New Requirements For Judgment Debt Instalment Plans

A recent Court of Appeal decision will be welcome news for companies recovering judgment debts by way of installment plans.

In the case of Diana Loson v Brett Stack and Newlyn PLC, Ms Loson’s husband failed to pay a parking fine. After a dispute over the fine, she was ordered to pay £5,000 in costs. When she failed to pay the parking company served a statutory demand upon her, which she sought to set aside. This application was refused and a further £3,000 costs were added to the amount she owed.

Ms Loson applied to the Court  to vary the Order to allow her to make monthly payments. This was granted by the County Court as being ‘reasonable and proportionate’ in light of her financial circumstances.

The parking company disagreed.

The monthly payment offered did not even cover the statutory interest accruing on the debt and they appealed the decision. The Circuit Judge hearing the case agreed and set aside the order and dismissed the application.

The matter went to the Court of Appeal who agreed with the Circuit Judge. The Court of Appeal Judges Pattern LJ and Floyd LJ recognised that the County Court had long been agreeing to low instalment payments. This interferes with the right of judgment creditors to use enforcement methods that require a debt to be due and owning, which is not the case when an instalment payment plan is in place.

The Court of Appeal said that judgement debtors must now put forward a realistic schedule for payment within a reasonable period of time. If this test is not met then the application to pay instalments should be refused.

This case will be welcomed by creditors who find that whilst successful, they have previously had to accept low repayments of sometimes just £1 per week in relation a County Court Judgement where interest is accruing daily.

It may increase the number of applications for Orders for Sale of property and insolvency proceedings, but it will hopefully act as a neat test for those hoping to pay off debts over time or indeed those looking for reasons to resist such applications.

For more information about our commercial debt recovery services, please contact Liz Henwood at our Sheffield office on 0114 3496982.