Charging order –– Charging order absolute –– Instalment payment order –– Section 86 of County Courts Act 1984 –– Instalment payment order made prior to charging order absolute –– Whether county court having jurisdiction to make charging order absolute –– Whether proper exercise of discretion
Following the dismissal of proceedings commenced by the appellant against the respondent, the appellant was ordered to pay the respondent’s legal costs. The costs were eventually taxed, and appropriate notices were issued in July 1999 for a sum of approximately £12,500. A charging order nisi was obtained by the respondent ex parte in November 1999. The date for consideration of whether it should be made absolute was listed for 25 November, but adjourned for lack of court time. In January 2000 the deputy district judge made an order for payment of the debt by instalments at the rate of £35.10 per month. In February the district judge made the charging order absolute. The county court judge dismissed the appellant’s appeal against that decision. The appellant further appealed, contending that the county court had no jurisdiction to make the charging order absolute.
Held: The appeal was dismissed.
The provisions of section 86 of the County Courts Act 1984, which inhibit the issue of the execution of a payment instalment order until after a default in payment, do not prevent the making of a charging order absolute following an instalment order. A charging order absolute takes effect from the date of the charging order nisi. Where a charging order nisi has been obtained before the instalment order is made, there is nothing wrong, in principle, with a charging order and an instalment order coexisting: an instalment order provides for the method of payment of a judgment debtor and a charging order gives security for the eventual payment of that debt. The district judge had had jurisdiction to make a charging order absolute and had properly exercised his discretion to do so.
The following cases are referred to in this report.
Burston Finance Ltd (in liquidation) v Godfrey [1976] 1 WLR 719; [1976] 2 All ER 976
Haly v Barry (1868) LR 3 Ch App 452
Mercantile Credit Co Ltd v Ellis; Mercantile Credit Co Ltd v James; Mercantile Credit Co Ltd v Carrington; Mercantile Credit Co Ltd v Huxtable; Mercantile Credit Co Ltd v Stanger The Independent 17 March 1987; The Times 1 April 1987
Roberts Petroleum Ltd v Bernard Kenny Ltd (in liquidation) [1983] 2 AC 192
This was an appeal by the appellant, Seoirse Treabhar Ropaigealach, from a decision of Judge Masterman, sitting in Cardiff County Court, dismissing an appeal from a charging order absolute made by the district judge in respect of legal costs ordered to be paid in proceedings by the appellant against the respondent, Allied Irish Bank plc.
Paul Spencer (instructed by Huttons, of Cardiff) appeared for the appellant; David Quest (instructed by Dolmans, of Cardiff) represented the respondent.
Giving the first judgment, HALE LJ said:
1. This is an appeal, with the permission of Tuckey LJ, from the order of Judge Masterman in Cardiff County Court on 18 April 2000 dismissing an appeal from a charging order absolute made by the district judge. It is therefore a second appeal. It raises a short, but not unimportant, point of practice in the county courts in relation to charging orders. If an order for payment of a judgment debt by instalments is made after a charging order nisi, but before that charging order has been made absolute: (1) is there jurisdiction to make the charging order absolute at all? (2) if there is such jurisdiction, what effect should the instalment order have upon the exercise of the court’s discretion?
2. The appellant was the claimant in an action against the respondent bank, which he lost. Costs were ordered against him. These were eventually taxed and the appropriate notices issued on 8 July 1999 for a sum of approximately £12,500. A charging order nisi was obtained ex parte on 8 November 1999. The date for consideration of whether it should be made absolute was listed for 25 November but adjourned for lack of court time.
3. On 12 January 2000, Deputy District Judge Garland-Thomas made an order for payment of the debt by instalments of £35.10 per month. It is worth noting that, at that rate, it would take between 29 and 30 years to pay off even the £12,500, let alone any further interest that might accrue upon that judgment debt.
