Third Party Debt Orders – Can’t Pay? Or Won’t Pay?

    Third Party Debt Orders – Can’t Pay? Or Won’t Pay?

    Often, the property disputes team at Porter Dodson are instructed by clients to secure a Court order directing a party to do an act (e.g. vacate a property or land) and / or to pay a debt (e.g. arrears of rent) by a stipulated date. Some defendants comply, others do not.

    When we think of a court order, quite reasonably people assume compliance.  It can be staggering that despite a Judge having considered the papers and directed a certain outcome, often in the presence of the parties, a defendant (or judgment debtor) could be so brazen as to ignore the order, and fail to comply.  However, what are the consequences in the English legal system?

    Contrary to expectations, the Court will not do anything of its own volition in the face of a party’s non-compliance with an order.  There are various remedies available to a party looking to enforce a court order.  Today I was faced with this question: an uncooperative tenant, who had been ordered to leave a property, and who has so far failed to pay the money awarded to my clients at trial.

    Some methods of enforcement are more popular or effective than others.  Which is the most appropriate will be fact specific to each case.  However, I was reminded today of one method of enforcement that, if timed correctly, can be an amazingly successful tool at recovering payment of a judgment debt.  This is the ‘third-party debt order’.

    In short, if a creditor is aware of money being held by a third party on behalf of the judgment debtor, then the creditor can apply to the Court for an order that entitles the creditor to receive direct payment.  By example, where you are aware of the bank details of the debtor, the Court can be asked (and will order) that the monies awarded in the court judgment may be paid directly by the bank to the creditor.  The money held is the property of the judgment debtor, and so the bank (subject to sufficient funds) must comply.

    This method of enforcement is not commonly used as it is not often that parties to a dispute will know bank details for the other.  However, in the circumstances of landlord and tenant work, bank statements or other information in support of a credit check may have been supplied at the outset. 

    The application for a third-party debt order is not notified to the judgment debtor before the order is made and served, for example, on the bank.  This is helpful as it avoids the risk of the judgment debtor learning of the prospect of their funds being depleted to pay the creditor, and therefore the risk of the money being moved.

    In some cases there may not be sufficient money in the account to pay the debt in full: there may of course be none.  However, third party debt orders are a relatively inexpensive and often overlooked method of enforcing payment in a ‘won’t pay’, rather than ‘can’t pay’ scenario.

    If you are a landlord or a tenant and require advice or assistance in respect of your commercial premises or residential lease, please contact Porter Dodson’s property disputes team.CONTACT OUR PROPERTY DISPUTE LAWYERS

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