In many cases, creditors who are owed a sum of money by a debtor will only think about obtaining a Judgment against the debtor.  Obtaining a Judgment can sometimes only be half the battle if the Judgment debtor does not make payment and discharge the Judgment.  In these circumstances, the Judgment creditor will need to take steps to enforce the Judgment debt.  This note will focus on the options that a Judgment creditor has to enforce a money Judgment against a limited company (the methods of enforcement against an individual are slightly different and include a Bankruptcy Petition and an application for an Attachment of Earnings).

The most common (and generally straightforward) methods of enforcing a money Judgment against a limited company are: (a) a Winding Up Petition; (b) instructing County Court Bailiffs/High Court Enforcement Officers to take control of goods with a writ/warrant of control; (c) an application for a Third Party Debt Order; and (d) an application for a Charging Order over a property owned by the company.

Winding Up Petition

If the value of the Judgment debt is over £750.00, then a Judgment creditor has the option of issuing a Winding Up Petition against the Judgment debtor based on its inability to pay its debts.  The Judgment against the Judgment debtor will prove the existence of an undisputed debt.  In order to issue a winding up petition, the Judgment creditor must pay a Court Issue Fee (currently £332.00) and a petition deposit to the Official Receiver to manage the winding up of the Judgment debtor (currently £2,600.00).  There will also be additional costs for (a) a process server to serve the Winding Up Petition on the Judgment debtor and (b) advertising the petition in the London Gazette.  

If the Judgment debtor is placed into liquidation then the costs which the Judgment creditor will generally incur will be paid as part of a claim in the liquidation with the net effect being that if there are insufficient funds in the liquidation to cover the costs then they will only recover a percentage (if anything).

The winding up of a Judgment debtor can sometimes be viewed as a somewhat extreme step (which carries substantial costs), however it can be an effective option if other enforcement methods are not viable/effective.

Taking control of goods

In order to enforce a money Judgment by taking control of goods through a writ or warrant of control, if the Judgment is in the County Court, then a Judgment creditor can apply for a warrant of Control, and then instruct a County Court Bailiff to attempt to take control of goods and sell them.  That being said, enforcement by a County Court Bailiff can generally be a slow process due to the limited resources of County Court Bailiffs.  In practice, Judgment Creditors will usually instruct High Court Enforcement Officers to transfer the Judgment to the High Court and then obtain a Writ of Control on the Judgment creditor’s behalf. The High Court Enforcement Officer will then send a Notice of Enforcement to the Judgment debtor giving them seven days to pay the Judgment before they go in and look to seize any recoverable assets.

Any recoverable assets that are seized by High Court Enforcement Officers would then be sold, with the funds being credited towards the balance of the Judgment (less any costs payable by the Judgment creditor to the High Court Enforcement Officers). The High Court Enforcement Officers’ fees are usually passed on to, and payable by, the Judgment debtor on the caveat there will usually be a flat fee payable by the Judgment creditor if the High Court Enforcement Officers are unable to enforce the Judgment.

Application for a Third Party Debt Order

Under a Third Party Debt Order, sums that are owed to a Judgment Debtor that are in the hands of a third party (for example, in a bank account) are frozen and then ultimately transferred to the Judgment creditor as payment towards the Judgment debt.

An application for a Third Party Debt Order is a two stage process whereby the Judgment creditor initially applies for an Interim Third Party Debt Order to freeze the Judgment debtor’s bank account whilst the Court considers the application for the Final Third Party Debt Order.  The application for the Interim Order is considered by a Judge on paper and the application for the Final Order is heard at a hearing.  If the Final Order is granted, and the third party holds a positive balance of funds, the third party can be ordered to transfer the funds to the Judgment creditor as payment towards the Judgment debt.

An application for a Third Party Debt Order can be a useful tool if the Judgment creditor is aware of a third party “debt” (such as a bank account) and knows the details of the third party (such as the bank account details).

Application for a Charging Order

In the event that the Judgment debtor is the sole owner of any land/property, then it is also open to a Judgment creditor to apply for a Charging Order over that land/property. Similarly to a Third Party Debt Order, an application for a Charging Order is a two stage process. The application for an Interim Charging Order will usually be considered by a Judge on paper and, if granted, can be registered as a notice or a restriction at the Land Registry. The Interim Charging Order will stop the Judgment debtor from selling the land/property without the Judgment creditor knowing.  If an Interim Charging Order is granted, a Court hearing will then take place, where a Judge will decide whether the Interim Charging Order should be made Final.  If a Final Charging Order is granted, then the Interim Charging Order will continue, and the Judgment Debtor will be required to pay the sum owed to the Judgment creditor upon sale of the land/property.

When considering whether or not to grant a Charging Order, the Court will take into account a number of factors, including all of the circumstances of the case, and whether the granting of a Charging Order would be equitable to all of the parties involved.

Unfortunately, a Charging Order will not actually have the effect of securing any immediate payment to the Judgment creditor. Once a Charging Order is obtained, a Judgment creditor can later apply for an Order for Sale, however this is a slow process, and the Court will take into account a number of factors before when considering whether to grant an Order for Sale, which include: the prospects of the Judgment debt being discharged without an Order for Sale; the Judgment debtor’s conduct; the value of the Judgment debt; and any human rights issues.

Before issuing proceedings for a debt owed by a debtor, it is important to undertake research beforehand to ensure that there are good prospects of enforcing any Judgment that may be obtained.  A Judgment creditor does not want to find itself in a position where it has spent a substantial sum of money in obtaining a Judgment, which it cannot later enforce.

If you are a Judgment creditor in need of advice on how to enforce a Judgment, or for any other advice, please do not hesitate to contact our commercial dispute resolution team on 01254 828410.

Disclaimer: this article is not to be relied upon as legal advice. The circumstances of each case differ and legal advice specific to the individual case should always be sought.