A review of Diana Loson v (1) Brett Stack (2) Newlyn PLC [2018] EWCA Civ 803

Facts

In this case a judgment debtor appealed against a decision in which her application to pay a judgment debt by instalments was refused.

The original claim arose due to a parking ticket which was obtained by the appellant’s husband and his failure to pay the parking fine. Following the dispute regarding a parking ticket, the appellant was ordered to pay £5,000 costs. When the appellant failed to satisfy the costs order the respondents served a statutory demand.

Consequent to the actions of the respondent the appellant applied unsuccessfully to set aside the statutory demand and further costs of £3,000 were added to the judgment debt. The appellant made an application under CPR rules 40.9A to vary the Costs Order through by applying for an order that monthly repayments be made. This order was granted on the basis that it was ‘reasonable and proportionate’ to grant the order in light of the appellant’s financial circumstances.

The Appeal

The respondents appealed against the District Judge’s decision. A Circuit Judge reviewed and concluded that the District Judge's decision had left out a crucial fact, being that the varied monthly instalment order would not even satisfy the statutory interest accruing on the costs. If the instalments were made in accordance with the original Order the Judgment Debt would continue to increase and therefore would never be paid.

The Court of Appeal

On this basis Patten LJ and Floyd LJ decided that the appellant had no realistic prospect of discharging any significant amount of her costs liability in the near future.  The District Judge’s decision failed to address the fact that the statutory interest would not be paid and the outstanding amount would increase, the Circuit Judge had been correct to set that order aside and dismiss the Debtor’s application.

Commentary

It has long been the habit of lower courts to make orders for the payment of judgment debts by instalments as low as £1 per month, thus interfering with the rights of judgment creditors to use various enforcement methods that require a debt to be due and owing .This is an important decision by Patten LJ and Floyd LJ as they construe that where a judgment debtor applies to pay a judgment debt by instalments  they must  put forward a realistic payment schedule for the outstanding debt and a reasonable time frame. If this test is not met a court should refuse the judgment debtor’s application.

An Instalment Order often stops a judgment creditor from enforcing a judgment and this decision, if followed by District Judges is likely to allow the judgment creditors to enforce their judgment debt as they may choose through other enforcement methods such as Charging Orders or Bankruptcy.