4. On 18 February 2000, District Judge Carson made the charging order absolute. As I have already said, Judge Masterman dismissed the appellant’s appeal on 18 April 2000.
Jurisdiction question
5. This depends upon section 86 of the County Courts Act 1984. Subsection (1) reads as follows:
Where the court has made an order for payment of any sum of money by instalments, execution on the order shall not be issued until after default in payment of some instalment according to the order.
6. Subsection (3) provides:
Except so far as may be otherwise provided by [rules of court] made for those purposes, execution or successive executions may issue if there is any such default for the whole of the said sum of money and costs then remaining unpaid or for such part as the court may order either at the time of the original order or at any subsequent time; but except so far as may be otherwise provided by such rules, no execution shall issue unless at the time when it issues the whole or some part of an instalment which has already become due remains unpaid.
7. A charging order is execution for this purpose.
8. It has been held by this court that a charging order nisi cannot be made at all if an instalment order has been made before that date: see
if it were necessary so to hold, I would hold that there was not jurisdiction in the court to make a charging order as long as the instalments were being regularly paid by the judgment debtor.
9. Parker LJ reinforced that conclusion on the jurisdiction point. There had been argument about the effect of the provision in section 1(1) of the Charging Orders Act 1979; this refers to a charge “for securing the payment of any money due or to become due under the judgment or order”. This indicates that a charging order may be made in advance of the money actually becoming payable, but Parker LJ took the view that, in this circumstance, this catered for the situation provided for in section 86(3) of the 1984 Act: that is that on default of any of the instalments, the court could order that the whole became due and subject to the charging order.
10. Mr Paul Spencer, who has appeared for the appellant, puts the jurisdiction point very simply. “Execution” in section 86(1) refers to any form of execution. For this purpose, a charging order nisi and a charging order absolute are to be treated as two separate forms of execution. A charging order nisi is, as it was described in Roberts Petroleum Ltd v Bernard Kenny Ltd (in liquidation) [1983] 2 AC 192 at p209, precarious until it is made absolute, and there is a discretion whether to make it absolute when the matter comes back before the court.
11. However, the important question is when execution is “issued”. There is, as Mr David Quest has put it on behalf of the respondent, only one charging order. It is issued nisi, in other words unless a good cause is shown why it should not continue, and it is then made absolute. A charging order absolute takes effect from the date of the charging order nisi: see Haly v Barry (1868) LR 3 Ch App 452, which is still good law on this point. There is an obvious analogy here with a freezing order. This is made ex parte, with a return date when it may, or may not, be confirmed, discharged or varied; but there is only one freezing order, unless, of course, a completely fresh one is made.
12. I therefore conclude, as a matter of statutory construction, that there is jurisdiction to make a charging order absolute if a charging order nisi has been obtained before the instalment order was made. It is also tolerably clear that there is nothing wrong, in principle, with a charging order and an instalment order coexisting. I draw that conclusion from the passage in the White Book, October 2001, at p1213, sc 50.1.20, which points out:
Section 1(1) of the Charging Orders Act 1979 empowers the Court to order a charge “for securing the payment of any sum due or to become due” under a judgment or order. Hence, when a judgment debt is payable by instalments, the High Court has power to make a charging order to secure the whole debt and not merely arrears of instalments, and, indeed, there is power to make an order where there are no arrears. The fact, however, that a debtor is up to date in complying with an order by instalments is likely to be a relevant factor in the exercise of the Court’s discretion to make or refuse a charging order. (Mercantile Credit Company Limited v Ellis).
13. From that, it would appear that section 86(1) of the County Courts Act is an exception to what would otherwise be the case. Furthermore, as Mr Quest points out, an instalment order provides for the method of payment of a judgment debtor. A charging order gives security for the eventual payment of that debt. In a case such as this, where, under the instalment order, the debt will not be payable for many years (if at all), there is all the more reason to secure its eventual payment in this way.
