The civil justice system aims to ensure that there is a fair way for individuals and businesses to recover money they are owed. This aim has to be balanced against the need to protect the rights of those who owe money. The Ministry of Justice is currently consulting about the use of default judgments. The aim behind the consultation is to ensure that the process for debt recovery strikes a fair balance between the legitimate right of a business or individual to pursue a money claim and the right of the debtor to know about a claim against them and have the chance to defend themselves.
If you have already completed your studies with ILSPA, then you will be aware that a Default County Court Judgment (often referred to as a CCJ) is a way for a creditor to get a judgment when a defendant fails to respond to a court claim. The main failure is usually in not filing a Defence to a claim. This could be because the defendant is not aware of a claim, or it may be that the defendant is deliberately avoiding payment. Failure to defend a claim will inevitably lead to a judgment being entered by default against the defendant.
Around 1.4 million County Court money claims were issued in 2016/2017, and this resulted in over 1.1 million County Court judgments. The vast majority (85%) of these were default judgments.
Stages in a debt recovery claim
As a reminder, the stages in a debt claim are:
Pre-claim stage – Before any action is started, parties must take reasonable steps to encourage settlement of a debt and avoid court action. One of our recent Journal articles considered the new debt claim protocol and outlined all the pre-action steps parties must now take.
Service of the claim – When court action is necessary, the rules governing service (i.e. the process of providing notice of proceedings to the defendant) of documents do not require the claimant to ensure or prove that a claim is received by the defendant. All a claimant must do is to take “reasonable steps” to determine the defendant’s current address.
This creates the possibility that a claim would be served to an old address. Prior to 2006, the County Court served the claim form by post. If the claim was returned to the court as not delivered, the claimant was sent a notice of non-service. The claimant would then have to serve the claim themselves and provide the court with a certificate of service. This was expensive for claimants, often requiring them to employ a process server (an individual who personally delivers court documents) and be subject to abuse by defendants seeking to frustrate legal proceedings. After 2006, the Civil Procedure Rules (CPR) were amended to provide that the court would continue to send a notice notifying the claimant that the claim form had been returned, but a notice of non-service was not issued. Other amendments made in 2008 included changes where a defendant has not provided an address for service. In this situation a claimant may provide the defendant’s last known or usual address. The CPR does not require the claimant to ensure or prove that a claim form is received by the defendant. Rather, the rule will deem that papers have been served.
Default judgments – Following issue of a claim form to the defendant, the defendant has 14 days to reply to the claim (or 28 days if they return an acknowledgement of service requesting further time to file a Defence). Provided the correct procedure has been followed, the claimant can obtain a judgment in default if the defendant has not responded or filed a Defence within the 14 or 28-day period.
Having a claim set aside – If the existence of a judgment becomes known to a defendant at a later date, they have a right to apply to the court to have it set aside. The process is contained within Part 13 of the CPR.
The Register of Judgments, Orders and Fines – When a court makes a default judgment, the record of that CCJ will remain on the Register of Judgments, Orders and Fines for six years, whether or not the debt is paid to the Registrar.
The consultation highlighted two key issues:
1. First, the need for better information for consumers on their rights and responsibilities; for example, what a defendant should do to keep creditors updated with their contact details. It is the defendant’s responsibility to ensure that the correct address is known to those who provide them with goods and services and to whom they may owe money. This is not something that all defendants realise. The problem that can then occur is that a County Court judgment may be made against defendants using an old address. The defendant may then, understandably, not know about ensuing CCJ and find out months or years later that their credit rating is damaged.
2. Second, what to do when a CCJ has been registered. The suggestion is to make improvements for defendants such as the removal of an entry on the Register of Judgments, Orders and Fines when a defendant settles the claim immediately once a judgment is brought to their attention. This would stop a defendant’s credit rating from being damaged.
Ideally, these changes would limit the circumstances when an individual has a judgment made in default against them without their knowledge. It is also hoped that the number of default judgment applications could be reduced from what is currently hundreds of thousands, saving court time and unnecessary additional costs.