A creditor obtained a charging order over a property based on a judgment in which a company had been ordered to pay £11,500 in costs. In addition, the company had been ordered to pay into court the sum of £30,000 and if it failed to do so, it would be prevented from defending the claims and the claimant would be entitled to enter judgment for the sums claimed. The company failed to make any of the payments and the claimant successfully applied for a charging order over the company’s property for all of the sums claimed totalling £234,372.87.
The company (now in administration) claimed that the charging order should be set aside. First, they claimed that when the company failed to make the payment into court in the sum of £30,000, the claimant should have applied to enter judgment, but as they failed to take this next step the charging order for the full amount should not have been granted. The court agreed and held that there was no jurisdiction to grant the charging order for the full sums claimed as the claimant had failed to take the next relevant step and it should be varied to limit it to the sum of £11,500. Secondly, the company claimed that in any event when the charging order was made, the company was in fact insolvent. The court also agreed with this argument and held that, on a balance sheet basis, the company was insolvent and so the whole of the charging order should be set aside as there was a real risk that it would operate to the disadvantage of creditors as a whole, as it appeared that there was a shortfall of assets over liabilities.
This case demonstrates that a charging order cannot be obtained in respect of an order which requires a party to take a next step such as entering a judgment until that next step is taken. Further, where a judgment debtor is insolvent at the time a charging order is made, the court will exercise its discretion and refuse the charging order so as to prevent a judgment creditor from gaining an advantage over other unsecured creditors.
Monte Developments Limited (In Administration) v Court Management Consultants Limited and others [2010] EWHC 3071