National Guild of Removers and Storers Ltd v Jones & Coid

A final charging order under the Charging Orders Act 1979 is a discretionary security measure, not a punishment or an additional debt. At the final hearing, the court must consider all the circumstances, including the debtor’s personal circumstances and likely prejudice to other creditors. The current CPR does not reproduce the former requirement that a debtor show cause before an interim order becomes final. The question whether any legal or evidential burden remains was left open. A court may adjourn the final-order hearing to test proposed payment arrangements. However, absent a legitimate reason, it should not suspend judgment interest during the adjournment. Refusal of a final order because it would punish the debtor is an error of law, particularly where refusal would leave the creditor with an unsecured debt for years and no reasonable repayment proposal.

The appellant, a trade association, obtained judgments against Mr Coid and Mr and Mrs Jones arising from passing-off and membership-related claims. Interim charging orders were made over the respondents’ homes. At the final hearings, the Patents County Court declined to make final charging orders. In Mr Coid’s case, the hearing was adjourned, interest was suspended, and time was allowed for him to seek finance. In the Jones case, the judge accepted proposed monthly payments instead of making a final order.

The appellant appealed, arguing that the court had misunderstood the effect of a final charging order, had wrongly dealt with the procedural burden under CPR 73.8, and had failed to consider the creditor’s prospects of recovery. The central issues were the scope of the court’s discretion, the relevance of the debtor’s circumstances, and whether interest could be suspended during an adjournment.

Pitchford LJ gave the leading judgment. Rafferty LJ and Neuberger MR agreed. The appeals were allowed.

1. Under section 1 of the Charging Orders Act 1979, a final charging order secures an existing judgment debt. It does not impose an additional financial burden or amount to punishment. It does not itself order a sale, and a final charge over a matrimonial home does not create a presumption that the property will be sold.
2. At the final hearing, the court must consider all the circumstances under section 1(5), including the debtor’s personal circumstances and whether other creditors are likely to be unduly prejudiced. The current CPR 73.8 does not reproduce the former RSC Order 50 rule 1 requirement that the order be made absolute unless the debtor showed cause. The court left open whether any legal or evidential burden rests on the debtor, holding that the burden question was not determinative. Roberts Petroleum Ltd v Bernard Kenny Ltd [1982] 1 WLR 301 (CN) was understood in the context of the former rules.
3. It was open to the judge to adjourn or postpone the final-order hearing in order to test Mr Coid’s stated intention to raise finance. However, his ability to make periodical payments was separate from the question whether judgment interest should accrue. No legitimate reason justified suspending interest during the adjournment. The relevant interest provisions, including section 74 of the County Courts Act 1984 and article 4(2) of the County Courts (Interest on Judgment Debts) Order 1991, did not prevent interest accruing on these charging-order proceedings.
4. The judge erred in treating a final charging order as punishment and failed to consider the effect of refusal on the appellant’s reasonable prospect of recovery. In the Jones case, the debt would otherwise remain unsecured for years without a reasonable proposal to repay the principal. A final charging order was therefore appropriate. The Coid appeal was allowed by deleting the suspension of interest. The Jones order was varied by removing the periodical payments and granting the final charging order.

Neuberger MR added obiter observations about disproportionate costs, the use of case management, costs management, alternative dispute resolution, the overriding objective and proportionality, and the possible difficulties in judges advising or vetoing consent orders made by litigants in person.

• Court of Appeal (Civil Division), [2012] EWCA Civ 216: allowed both appeals. In the Coid appeal, interest was restored and the final-order hearing could be resumed. In the Jones appeal, the periodical-payment order was removed and a final charging order granted.
• Patents County Court: made interim charging orders but declined to make them final. The Coid hearing was adjourned with interest suspended. In the Jones case, monthly payments were accepted instead of a final charging order.