Judgment – Third party debt order – Public funding – Judgment debtor appealing against third party debt order – Judgment debtor having benefit of public funding – Legal services commission having first charge on property recovered – Whether district judge properly making third party debt order – Appeal allowed in part
The judgment debtor obtained a default judgment against a third party in the county court for £10,260 inclusive of interest. The judgment creditor and the judgment debtor compromised the trial of an action in the Technology and Construction Court. Under the terms of the compromise, the judgment creditor obtained judgment for £15,000 against the judgment debtor payable by five monthly instalments of £3,000. None of the instalments were paid and the entire outstanding balance became due.
The judgment debtor obtained public funding from the Legal Services Commission (LSC) in respect of the claim against the third party. An application by the third party to set aside the judgment in default was dismissed and the order recorded a public funding direction in relation to the judgment debtor’s costs, but there was no order requiring the third party to pay those costs.
The third party was granted permission to appeal subject to making a payment into court. She failed to meet that condition and consequently her appeal was struck out and she was ordered to pay the judgment debtor’s costs. No sums were paid by the third party either in respect of the judgment debt, interest or costs and eventually the district judge made a final third party debt order in favour of the judgment creditor.
A dispute arose because the moneys due to the judgment debtor from the third party were the result of successful litigation in which the judgment debtor had the benefit of public funding. It was common ground that the LSC were entitled, under section 10 of the Access to Justice Act 1999, to a first charge on property recovered or preserved as a result of a litigation. The judgment debtor contended that the statutory charge and regulation 18 of the Community Legal Service (Costs) Regulations 2000 meant that the court could not make a third party debt order against her. The judgment creditor contended that the district judge was right to make the order.
Held: The appeal was allowed in part.
The district judge was correct to hold that she had jurisdiction to make a third party debt order. Although the judgment creditor could not be in a better position than the judgment debtor in relation to the third party debt, it did not mean that there could be no third party debt order in relation to that debt. It simply remained subject to the LSC charge and to the method of collection prescribed by regulation 18.
The judgment debt had to be collected by the solicitor with the benefit of the CLS funding certificate. If and in so far as it was able to satisfy the LSC charge, any surplus was to be held by the solicitor for the judgment creditor. Thus litigants with the advantage of LSC funding would be in no better position than other litigants in relation to third party debt orders.
However, the district judge had no jurisdiction to bypass regulation 18 and in effect provide for payment direct to the judgment creditor or its solicitor. Such a person could not give a good discharge for the payment. Accordingly, the order should have provided for payment of the judgment sum and any costs to the judgment debtor’s solicitor in accordance with regulation 18. After satisfaction of the statutory charge the balance, if any, would be payable to the judgment creditor.
With regard to costs, in the county court proceedings the judgment debtor would have recovered any sum ultimately paid by the third party. Therefore, costs incurred by the judgment debtor’s solicitor were caught by the statutory charge, under section 10 of the Access to Justice Act 1979.
In the proceedings for a third party debt order, the judgment creditor sought to attach the third party debt and succeeded. The judgment debtor did not preserve or recover any assets but lost the right to the fruits of her judgment. Accordingly, any costs incurred by the judgment debtor’s solicitor were not within the statutory charge and had to be recovered under the CSL funding certificate for the third party proceedings.
Ian Pennock (instructed by Stachiw Bashir Green, of Bradford) appeared for the judgment debtor; Cristin Toman (instructed by Keeble Hawson, of Leeds) appeared for the judgment creditor; The third party did not appear and was not represented.
Eileen O’Grady, barrister
