uk county court procedure
DESCRIPTION
Explains County Court procedure in England and Wales. The process commences with a claim, followed by judgment in default, followed by enforcement. Claim data can be transmitted directly to the Court Service via the CCBC department in Northampton.TRANSCRIPT
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Legal Actions and Insolvency
Allied Factors LimitedDelta Credit ManagerTM
www.alliedfactors.com
www.civilprocedurerules.co.uk
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Aims
• This course aims to give an overview for collection of fixed value commercial debt in England and Wales using the county court
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Objectives
• At the end of the course, delegates should be able to exercise best practice in the completion of:
• Letters before action
• County Courts Claim forms
• Enforcement procedures
• Awareness of Insolvency Act on actions
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Pre-action considerations
• It is important that before considering recovery of a debt through the County Court system, a number of areas are considered.
• The County Court will not collect a debt
• The CC will issue an order for the debt to be paid
• The CC provides enforcement measures
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Proof of debt
Before considering County Court action, the claimant (party owed money/creditor) must be able to PROVE that the debt is owed by the defendant
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Primary areas of proof
1. Contract
2. Terms and conditions
3. Proof of delivery
4. Paper audit trail
5. Signed credit application form
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Contract
• Parties to contract
• Timing of contract
• Contract terms
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Terms and conditions
1. Proof of service
2. Timing of service
3. Prevailing terms and conditions
4. Retention of Title (Romalpa case)
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Proof of delivery
• Third party considerations
• Valid1. Signature
2. Stamp
3. Quantity
4. Conditions
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Paper Audit Trail
Full details of all contact between the parties
should be kept.
This includes letters, emails, telephone calls
As these may prove important in disputed
cases.
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Defendant details
There are three different types of defendants
1. Individual
2. Partnerships
3. Corporations – Limited companies– PLC’s– LLP’s
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Individual
• Preferably you should have full name identity including gender
• Date of birth
• Individuals are liable to the extent of their personal wealth
• Information via credit reference agencies – CCJ’s, court orders, previous names
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Partnerships
• Preferably, you should have the full name identity of ALL the partners including gender.
• Partnerships are liable to the extent of the wealth of the partnership assets and the personal wealth of all partners.
• Known as “Jointly and severally liable.”
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Corporations
• Are liable to the extent of their corporate wealth – and not beyond
• Shareholders are not liable in the event of failure
• Directors are not liable in the event of failure – except they may become liable where it is proven that they have been fraudulently trading whilst insolvent
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Costs
• The cost of taking action should be considered against the value of the debt and the likelihood of obtaining payment.
• Proceedings will include some or all of the following costs:
1. Court costs.2. Legal costs.3. Administration costs.4. Man hours.
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Court & Legal Costs
• There are fees for almost every step of proceedings which are recoverable and increase the total judgment debt
• Only solicitors can charge legal costs even if a claimant is taking their own action. Solicitors costs can be subject to a sliding scale and Judge’s discretion
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Admin & Man Hours
• Includes chase letters, reports, phone calls – consider in relation to size of debt
• Disputed/defended cases where Court attendance may be required can cause a disproportionate use of time in reation to debt size.
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Previous Collection History
• A file of Claimant/Defendant contact must be kept.
• Your system should promote settlement from the outset to avoid defended matters going to Court.
• The Court will expect to see that offers of settlement (in whole or part) have been made by both parties.
• There must be good commercial reasons to proceed to trial in disputed cases.
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Unresolved queries
• Every effort should be made by both parties to resolve queries prior to action.
• Evidence of attempts to resolve may be required• Proceed to Court on a disputed case only after
assessing:-
1. Value of the debt
2. Likelihood to succeed
3. Commercial viability
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Excuses (1)
• We are in the middle of an audit/payroll run
• The cheque signatory is on holiday
• The computer says no
• I moved address and lost my cheque book
• We’re not paying because you put our company on stop for non-payment
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Excuses (2)
• I’ve been hit on the head with a hammer
• We can’t be overdrawn; we still have cheques left
• My dog has swallowed a fish hook
• I posted it but a firework was put in the post box
• I haven’t got a pen
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Response to Contact
• Can indicate likelihood of a defence
• Can provide information re: debtor’s finances
• Good information can be vital in proving the debt and assist in the enforcement process
• Identify can’t pay from won’t pay
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Credit Check
• It is good practice to obtain a credit reference prior to issuing a County Court claim.
