Debt Recovery

The aim at the outset of any debt recovery claim is simply to recover the debt owed. However, obtaining a judgment or order from the court is sometimes just the first step in trying to recover the debt. A court will not automatically enforce any judgment or order, and the onus is on you, as the creditor with the benefit of the judgment or order, to take the appropriate enforcement action.

The judgment of the court will either state the time within which the debtor must pay the sum owed but if not, the general time limit under the Civil Procedure Rules is that the debtor has 14 days to make payment. There are of course exceptions to this, however these can be explored on a case by case basis.

What happens when the debtor still doesn’t pay?

If payment is not received in line with the court’s judgment, the next step is to identify the debtor’s assets. For a limited company, the starting point in this exercise can be done through a Companies House search and a review of the latest filed accounts. Alternatively, if the judgement debt is a sizable one, expert evidence could be obtained to look at the value of the judgment debtor company and also to scrutinise how and where the company has spent it’s money to see if any potential claims might later on be made against the company’s directors.

If the judgment debtor is an individual, the first step is to identify any properties they own, as well as any other income they might have, including pensions or shares.

Once the assets have been identified an assessment must be made to conclude whether the debt is recoverable. Simply put, if the assets are not more valuable than the debt, you are not going to recover the full amount owed.

Assuming the debtor has the assets against which you can recover, there are various methods that can be used to enforce the judgment debt, for example:

• An application for the debtor to be made bankrupt or wound-up.
• Obtaining a charging order against a property
• Instructing bailiffs to seize and sell goods owned by the debtor through a writ or warrant of control.
• Obtaining a third-party debt order against monies held for the debtor by a third party.

On the merits of each case, any of the above could be a more desirable method of recovery than the others.  For example, if the debt is not needed urgently, obtaining a charging order against the debtor’s property is a fairly straightforward application to secure your debt. The debt will then be recovered, as and when the debtor sells the property, assuming there is sufficient value in the property when you secure your debt. In some circumstances you might ask the court for an order to sell the property.

Alternatively, in the interesting case of Blight v Brewster [2012] EWHC, a third-party debt order was pursued and successfully obtained against the debtor’s pension fund. The debtor had the right to elect to drawdown 25% of his pension as a tax-free lump sum, and no other available assets. Initially the court ruled that the application for a third-party debt order was unviable because the right to draw down a pension was not a debt. The debt would only arise if that election was made.

On appeal, Gabriel Moss QC said the following:

“There appears to me to be a strong principle and policy of justice to the effect that debtors should not be allowed to hide their assets in pension funds when they had a right to withdraw moneys needed to pay their creditors.“

The court then ordered that the debtor must delegate their power to drawdown on the pension to the creditor. The debtor refused to do so, however the court allowed the creditor to make the drawdown on his behalf and in his name. The payment from the pension was then made, transferred to the creditor, and the debt paid.

How Pinney Talfourd can help

Our Commercial Litigation and Dispute Resolution Team regularly act for clients based in Essex and London, along with clients in Europe and further afield. There are many routes to take when you have the benefit of a judgment debt and the debtor is refusing to pay.

To discuss any of these further, please contact Nick Hatchett on 01708 229 444 or email