To help reduce the number of CCJs made against individuals without their knowledge
The Government has launched a consultation looking to improve the processes by which businesses and individuals who are owed money can seek to recover it through the County Court. The consultation paper looks specifically at reducing the number of County Court Judgments (“CCJs”) made against individuals without their knowledge and at reducing the impact in such cases.
If a business or individual is owed money by another and has been unable to recover it from them in the usual way, they may commence a court claim. Upon issue of a claim, the person owing the money (“defendant”) is given 14 days to either admit the claim or file a defence (or 28 days to file a defence if they acknowledge the claim within the 14 day period). If no response/defence is received within the relevant period then the person bringing the claim (“claimant”) can request judgment in their favour, commonly known as default judgment. If the correct processes have been followed by the claimant, a Judge should then enter judgment in favour of the claimant for the amount claimed.
A default judgment is a type of CCJ which will be entered onto the Register of Judgments, Orders and Fines and will ordinarily remain there for six years, unless it is paid within one month or set aside by the court. If paid sometime after the first month, a CCJ will be marked as ‘satisfied’ but will remain visible on the register for the remainder of the six years. The existence of a CCJ causes significant damage to an individual’s credit rating, which is relied on by financial institutions, amongst others, considering whether or not to provide credit by way of a loan, credit card, overdraft, mortgage, vehicle finance etc. A claimant can also take steps to enforce a CCJ against a defendant, most commonly by utilising enforcement officers (bailiffs) to seize a defendant’s assets.
The reality is that over 1.1 million CCJs were made in the financial year 2016/17, of which, alarmingly, approximately 85% were default judgments. A proportion of those defendants will have decided not to respond/defend the claim, perhaps because they did not know what to do, did not understand the claim, thought they did not owe the money, were poorly advised or otherwise thought there would be no consequences if they ignored the claim. Other defendants, however, will have been entirely unaware of the claim because they did not receive the court papers, which were perhaps sent to an old address or lost in the post. A claimant’s obligation is to supply the individual defendant’s usual or last known residence, not to prove they actually received the claim. It is a defendant’s responsibility to ensure their creditors have the correct address and are notified if they move.
An obvious injustice will arise if a person is not aware of a claim as they will not have the opportunity to defend it or otherwise prevent the making of CCJ by settling the claim. It could be some months or years before a defendant becomes aware of a default judgment, as it is neither easy nor common place to regularly check one’s own credit rating. A default judgment will instead usually come to light when an individual’s application for credit is rejected or when bailiffs make contact.
It is possible to have a default judgment set aside but only on limited grounds, some of which are discretionary to the court. It is often not enough to simply state the court papers were never received if they were sent to your last known address, without also showing a real chance of successfully defending the claim or some other good reason why the judgment should be set aside. There is also a cost involved as a court fee will be payable on top of any legal fees incurred, although a defendant may be able to recover some of their costs if the application is successful. In 2016/17, there were only around 44,000 applications to set aside a default judgment, although approximately 75% of those applications were successful.
The Government consultation looks to improve public information and knowledge about what to do on receipt of a claim and how to avoid CCJs. The aim is to improve response rates so default judgments can be generally reserved for those who willfully ignore court claims. The Government also wishes to reiterate and make clear the responsibility to update creditors of address changes.
The Government also acknowledges there is more reliance on transacting digitally, with many preferring to correspond by email. Court claims, however, are still only served by post to an individual defendant’s last known or usual residence. A claimant can apply to the court to serve at an alternative place (such as a known place of work) or by email but most would prefer to simply skip to default judgment. Some provision requiring claims to be sent to any email addresses previously used or provided by the defendant to the claimant and to serve on any other known addresses before seeking default judgment, would appear simple enough and should help to reduce the number of claims that never reach a defendant.
As set out above, simply claiming you were previously unaware of the claim is usually insufficient to set aside a default judgment. To that end, the Government is proposing a policy change to enable a court to remove a judgment from the register if it is satisfied that:
- The defendant was unaware of the claim and judgment at the relevant time;
- The defendant has only just become aware of the claim and judgment; and
- The defendant immediately pays in full.
If put in place, provided a defendant acts quickly upon finding an historic default judgment, the judgment could be removed from the register in the same way as if it had been paid within the first month of being made. It would grant a defendant the opportunity they should have had but for defective service. There would, however, presumably still be a court fee to pay to obtain such an order. If the CCJ was disputed then a defendant would have to apply to set aside the judgment in the usual way, as outlined above.
To learn more or respond to the consultation, please visit The Ministry of Justice website.
If you are a business or individual in need of legal advice or assistance with a money claim or any other civil dispute, please contact the Commercial Litigation team at Hunt & Coombs on 01733 882800.
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