• Reveals existing CCJ’s and if unsatisfied – further action involving costs may not be prudent.
• Insolvency Act action may be effective if the debtors has something to lose.
• Corporate accounts – check net profits, net assets, issued share capital, list of directors and officers.
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CCJ’s
• After ONE month stored on the Registry Trust Limited’s national database
• Web link:-
• http://www.registry-trust.org.uk
• http://www.payontime.co.uk
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Full & Final Settlement
• If a debtor has made a payment which the creditor has accepted in “full and final settlement”, then no further action can be taken on the balance.
• Various test cases:-
• Pinnels Case (1602)• Foakes v Beer (1884)• D&C Builders Ltd v Rees (1965)
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Part payment problem
A debtor may try to get you to accept a part payment in full settlement. Example
Debtor A owes creditor B £6000. A states in a letter to B that the service was poor or that deliveries were late. He encloses a cheque for £5000 with his letter stating that the cheque is in full and final settlement and that if full settlement is not accepted, the cheque must be held unpresented.
To be valid, consideration has to be an integral part of a contract, that of offer and acceptance. No extra consideration has taken place and the payment of a smaller sum does not discharge a debt for a greater amount.
In these circumstances, you can bank the cheque and pursue for the balance.
Write back accepting the cheque only as a part-payment.
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The Collection Process
• Letter before action
• Legal action
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Legal Action
• Issue claim
• Enter judgment by default
• Enforce judgment in County Court
• Enforce judgment via High Court Sheriff
• Insolvency Act demand
• Winding up/ bankruptcy
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County Courts
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Letter Before Action
After all reasonable procedures have been taken to
collect the debt:-• Telephone calls• Standard letters• Customer visits
A letter before action (LBA) should be sent either
from the creditor’s business or using a third party
(debt collection agency or solicitor)
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LBA – useful for…
• Filtering process – flush out a genuine reason for non-payment
• Minimise costs
• Query resolution – force solution to the problem by demonstrating intent/resolve
• Establish dialogue – check debtor details and financial circumstances
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LBA - elements
1. Full & correct names(s) & address(es)1. Gender2. All partners (if applicable) + bus address3. Company registered office + home address of
secretary
2. Total amount outstanding3. Interest charges – interest type &
legislation
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LBA - Interest1. Contractual interest
1. Must include in terms and conditions of trading
2. Right to interest must be contractually bound
3. Should be deemed fair under the Unfair Contract Terms Act 1977
2. Statutory interest1. S.69 County Courts Act 1984 (currently at 8% per annum)
2. Added to debt when County Court claim is issued
3. Late payment interest1. Late Payment of Commercial Debt (Interest) Act 1998
2. Make debtor aware via letter or T&C’s (Base rate + 8% p.a.)
3. http://www.payontime.co.uk
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LBA - Compensation Charges
• Late Payment of Commercial Debt (Interest) Act 1998
• Debtor must be aware of right to claim – include in T&C’s or letter
• Post charge to the Sales Ledger
Debt Charge
Up to £999.99 £40
£1000 - £9999.99 £70
£10,000 & above £100
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LBA…finally
• Specific payment date – give a specific deadline for payment not just a number of days to pay within
• Stop trading! – continued late payment is likely if credit is extended beyond an LBA
• See example letter
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Claim Form (N1)
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Claim form – completion [1]
Once the deadline from the LBA has passed
and provided all the pre-action considerations
(Pre-action Protocols) have been taken into account…
complete the County Court Claim (N1):-
(See appendix):
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Claim form – completion [2]
• Court - can be issued in the local court of either claimant or defendant
• Claim No. – leave blank; the Court will assign the number. Use in all future Court correspondence.
