20th November 2019
Written by Andrew Gregory – Director, Leonard Curtis Legal
The full force of the court process is sometimes lost in our experience by businesses who can sometimes find themselves the subject of a country court judgement (“CCJ”). Even the best managed business can let an unpaid debt slip through the net. We have dealt with several cases recently where, to the shock of the directors, a judgement had been entered against their company.
The impact of a county court judgement can be severe and sometimes difficult to overturn without some costs and time spent which is wasted management time.
Anyone who is based in England and Wales can use the County Court to issue a summons against a party who it is alleges owes them money. The process is straight forward and can now be done online. Many debt collection businesses who act for companies seeking payment of overdue debts will often use what is known as the Bulk Centre at Nottingham County Court and issue multiple claims at any one time.
Once a county court summons has been issued by the court, then it is usually served by post and the defendant then has 14 days from the receipt of the summons to file an acknowledgment of service at the court. If the defendant does this and indicates an intention to defend, then the court rules permit the defendant a further 14 days to file a defence and set out the reasons why the claim is disputed.
What problems can arise and how?
The problem arises if the defendant fails to file the acknowledgment of service with the court or the defence. Once the 14 days elapses then the claimant can enter judgement in default if no acknowledgment of service has been filed.
How could this occur? It is often for a number of reasons – sometimes the summons sits in someone’s in-tray and is overlooked; in other situations the company’s trading address may have been changed and the party making the claim is unaware of this. Whatever the reason, if the rules are not complied with, then until the court makes an order setting it aside, it is a regular judgement. This can be enforced in a number of ways, including the use of bailiffs to seize the goods of the defendant.
In many cases, the main issue is that the existence of a county court judgement means that the credit rating for the business can be severely impacted.
How can a judgement be set aside?
If the defendant can show that the summons was only served at an address which they vacated some time ago, then it is likely that the court will be prepared to make an order to set aside the judgement. But if the judgment was made due to the failure of a party to comply with the rules of court, then an application to set aside has to be made to a district judge and there will have to be hearing in which the defendant must not just give a satisfactory explanation for why they failed to deal with the summons, but also demonstrate that they have a defence to the claim.
An inability to pay the judgement in full and at once will not suffice. Therefore those with cash flow problems may find it very difficult to have a judgement entered against them set aside.
If the judgement is set aside, then it will be removed by the court from the Register of County Court Judgements. If not, then it will stay on the register and remain a potential issue for companies seeking to raise finance or obtain credit facilities in the future.
Anyone can apply for details of a county court judgment by making an application to the Registry and paying a fee which is presently £3.
Key learning points
As accountants, there are a couple of key points that your clients should be aware of:
- Make sure that suppliers have the up to date trading address of the business and if the business has changed premises in the past three years then have a postal redirection order in place.
- Many companies use a different address for their registered office rather than their trading address. A county court summons can be served at either address. Therefore if the business uses a different address for its registered office, then either have a postal re-direction order in place, or if the registered office is the address of their accountants, ensure that there are satisfactory arrangements in place to collect mail given the time limits imposed by the court rules.
Finally if a judgement has been entered against the company, then urgent action should be taken. Parties who delay seeking to have a judgement set aside may find that it will be too late as the court can exercise its discretion not to set aside a judgement if it considers there has been delay on the part of the defendant.
If a party has any doubt as to the position on finding that a judgement has been entered against it then legal advice should be taken as soon as possible.
For further information about Leonard Curtis Legal visit the website.
About the Lifecycle Network
Lifecycle is a unique network for accountants – provided by the Leonard Curtis Business Solutions Group. It provides member accountants with a comprehensive range of specialist services – and the expert support required – to improve their client offering at every stage of a business’ lifecycle. From company formation to cessation and all stages in between.
Lifecycle is free to join and also offers members many additional benefits. These include access to competitively priced Professional Indemnity insurance cover, a regular programme of free training and education and discounts on products and services relevant to their business and clients’ needs.
Services offered by Lifecycle include: Company secretarial and formation; equity finance for SMEs; debt advisory for SMEs; personal debt advice; corporate restructuring, insolvency and cessation; debt finance for SMEs; cashflow maximisation; property solutions and legal services.
For more information on Lifecycle click here.