Discretion
14. This leads on to the question of discretion. The matters that are relevant to the exercise of the court’s discretion are set out in section 1(5) of the 1979 Act, which provides:
In deciding whether to make a charging order the court shall consider all the circumstances of the case and, in particular, any evidence before it as to ––
(a) the personal circumstances of the debtor, and
(b) whether any other creditor of the debtor would be likely to be unduly prejudiced by the making of the order.
15. It is clear that the court can take into account what has happened since the charging order nisi in deciding whether to make it absolute. Haly v Barry decided to the contrary on this point, but was disapproved by this court in Burston Finance Ltd (in liquidation) v Godfrey [1976] 1 WLR 719. Burston Finance was approved on this point by the House of Lords in Roberts Petroleum. Those cases were concerned with the effect of the later insolvency of the judgment debtor. Roberts Petroleum held, in effect, that one judgment creditor should not be able to steal a march on the other unsecured creditors by getting a speedy charging order nisi and thereby pre-empting the statutory insolvency scheme. That, of course, is all relevant to the matters in section 1(5)(b) of the 1979 Act. There was an argument on this point in the court below, but it has not been maintained before this court.
16. As far as this instalment order is concerned, therefore, it would fall to be considered principally under subpara (a), the personal circumstances of the debtor. The circuit judge did not expressly refer to the relevance of the instalment order in the exercise of the discretion. The district judge, however, did do so in the following terms:
I have then to look at the personal circumstances of the debtor, about which I had been given information and evidence. I have also to look to the fact that there is an instalment order now in being. Were I to make a charging order absolute, that instalment order will still remain in being, and it is open to the defendant to continue paying that.
17. When the district judge says “the defendant”, he means the appellant to this court, who was the claimant in the basic action. The quotation continues:
Indeed the claimant [by whom he means the respondent who was the defendant in the basic action] made the submission that the claimant would not seek to enforce sale of the property whilst those instalments were being paid. Of course, whether or not the property should be sold is a matter for a separate action were there any attempt made to seek to enforce by sale the charging order absolute.
18. Mr Spencer has very fairly accepted that the district judge was there taking into account the relevant factors in the exercise of his discretion. He is driven, therefore, to argue that, as a matter of principle, an instalment order and a charging order should not, as a general rule, coexist.
19. For the reasons that I have already explained, it is impossible to sustain the contention that, as a matter of principle, they should not coexist. Indeed, one can think of many circumstances in which it would be entirely sensible and satisfactory from both parties’ points of view for them to do so. That being so, I see no ground upon which this court could interfere with the exercise of the discretion that primarily rested with the district judge in this case.
20. For those reasons, I would dismiss this appeal.
21. Agreeing, RIX LJ said: I agree. On the first point, that of jurisdiction, the statutory word found on a number of occasions in section 86 of the County Courts Act 1984 is “issue”. What that section is referring to is the issuing of execution. One asks the question: when does execution issue in connection with a charging order nisi that is confirmed and made absolute? It is, in my judgment, when the order nisi is made and there is no separate and additional issue of execution when the order is made absolute. My lady has referred to the analogy of a freezing order, which, in my judgment, is entirely in point.
22. As to the second matter debated before the court, that of discretion, this was considered by District Judge Carson, in my judgment, perfectly adequately. It was not separately considered by Judge Masterman, but it does seem to me that there is, in any event, force in Mr Quest’s submission that the matter was presented before the learned judge on specific points, which he details in the course of his judgment. First, the point of jurisdiction; second, the question of consideration of other
23. In my judgment, there may well be, depending upon all the circumstances of the case, good reason to make absolute a charging order nisi when a lengthy instalment order has been made. As Mr Quest submitted, the more time is given to a judgment debtor the more reason there will be for security.
24. It seems to me that, for those reasons, the exercise of discretion in this case cannot be faulted, and therefore it must follow that this appeal must be dismissed.
Appeal dismissed.