• Issue date – leave blank as the Court will advise both parties the date of claim issue
• Claimant – party who is owed the money, can use trading or registered office address
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Claim form – completion [3]
• Defendant(s) - party who owes money• Full name including gender• Partnership – one or all the partners
– Partnership OR– Private residential address
• Corporation– Trading OR– Registered office address
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Claim form – completion [4]
• Brief details of the claim– Goods sold and delivered + contractual interest– Services rendered + contractual interest– Returned cheque + court interest
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Claim form – completion [5]
• Value– Debt + interest to the date of claim + compensation
– Xref to the Particulars of Claim on the reverse
– Is the same as Amount claimed (bottom right)
• Solicitors’ costs– Only for a solicitor – leave blank
• Total amount– Total of the Value + Court fees
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Claim form – Court fees [6]
Not > £300 £30 > £15K but not £50K £360
> £300 but not £500 £45 > £50K but not £100K £630
> £500 but not £1000 £65 > £100K but not £150K £810
> £1000 but not £1500 £75 > £150K but not £200K £990
> £1500 but not £3000 £85 > £200K but not £250K £1170
> £3K but not £5K £108 > £250K but not £300K £1350
> £5K but not £15K £225 > £300K or not limited £1530
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Claim form
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Claim - completed (1)
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Claim - completed (2)
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Claim - completed (3)
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Claim screen
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Claim form – Page 2 [7]
• Claim No. – leave blank
• Human Rights Act – leave blank unless in doubt
• Particulars of Claim – set out full details of the Claim here – use a separate sheet if necessary
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Claim form – Page 2 [8]
The Claimant’s claim is for £348.98 being
the price of goods sold and delivered by the
Claimant at the request of the Defendant as
per invoices dated from 01/01/08 to 31/03/08.
To date, the defendant has failed to pay the
Outstanding invoices therefore the Claimant
Claims the sum of £348.98.
Invoice date Inv ref Amount
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Claim form – Page 2 [9]
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Claim form – Page 2 [10]
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Claim form – Page 2 [11]
• Interest– Accrued to date of issue– Daily rate to Judgment or earlier payment– Use due date for each invoice– Can only claim ONE type of interest
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Claim form – Page 2 [12]
Types of interest:-
• Contractual
• Statutory
• Late Payment Act
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Claim form – Page 2 [13]
Contractual
Contractual interest on that sum, at a rate of “8%”, as per agreed Terms and Conditions of trading, from “01/01/08 to 30/04/08” totalling “£6.42”.
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Claim form – Page 2 [14]
Statutory
Interest on that sum under Section 69 of the County Courts Act 1984 from from “01/01/08 to 30/04/08” totalling “£6.42”.
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Claim form – Page 2 [15]
Late Payment Act [base + 8%]
Interest on that sum under the Late Payment of Commercial Debts (Interest) Act 1998 at the rate of “12.75%” from from “01/01/08 to 30/04/08” totalling “£6.42”.
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Claim form – Page 2 [16]
Daily rateTake the original debt value x interest rate/365
…….and continuing at the same rate up to the date of judgment or earlier payment at the daily rate of “£0.12”
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Claim form – Page 2 [17]
Compensation chargesTo include these, use the following wording in the
Particulars or post to the sales ledger
The Claimant claims compensation arising from late payment under section 5A of the Late Payment Commercial Debts (Interest) Act 1998, under the table of compensation, “£40” is owed
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Claim form – Page 2 [18]
Claim summaryElements of the claim should then be summed up:
AND THE CLAIMANT CLAIMS:
1.The amount of outstanding invoices plus “statutory” interest to date Total: “£355.40”
2. Interest at a daily rate of “£0.09” from “15/04/07” to judgment or earlier payment date
3. The costs of this case Total: “£50.00”
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Claim form – Page 2 [19]
Statement of TruthThis should be completed by an authorised
representative of the Claimant, e.g.
Managing Director OR
Financial Director
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Claim form – Page 2 [20]
Claimant’s addressIf a Registered Office address has been used on the
front page then it may be wise to use the trading
address here if different so the Defendant is
clear who the Claimant is
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Claim form – Service(1) A minimum of 2 x signed copies should be sent
to the County Court + fee payable to HMPG.
