Payment of Judgment debt by instalments

In the recent case of Loson v Stack and another [2018] EWCA Civ 803, the Court of Appeal has provided clarity and guidance on the test that judges should apply when making an order for a judgment sum to be paid by instalments.

Loson v Stack and another [2018] EWCA Civ 803 concerned a fine issued under a parking ticket. The Claimant received a parking ticket while her husband was using her car. When he failed to pay the fine, Bailiffs were then instructed by the local authority in order to seize the vehicle. Following this event, the Claimant issued proceedings seeking an injunction and damages. The claim was dismissed and the Claimant was ordered to pay £5,000.00 worth of costs. When she failed to pay the costs, the Defendants served a Statutory Demand upon the Claimant which she applied to have set aside. The application was unsuccessful and a further costs order of £3,000.00 was made against the Claimant. The Claimant then subsequently sought a variation of the costs order to allow for payment by instalments. This was granted by the District Judge based on the Claimant’s ‘limited means’ and on the basis that payment by instalments would not delay the Defendants ability to proceed in a bankruptcy claim. The Claimant was ordered to pay £50.00 per calendar month, despite statutory interest of 8% amounting to £53.33 per month alone. This in turn meant that the Claimant would never pay off the Judgment sums, and would only ever cover the accruing interest.

The Defendant made a successful appeal, following trial, on the basis that the Judge at first instance ignored the statutory interest and ignored that it would have taken 13 years to pay off the principal Judgment sums, if the interest did not apply. The Judge’s decision was therefore said to be perverse specifically as it failed to take into account the Defendant’s interests.

While the Claimant argued that the Defendant could apply to have the order varied in the future “upon there being a change of circumstances”, this was rejected by the Circuit Judge and therefore the appeal was allowed meaning that the order allowing payment by instalments was set aside.

The Claimant then appealed to the Court of Appeal, on the basis that “exceptional circumstances” were not required for an order allowing payment by instalments, and that it was open for the Defendants to apply to vary the instalments. While the Court of Appeal agreed that exceptional circumstances were not a requisite for payment by instalments, they held that discretion had to be exercised in a way that the rights and interests of the Creditor were given priority.

The Court also advised that a Debtor applying for an instalment order must present to the Court a realistic repayment schedule and must demonstrate that the Creditor would receive the monies within a reasonable time period. What is considered as reasonable will depend on the individual details of each case and the individual circumstances of each party. The Court of Appeal agreed with the decisions reached by the Circuit Judge, and the appeal was therefore dismissed.

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