Debt recovery options

Having reviewed, in the last edition, the various steps involved in debt collection through the courts, Siobhan Kenny of Frank Murphy Solicitors considers the recovery options available once a court order has been obtained.

The options outlined below are not necessarily mutually exclusive, and a claimant might elect to pursue two or perhaps more enforcement steps at the same time. The debt, of course, is  recoverable only once and some caution is required. It would be highly unusual for a court to allow a claimant to recover costs in circumstances where they were incurred unnecessarily.

It is also of course prudent to consider the cost-effectiveness of the available options – and undoubtedly an option which might be ideal in one case, will be completely ineffective in another.

After judgement

Once judgement has been obtained – in any of the District Court, Circuit Court or High Court, the claimant has a number of options intended to assist in converting that judgement into payment. A judgement may, in normal course, be enforced at any stage during a period of 12 years from the date on which it is obtained, although if it is older than six years, application to Court may be necessary in some cases.

Publication of the judgement

This requires lodgement of details and particulars of the judgement in the High Court administration office. On registration, the fact of the judgement will be published in the gazettes such as Stubbs etc – with consequent impact on credit ratings. Processing time by the Courts is usually two weeks.

Execution order – Sheriff

Upon obtaining the judgement, it is open to the Creditor to refer the judgement to the local County Sheriff – who will attend at the debtor’s premises with the intention of seizing goods to the value of the judgement. If the debtor has goods available to seize – such as stock, plant or machinery, this remedy can be very effective. Frequently, however, the Sheriff will come away empty-handed,
leaving the judgement creditor with no return, having incurred relatively low fees in respect of the Sheriff’s attendance. The time involved can be very difficult to estimate, and the Sheriff may retain the judgement referred to his office for lengthy periods.

Judgement mortgage

Subject to compliance with procedural requirements – a Judgement can be converted into a mortgage and registered as a charge against any property owned by the Debtor. The benefit of registering a judgement mortgage against a property which is already charged to a bank or other lender is limited. The owner of the earlier charge will take priority, and, if there are insufficient funds to satisfy the charges registered ahead of the judgement mortgage in question, the judgement creditor will recover nothing.

On the other hand, if the property in question is charge free – the registration of a judgement mortgage might be the ideal enforcement option. The process is a relatively straightforward one and will involve the swearing of an affidavit and the lodgement of a dealing in the Land Registry. Both the affidavit and the application have to be prepared, and there will be costs and office fees involved.

Once the judgement mortgage is registered, it becomes a charge on the land, and the landowner will have to deal with the owner of that charge if he wants to sell or mortgage his land. In addition,
and subject to further court application – involving detailed court proceedings – it might be open to the judgement mortgage holder to seek an order for the sale of the lands in question. Clearly the costs involved in such a process are likely to be quite substantial, and this course is usually considered only where the value of the debt is significant.

Garnishee Proceedings

Once a judgement is obtained, the claimant can make an application to Court for an order directed to a third party from whom the debtor is due to receive a payment (e.g., an employer, a Client under a building contract, a local authority). Under the terms of the order, the third party is required to make any relevant payment to the judgement creditor (i.e., the claimant) and not to the judgement debtor. As you might imagine, this can be very effective.

The process is again relatively straightforward – and involves the swearing of court documents, and the making of an application to court. The difficulty for the creditor is in identifying a paying party, and obtaining an opportunity to make the court application, and serve the resulting order, before the payment is made. This is a relatively cost-effective process – and will usually involve counsel.

Injunctions

An injunction is an Order of the Court requiring a party to do something or not do something. In the context of debt recovery, the relevant type of injunction would be an order freezing assets, known as a Mareva Injunction – under which the respondent is constrained from disposing of or dissipating assets whilst the injunction remains in place. This is a complex remedy, and the grounds on which it will be considered are very specific. It is not commonly granted  in any but the most complex of commercial cases and, as always when dealing with legal remedies, the costs involved will be directly impacted by the complexity of the matter in issue.

This Business Support article featured in the November/December 2016 edition of The Hardware Journal.