(2) A third copy is endorsed and returned to you
(3) Provide copies for all multiple defendants
(4) Provide copy invoice/POD if you wish
(5) Service is deemed to be 2 x working days from date of posting by the Court
(6) Notice of issue [N205A] – [Appendix F]
(7) Response pack [N9] – [Appendix G]
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Claim issued - N205A (1)
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Claim issued - N205A (2)
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Claim issued - N205A (3)• If the Claim and other documentation is returned by
the Royal Mail to the Court, a form N216
(Non-service form) will be issued.• The Claim must be served within 4 days of issue.• Apply on form N244 to ask the Court’s permission
for an extension to this time.• Service is normally deemed to be 2 days following
posting by the Court
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Debtor’s response (1)
The debtor/defendant has 14 days from the date of
service to reply or acknowledge service…
[N9 - Appendix G]
…and then a further 14 days to file their defence
[N11 - Appendix J]
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Claim response – N9
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Debtor’s response (2)
1. Pay in full
2. Pay in part
3. Admit claim – no payment [N9A – app. I]
4. Admit claim – offer instalments[N9A – app. I]
5. Ignore claim
6. File a defence [N11 or N9B – app. J]
7. Defence & counterclaim [N9B – app. L]
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Debtor’s response (3)
1. Pay in full1. Close the file
2. Consider permanent stop
2. Pay in part1. Enter judgment for costs and interest where just the
principal has been paid
2. Proceed to enforcement OR
3. Write off and close credit account
![Page 71: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/71.jpg)
Debtor’s response (4)
1. Admit claim (N9A) – no payment1. Request judgment for immediate payment OR
2. Judgment with instalment plan
2. Admit claim (N9A) – offer of instalments1. Request judgment accepting instalments
2. Decline – Judge will direct reasonable instalment plan based upon defendant’s means
![Page 72: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/72.jpg)
Debtor’s response (5)
1. Ignore claim1. Enter judgment in default using form N205A or
form N225 [Appendix F and M]
2. File a defence (N9B)1. Complete Allocation Questionnaire from the Court
form N150 [Appendix K]
2. Consider Summary Judgment application
![Page 73: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/73.jpg)
Debtor’s response (6)1. Defence and Counterclaim (N9B)
1. Seek legal advice
2. Counterclaims only received in 2% of cases
3. If counterclaim exceeds the value of the original claim, the difference is to be paid into Court
![Page 74: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/74.jpg)
Defended Actions
![Page 75: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/75.jpg)
Summary JudgmentThe Court may give judgment against a Claimant
or Defendant if it considers:-• That either party has no real prospect of
succeeding on the claim OR• Has no real prospect of successfully defending
the claim or issue• Use form N244 to make an application to the
Court
![Page 76: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/76.jpg)
Notes on defences• If you get a defence that shows a dispute then
your systems have failed• Defences in small cases are disproportionate
to the outcome• Litigate in proportion to the value of the claim• Mediate rather than litigate• SETTLE or AVOID them in simple debt cases
![Page 77: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/77.jpg)
Track SystemThe Court will assign defended cases to one of the
tracks according to its value and complexity:-
![Page 78: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/78.jpg)
Judgment
• Paper order from the Court for the Defendant to pay the Claimant N30 (N)
• Registered after 1 month
• Stay on Register for 6 years
• Advise the Court if paid within 1 month
• Defendant may apply for Certificate of Satisfaction N441 (V) if debt is paid
![Page 79: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/79.jpg)
Enforcement – key questions
• Assets/property to seize
• Leasehold & HP exempt from seizure
• Title and ownership of goods
• Accessibility of assets
• Income/self-employed
• Debts owing to the defendant
• Land or buildings
![Page 80: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/80.jpg)
Enforcement – methods
• Warrant of Execution (N323)
• Transfer to High Court (N293A)
• Charging Order (N379)
• Attachment of earnings (N337)
• Third party debt order (N349)
• Order to obtain information (N316/A)
![Page 81: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/81.jpg)
![Page 82: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/82.jpg)
Warrant (N323) – [1]
• Most common type of enforcement
• Assets seized and sold at auction
• Court uses Bailiffs
