the Judgment debtor is the sole owner.

The process for obtaining a charging order can be timely, and a charging order of itself does not realize funds to satisfy a Judgment debt. To satisfy the debt, the Judgment creditor then has to apply separately for an order for sale of the property. Or alternatively, wait for its sale in due course by the owners, or following an order obtained by other creditors.

Once a Charging Order has been made, we will make enquiries with the additional creditors, i.e. the mortgage company, to establish the value of the monies that are owed to them. A valuation of the property is also obtained to enable a calculation of any equity that may be in the property to establish the merits of proceeding with an order for sale application.

On the basis that there is sufficient equity to discharge the Judgment debt and any prior charges in full, then an application for an order for sale can be made.

 

Third Party Debt Order

This entitles payment to be made either direct from the Judgment debtor’s bank account if in credit and or from a third party who owes money to the Judgment debtor.

The Judgment debtor’s bank account must be in the Judgment debtor’s sole name, you are not able to make an application against an account in joint names, unless the Judgment order is in joint names.

If the application is against a third party, then once the application is filed at court the Judge if satisfied will give an Interim Third-Party Debt Order. The order is served upon the third party after which they are to freeze the money that is owed.

If the third party is not a bank or building society, they have an opportunity to state if they do not owe the Judgment debtor any monies or if the value is less than the monies being claimed.

If the third party is a bank or building society, they must identify all accounts that are in the sole name of the Judgment debtor, whether the account(s) are in credit and there are sufficient funds to cover the order and whether they are entitled to retain some of the credit balance to offset debit balance or other accounts.

At the hearing, the Judge will consider whether to make the order final and arrange for the monies that are frozen to be transferred to the claimant. If insufficient monies are held to cover the Judgment debt & costs, then the monies will be allocated to the costs aspect firstly, the balance of the monies that are unpaid will still be payable and owing by the Judgment debtor, this does not stop you from taking further legal action.

 

Contact

If you require any further information in relation to our services, please contact a member of our team today:

Matt Perry
Recoveries Manager
Tel: 0113 2258847 Email: Mattperry@acclaim.law

Dan Hirst
Partner
Tel: 0113 2258815 Email: Danhirst@acclaim.law

Sean Thornhill-Adey
Recoveries Executive
Tel: 0113 2258853 Email: Seanthornhill@acclaim.law

Katy Mullarkey
Recoveries Executive
Tel: 0113 2258822 Email: Katymullarkey@acclaim.law