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Instalment Orders & Time to Pay

There is no doubt that the current Coronavirus pandemic is creating financial difficulties for a great many people and this has been recognised with banks and building societies offering mortgage, credit card and other payment holidays. It is likely that these financial difficulties will continue for some time even after the pandemic has eased.

It is therefore foreseeable that in the not too distant future many unsuccessful defendants to money claims may well be asking if they can have time to pay any sums that the court orders are payable.

When a court gives a monetary judgment the usual order is for the sum to be paid within 14 days (CPR r.40.11).

Whilst the court will ordinarily order sums to be paid within 14 days, CPR r.40.11 does provide the court with the power at the time of making the order to make a different order, i.e. by providing a longer period to pay in full or even providing for payment by instalments.

It is also possible for a judgment debtor to seek to vary an order after it has been made whether that be a request for a longer period to pay or for payment by way of instalments or even a variation in the instalment amount if payment by instalments was the order previously made (CPR r.40.9A).

A judgment creditor can always agree to a request for time to pay but where the judgment creditor does not agree it will be for the debtor to persuade the court that an alternative order (to payment in full within 14 days) should be made.

It should be noted that a judgment creditor can also apply (pursuant to CPR r.40.9A) to the court for a variation to any order. An obvious example would be if an instalment order was previously made and the judgment creditor becomes aware that the judgment debtor’s circumstances have changed for the better – the creditor could seek for increased instalments or an earlier payment in full.

The Court of Appeal considered the issue of instalment orders in the case of Loson v Stack [2018] EWCA Civ 803 and built upon earlier principles established in High Court authorities.

The following principles can be extracted from those authorities:

  • The starting point is that an inability to pay is not a sufficient reason for a different order (see: Gipping Construction Limited v Eaves Limited [2008] EWHC 3134 (TCC) at para [11]).
  • Parliament has afforded judgment creditors with a range of options for enforcement (see Amsalem v Raivid [2008] EWHC 3226 (TCC) at paras [6]-[7]).
  • The Court of Appeal in Loson did not accept that applications for instalments orders could only be successful in ‘exceptional cases’ but emphasised that:
  1. The repayment schedule must allow for the judgment debt to be settled within a ‘reasonable period of time’, and
  2. The interests of the judgment creditor are ‘paramount’

(see Loson at para [23]).

Another important consideration in relation to instalment orders is the entitlement to interest particularly where a judgment is for a sum in excess of £5,000. By way of the Judgments Act 1838, s.17 / County Courts Act 1984, s.74 and the County Courts (Interest on Judgment Debts) Order 1991/1184 a judgment creditor will have a statutory entitlement to simple interest on the principal sum at 8% – in other words, where the debt is not paid in time, the interest will accrue.

The imposition of an instalment order has the effect of suspending that statutory right to interest on the judgment debt (see: County Courts (Interest on Judgment Debts) Order 1991, art.3).

Having regard to the fact that the interests of the judgment creditor are paramount, it can be argued that the effect of an instalment order would be to elevate the interests of the judgment debtor above the interests of the judgment creditor because of the suspension of the right to claim interest on an outstanding debt.

CONCLUSION.

Parliament has provided judgment creditors with a range of options for the enforcement of a judgment debt.

The authorities show that a court is likely to be cautious about limiting a judgment creditor’s right to exercise any of the options for enforcement that have been provided by Parliament.

It is right to point out that these are not ordinary times but this alone should not make an application for time to pay any more or less likely.

A court will always look at any application carefully and will look to balance competing interests.

It must be remembered that judgment creditors are likely to also be finding the current economic climate just as difficult as judgment debtors and applicants should not expect Covid-19 to be reason of itself to justify a different order to the standard 14 days for payment.