• Bailiff can seize goods up to a maximum value of £5000
![Page 83: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/83.jpg)
Warrant (N323) – [2]
• The warrant can be issued for either the whole amount outstanding or part thereof subject to a minimum of:-
1. One monthly instalment
2. 4 x weekly instalments
3. £50
![Page 84: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/84.jpg)
Court bailiff
![Page 85: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/85.jpg)
Warrant process (N323) – [3]
• The Levy – claim the goods
• Inventory - list
• “Walking possession”
• Offer of payment
• Removal & storage
• Sales by auction
• Distribution of sale proceeds
![Page 86: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/86.jpg)
Warrant process (N323) – [4]
Exemptions:-
• Goods on HP or subject to lease
• Tools of trade/ perishable items
• Livestock & pets/ household essentials
• Pawn tickets
• Firearms/ Fixtures & fittings
![Page 87: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/87.jpg)
Warrant process (N323) – [5]
Rights of entry:-
• Allowed in by person
• Unlocked door or open window
• Business premises– Break in if no living accommodation is attached
and believe the defendant’s goods inside
![Page 88: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/88.jpg)
Execution
![Page 89: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/89.jpg)
High Court Sheriff
![Page 90: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/90.jpg)
Court bailiff
![Page 91: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/91.jpg)
![Page 92: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/92.jpg)
Transfer to High Court (N293A) [1]
• Judgment must be above £600• Select a Sheriff from Enforcement officer
listing:-• www.dca.gov.uk/enforcement/directory05sm1.pdf • www.dca.gov.uk/enforcement/directory05sm2.pdf
• Get the County Court officer to countersign and seal the completed form N293A
• Send to the chosen Sheriff office with fee
![Page 93: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/93.jpg)
Transfer to High Court (N293A) [2]
• Form N293A is a ‘Combined certificate of judgment and request for writ of fieri facias or writ of possession’
• Court certifies for the High Court that the details are a true record of the Court record in this case
![Page 94: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/94.jpg)
Charging orders (N379) [1]
• Only applies to sole traders & partnerships
• Land Registry search for legal title
• Research for value and equity
• Serve application on defendant and all known creditors
![Page 95: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/95.jpg)
Charging orders (N379) [2]
• Interim Order (Nisi) is issued. This should be registered with the Land Registry
• At the final hearing, a Final Order (Absolute) will be issued if the application is successful
• CO held against property till discharged
![Page 96: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/96.jpg)
Attachment of earnings (N337) [1]
• Debtor must be employed
• Application form is sent to debtor– Can be without specific employer– Debtor to make offer of payment on form N56
• A Suspended Order is issued
![Page 97: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/97.jpg)
![Page 98: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/98.jpg)
![Page 99: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/99.jpg)
Attachment of earnings (N337) [2]
• There is no expiry date for the Suspended Order
• If a Default occurs, a full Order can be made and served on the Employers
![Page 100: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/100.jpg)
Third party debt order (N349) [1]
• Previously called a ‘Garnishee order’
• Third party must owe money to the debtor at the time of application
• Complete stating the source of your information
• Interim Order (Nisi) is issued by the Court
![Page 101: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/101.jpg)
Third party debt order (N349) [2]
• The Third Party has to confirm the money is owed and is frozen until the hearing
• At the hearing, a Final Order (Absolute) is made
• The Third Party pays the Claimant directly
• Defendant can plead hardship
![Page 102: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/102.jpg)
Order to obtain information [N316]
• Means to obtain information under oath in order to select most effective enforcement
• Individual – form N316
• Company officer – form N316A
• Order to attend Court for questioning
• Order for Committal if ignored
![Page 103: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/103.jpg)
County Court flowchart
![Page 104: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/104.jpg)
Summary
• The Debtor must have something to lose for the system to work
• Many Rogue Directors can, and do, hide behind the veil of incorporation
• Information is key to selecting the collection method
![Page 105: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/105.jpg)
What is Insolvency?
