“Lenders need to review their Charging Order strategy in order to maximise enforcement/recovery opportunities”.

Charging Orders are, for good reason, considered by many banks and financial institutions as the most effective method for enforcing judgments in respect of personal borrowing.  Once secured a creditor is usually quite happy to agree a reasonable repayment schedule.  However a Charging Order is not a formality - the Charging Order Act 1979 states   the decision to make the award is one of discretion and as many lenders will know District Judges are very keen to emphasise and preserve this.  

Not surprisingly the appellate courts have ruled how that discretion should be exercised when a Charging Order is opposed either by the account holder or co – proprietor and helpful case law has built up over the years which gives guidance as to how the wide range of objections should be dealt with eg interaction of matrimonial proceedings/ available equity in the property/alleged disposition of the beneficial interest which is not apparent from the Land Registry.

The problem is that not all of this case law has in the past been noted in the White Book which is the main point of reference for District Judges .In the usual situation of a block list with a time estimate of only 5 minutes a creditor risks losing the Charging Order on the grounds of an “exercise of discretion”. Faced with the growth of kitchen sink style/technical challenges over the last few years   awareness and correct application of both statute and case law is a pre – requisite to obtaining judgment. Similarly in order to maximise enforcement opportunities a creditor needs to ensure   the relevant case law is presented to the court. Failure to do so will leave the way   open to better prepared creditors to secure their liability.

 Last year the High Court in the case of British Arab Commercial Bank Plc & Others v Algosaibi & Others hopefully put an end to the familiar argument made by judgment debtors that the Charging Order would be unfair on other unsecured creditors.  It was never clear why this popular argument was entertained by District Judges – after all other creditors once served with the Interim Charging Order had the opportunity to make their own representations.

After constant scrutiny/consultations from the regulators over the use of Charging Orders lenders will have been comforted by one recent development by the Government. Section 93 of the Tribunal and Courts Enforcement Act 2007 will at last become effective from 01 October 2012. It has taken many years for Parliament to dilute the effect of Mercantile Credit v Ellis which required a judgment   creditor to demonstrate a breach of an Instalment Order before a Charging Order could be obtained ( albeit compliance with the same is a factor which needs to be considered by the court on a Charging Order application).  This is in spite of the fact that as long ago as 2001 the Court of Appeal in Ropaigealach v Allied Irish Bank made it very clear that there was nothing wrong  in principle with a Charging Order sitting alongside an Instalment Order.

Despite these   favourable legal   developments and the costs savings of the “bulk” system for determining such applications, charging orders as with other enforcement strategy still require careful attention – the “will not” payers still have two opportunities to frustrate a lender – at judgment and then enforcement stage.

In recognition of the importance of enforcing any judgment, Restons have a specialist team who concentrates solely on enforcement action which includes charging orders, attachment of earnings, bankruptcy proceedings and execution.

Judgments never remain dormant.  Restons specialist case management system is designed to provide swift enforcement of a judgment.  Working closely with collections managers and where necessary the defended department, the team ensures a creditor obtains the most effective enforcement of its judgment and retains priority over other creditors.

Official figures confirm our position as one of the country’s top five issuers of Charging Orders.

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