So you have won your commercial legal dispute and been awarded damages by the Court.
Unfortunately obtaining an award of damages may only be the first step in getting what you are entitled to. Where the defendant ordered to pay your damages fails to make payment by the date ordered by the court, you will have to apply to the court for a judgment enforcement.
A court will not automatically enforce any judgment or order, you will need take judgment enforcement steps yourself through your commercial lawyer.
What does the defendant own?
You need to establish if the defendant has enough assets to make it worthwhile before taking any enforcement steps. If the defendant does not have any assets, it will not be worth proceeding. More money spent on enforcement proceedings will be cash thrown away. This should not be the situation though, as your commercial lawyer should have done as asset search prior to taking legal action.
What should an asset search reveal?
As much information as possible should be obtained about a defendants assets. This would include information regarding the following:
Do they own any land? If so, where is it? What is its likely value?
Is he/she employed? If so, by whom? When and how does his salary get paid?
Does they own or have a stake in another business?
Do they have insurance covering liability?
What goods of significant value do they own?
Do they have a bank account?
Be careful, and act quickly to ensure that assets are not moved away so you cannot obtain them. It is possible to prevent such behaviour by applying for a court order, known as a freezing injunction.
It is also worth making enquiries to see if the judgment is likely to make the defendant become insolvent. If it will, it may not be worth taking steps to enforce in any event as your debt will rank alongside other unsecured creditors in the insolvency, meaning you are unlikely to get back the full amount of the debt or anything at all.
Types of Judgment Enforcement
Writ of control and warrant of execution
An execution against goods is a popular method of judgment enforcement. It can be the quickest method of enforcement, is a simple procedure and can be used against corporate debtors.
It is the only method of enforcement that does not require a decision by a court and can be taken alongside other methods of enforcement. Execution requires the issue of a court document which commands an enforcement officer (bailiff) to take control of and sell a debtor’s goods to raise funds to satisfy the debt.
Third party debt order
A third party debt order freezes sums owed to a debtor that are in the hands of another party, such as a bank. The debtor is then prevented from having access to the money until the court makes a decision about whether or not the money should be paid to the creditor. Third party debt orders can be used alongside other methods of judgment enforcement.
Charging orders & orders for sale
A charging order is a way of securing a debt by imposing a charge over a debtor’s beneficial interest in land, securities or certain other assets. This acts to prevent the debtor from selling the land without paying what is owed to the creditor, provided that there is enough equity after payment of prior creditors. The charging order or order for sale method of judgment enforcement can be used in addition to other methods of enforcement, either simultaneously or consecutively.
Attachment of earnings
An Attachment of Earnings Order provides that a proportion of a debtor’s earnings is deducted by his employer and paid to the creditor until the judgment debt is paid. It is only available against individuals who are in paid employment. You cannot obtain an AEO if the debtor is a corporate or partnership debtor, and so this is not the route for judgment enforcement for recovering your commercial legal dispute damages.
Bankruptcy and company liquidation
If the amount you are owed by an individual debtor is more than £5,000, you can apply to make him bankrupt.
You can also apply for a company to be wound up. The threshold in respect of corporate debtors is lower at £750. A usual prior step is the service of a statutory demand identifying the exact sum owed and providing the creditor with 21 days in which to make payment. If such payment is not made, the creditor will be able to present a petition for bankruptcy/winding up to the court.