• Liabilities exceed assets – balance sheet test (Solvency)
• Inability to pay debts as they fall due (Liquidity)
• Two types of Insolvency:-– Corporate– Individual
![Page 106: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/106.jpg)
Corporate Insolvency
• Administrative Receivership
• Liquidation (3 types)
• Administration
![Page 107: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/107.jpg)
Administrative Receivership [1]
• Requires fixed & floating charge
• Only for charges created before 15/09/2003
• The Debenture– Requires floating charge– Can be hostile or invited
![Page 108: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/108.jpg)
Administrative Receivership [2]
• The Receiver’s powers are set out in the Debenture and they are there only to act in the Bank’s interest
• Meeting called within 3 months
• Usually followed by liquidation
![Page 109: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/109.jpg)
Creditors’ Voluntary Liquidation
• Most common type
• Directors and members led
• Members nominate Liquidator
• Meeting of Creditors called
• Creditors have final say
• Liquidation committee
![Page 110: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/110.jpg)
Members’ Voluntary Liquidation
• Solvent Liquidation– Company restructure– Retirement
• Requires Declaration of Solvency
• Can be converted if not 100p/£
• 12 months to liquidate the assets
![Page 111: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/111.jpg)
Compulsory Liquidation [1]
• Winding-up Petition presented to Court– Usually inability to pay debts– Unsatisfied Statutory Demand > £750– Liabilities exceed assets– Unsatisfied CCJ - enforcement
![Page 112: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/112.jpg)
![Page 113: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/113.jpg)
Compulsory Liquidation [2]
• Based on Court Order
• Advertised in the London Gazette– Bank a/c often frozen
• Supporting creditors
![Page 114: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/114.jpg)
Compulsory Liquidation [3]
• Hearing (6-8) weeks– Winding-up Order– Dismiss petition– Adjourn
• Official Receiver appointed– Investigate failure– Acts as Liquidator until an IP is appointed
![Page 115: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/115.jpg)
Administration [1]
• Introduced by the Insolvency Act 1986
• Petitioned by Director, Shareholder or Creditor
• Specified purpose– Survival in whole or in part– More advantageous realisation
![Page 116: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/116.jpg)
Administration [2]
• Creates Moratorium…(halt to..)– Retention of title– Legal action– Discontinuation of trading
• Creditors’ meeting to approve proposals within 3 months of appointment
![Page 117: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/117.jpg)
Company Voluntary Arrangement
• Director led
• Minimum Court involvement
• Directors appoint nominee
• Nominee calls Creditors’ meeting and provides proposals – NO Moratorium
• 75% of Creditors must agree or CVA fails
• Nominee becomes Supervisor or is outvoted
• Default = Liquidation
![Page 118: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/118.jpg)
Individual Insolvency
• Bankruptcy
• Individual Voluntary Arrangement (IVA)
• Partnership Voluntary Arrangement (PVA)
• Liquidators & trustees
• Creditors’ meetings
• Distribution of funds
![Page 119: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/119.jpg)
Bankruptcy• Statutory Demand (S.268) - £750 or more
• Petition by Creditor (or Debtor themselves)
• Official Receiver appointed – Initially trustee– Assets vest in him– May appoint IP as trustee
• Trustee has wide powers of investigation
• Usually last 12 months
![Page 120: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/120.jpg)
![Page 121: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/121.jpg)
Individual Voluntary Arrangement
• Nominee calls meeting:– Report & contents– 75% in value of Creditors voting must agree
• Forms a contract with the Creditors
• Supervisor has no powers of investigation
• Forms Moratorium
![Page 122: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/122.jpg)
Partnership Voluntary Arrangement
• Introduced in December 1994
• Same procedure as CVA
• IVA’s recommended for partners
• No effect on partners’ private assets
![Page 123: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/123.jpg)
Liquidators & trustees
• Look at Preferences
• Look for transactions at under value
• Look for wrongful or fraudulent trading
• Examine witnesses
• Apply for director’s disqualification (CDDA)
![Page 124: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/124.jpg)
Creditors’ meetings
• Notice given to Creditors
• Proxy forms
• Right to question
• Investigative function
• Voting & challenging nominations
![Page 125: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/125.jpg)
Distribution of funds
1. Petitioner’s costs
2. Insolvency fees
3. Fixed charge holders
4. Preferential creditors (Hol pay/wages)
5. Floating charge holders
6. Unsecured creditors (VAT + tax)
7. Shareholders
![Page 126: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/126.jpg)
Insolvency v Legal action
Advantages:-1. Initially quick, easy & cheap2. Focuses the debtor on your debt3. Gets ahead of other creditors4. Creates final chance in negotiations5. Solution achieved quickly – either way6. Maximum pressure
![Page 127: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/127.jpg)
Insolvency v Legal action
Disadvantages:-1. Cannot be used for disputed debt
2. Costly after initial stage
3. Alerts other creditors
4. Freezes bank account
5. Official Receiver’s deposit6. Poor knowledge may lead to poor legal advice
7. May be what the debtor wants
![Page 128: UK County Court procedure](https://reader035.vdocument.in/reader035/viewer/2022062704/5562515cd8b42aa02d8b4ff4/html5/thumbnails/128.jpg)
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End
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