The creditors’ right to enforce a judgment outweighed the debtor’s offer to pay by instalments when the payments would not clear the debt in a reasonable time.
Summary
This case concerned an application to vary two costs orders using the provisions in Civil Procedure Rules - CPR 40.9A to orders payable by instalments.
Background
In May 2010 Loson (L) was issued with a parking ticket by the London Borough of Camden (Camden). L’s appeal to the parking adjudicator and application for judicial review were both unsuccessful.
The ticket remained unpaid. Camden obtained a warrant for the possession of the car and instructed Stack (S), an enforcement agent. S clamped and then impounded the vehicle. L sought an injunction against S in the County Court. After having the proceedings struck out and then reinstated, L was ordered to pay S’s costs with £5,000 on account and was refused permission to appeal.
S then issued a statutory demand in respect of their costs order. L unsuccessfully applied for the demand to be set aside and incurred further costs of £3,000.
In November 2014, L applied to vary the two costs orders. Their income, including part time work and some benefits, was just under £2,000 per month. They made an offer to pay by monthly instalments of £50.
S objected to the offer as it would take L some 13 years to pay the total amount of £8,000 plus interests. In December 2015, S issued a bankruptcy petition against L.
In February 2016, the district judge accepted L’s offer of instalments believing that the instalment order would not prevent the S from continuing with their bankruptcy petition.
S appealed against the instalment order and was successful. The appeal judge recognised that the instalment order may well prevent a bankruptcy order, referring to rule 10.24(2) of the Insolvency (England and Wales) Rules 2016. This states that:
‘If the petition is brought in relation to a judgment debt, or a sum ordered by any court to be paid, the court may stay or dismiss the petition on the ground that an appeal is pending from the judgment or order, or that execution of the judgment has been stayed.’
The principal reason for allowing the appeal was because the payment of £50 per month would not cover the statutory interest. L appealed to the Court of Appeal.
The court's decision
Appeal dismissed.
The Court of Appeal sympathised with L but agreed that the payment offered did not represent a realistic repayment schedule, especially when statutory interest was taken into account.
Para 23 of the judgment states: ‘… I would not myself describe the circumstances in which the debtor can successfully apply for an instalment order as exceptional. Nor would I, in terms, endorse the view that the jurisdiction can only be exercised where the debtor is solvent. Any case in which the debtor seeks time to pay is, in one sense, an instance of insolvency at least insofar as the debtor is unable to pay his or her debts as they fall due. But I do accept that for the debtor to obtain the benefit of an instalment order, whether originally under CPR 40.11 or by way of variation under CPR 40.9A, the Court must be presented with a realistic repayment schedule backed up by evidence that the creditor can be expected to receive the amount of principal and any interest within a reasonable period of time. To that extent, the interests of the creditor will be paramount.’
Comments
The most striking thing about this judgment is the failure of the Court of Appeal to take into account that the order made by the district judge would not have attracted statutory interest.
Section 3 of the County Court (Interest on Judgment Debts) Order 1991 states that ‘Where under the terms of the relevant judgment payment of a judgment debt … is not required to be made until a specified date, or is to be made by instalments, interest shall not accrue under this Order until that date, or on the amount of any instalment, until it falls due, as the case may be.’
The judgment is clearly unhelpful to debtors wishing to pay their judgments by instalments. Care should be taken (where applicable) when making applications to demonstrate that interest will not accrue. We will have to wait and see what impact the judgment has on applications for instalment orders in the County Court.
Some readers may now feel that section 3 of the County Court (Interest on Judgment Debts) Order 1991 only applies to debts regulated by the Consumer Credit Act 1974, and that a parking charge is not a regulated debt – therefore, the County Court and Court of Appeal's interpretation of the law is correct. However, it is arguable that section 2(3)(a) of the 1991 Order exempts all Consumer Credit Act regulated agreements from statutory interest. This is separate to the provisions in section 3 for instalment orders, which would only ever apply to unregulated agreements. Did the Court of Appeal decision wrongly considered statutory interest where it would not fall due?