Civil Litigation Solicitors

Most cases involving cowboy builders are relatively straightforward from a legal standpoint. In these cases, breach of contract is generally easy to establish and judgment can be obtained without huge issue (particularly as these builders tend to disappear and not engage in the litigation process). Enforcement Unfortunately, obtaining a judgment in your favour is only half of the battle. If the other party is unwilling to pay the judgment award voluntarily, you will need to consider what steps you can take to recover what is owed to you. This is known as “enforcement” of the judgment. Judgment debtors are invariably resistant to voluntarily paying sums that they have been ordered to. The common alternative methods of enforcement are:

1. Writ of Control – this is an order obtained by High Court Enforcement Officers (bailiffs), which enable them to attend the judgment debtors’ property, seize and sell the debtor’s assets, in order to satisfy the judgment debt.
2. Charging Order against Property or other assets – if you are aware of property or other assets that the Judgment Debtor owns in their own name, then you can apply to the court for a Charging Order. A Charging Order enables the Judgment Creditor to take control of and sell property owned by the Judgment Debtor, which are subject to the order.
3. Attachment of Earnings Order – An Attachment of Earnings Order is a direction to the Judgment Debtor’s employer that they must pay a specified proportion of the Judgment Debtor’s salary, to the Judgment Creditor. It goes without saying that it will only be useful to pursue an Attachment of Earnings Order against a cowboy builder if you know that they are employed elsewhere (and have details of this employment).
4. Third Party Debt Order (‘TPDO’) – A TPDO is effectively an order intercepting payments owed to the Judgment Debtor by a third party, which are instead paid to the Judgment Creditor in order to satisfy the judgment debt. They are useful tools when the Judgment Creditor knows of monies owed to the Judgment Debtor. For example, if the Judgment Creditor knows and has details of bank / building society accounts that are held by the Judgment Debtor, then it would be appropriate to apply for a TPDO.
5. Winding-up / Bankruptcy – Insolvency proceedings are often a last resort of the enforcement steps. A Judgment Creditor can:
• Apply for Winding-up if the Judgment Debtor is a company and if the judgment debt is greater than £750; or
• Apply for Bankruptcy if the Judgment Debtor is an individual and the judgment debt is greater than £5,000 and remains owing 21 days after the Judgment Creditor has served a Statutory Demand for the outstanding sum on the Judgment Debtor.

Various formalities must be met and an application to the Court is required in both instances. If successful, the insolvency process will take over, the Judgment Debtor’s assets will be divided up amongst the Judgment Debtor’s creditors in accordance with insolvency law. Care should be taken to ensure that insolvency proceedings are the most effective enforcement method in the given case. The value of the Judgment Debtor’s assets, the existence of other creditors and the effect of the insolvency proceedings on the Judgment Debtor all affect the prospects of recovery in insolvency proceedings should all be carefully considered before they are initiated. Ultimately, information is key and the more detailed information that a Judgment Creditor has, the easier it is to enforce the judgment. However, obtaining this information can be challenging, particularly when cowboy builders are involved. Why cowboy builders pose problems to enforcement? Rogue traders in general, but cowboy builders in particular, often use shell companies to conduct their work. A shell company is a corporation, with no assets or liabilities – but which is incorporated as a company and therefore has a registered address. Cowboy builders often operate from shell companies, because it gives them the protection from principles of English company law known as “separate legal personality” and the “corporate veil”. Separate legal personality means that incorporated entities (such as Limited Companies, PLCs and Limited Liability Partnerships) are legal persons in their own right – and should be dealt with as such for the purposes of legal proceedings. The effect of this is that the directors and officers of incorporated companies are shielded by the corporate veil and can only be held liable for the companies’ actions in certain well-defined circumstances (generally where there has been some impropriety on the part of the director / officer). Cowboy builders often use shell companies, which can be quickly dissolved, allowing the people behind the company (i.e. the builders themselves) to disappear without being pursued for the company’s liabilities. This scenario leaves customer in a position without recourse, where the building company owes a debt, or substantial work remains outstanding. The most frustrating aspect can be tracking down the directors of the company to pursue the debt – in circumstances where the client only has information (such as an address) for the shell company. Other tools to enforce a judgment against an evasive cowboy builder Information is the most important weapon in a Judgment Creditor’s arsenal. All too often, however, the Judgment Creditor has scant information about the builders – often just an email address, the registered address of the company and a phone number. Asset and Subject Tracing In cases like this, it can be helpful to instruct a third party agent to undertake an Asset and Subject Tracing exercise. At their most basic, these reports can identify useful information, such as the directors’ address and contact details. The more sophisticated reports can also determine whether the company owns any assets against which the judgment can be enforced; and whether the company owes money to any other creditors. It may be that an Asset and Subject Tracing report provides the Judgment Creditor with enough information to enforce the judgment. However, if the company is relatively new, has no assets and only one director – then sometimes even these reports do not provide any useful information. Part 71 Applications Part 71 of the Civil Procedure Rules can assist in these cases. Under Part 71, a Judgment Creditor can obtain an order from the court obliging an officer of the Judgment Debtor company to attend an Information Hearing at Court, to provide information to enable the Judgment Creditor to enforce the outstanding judgment. Information routinely sought includes, details of bank accounts, details of any debtors, and details of the company’s current trading. It may be that this information is sufficient for the Judgment Creditor to enforce the judgment using one of the enforcement methods listed above. Part 71 applications have another benefit, which is that Part 71 Orders contain a “penal notice” stating that the subject (i.e. the officer) must comply with the order, or may otherwise be held in contempt of court (see below). The threat of imprisonment is often enough to incentivise an evasive judgment debtor to engage with the process and settle the judgment debt. One hurdle to overcome when making an application under Part 71 is service. The law has rules about when documents are deemed to have been formally delivered to the recipient. Service is the process of how documents are served in line with these rules. Because of the serious consequences of the penal notice, court orders for Judgment Debtors to attend Court under Part 71 are required to be “personally served” on the Judgment Debtor. This means that rather than posting or emailing the Order to the Judgment Debtor, the Judgment Creditor must arrange for the Order to be handed to the Judgment Debtor (or director) in person. This can be tricky, especially when the Judgment Debtor is deliberately trying to avoid the Judgment Creditor and payment of the debt. Committal / Contempt of Court If all else fails, the Judgment Creditor does have one more ‘nuclear’ option: to apply to have the Judgment Debtor committed for contempt of court. Contempt of court is a serious matter – and can result in prison sentences and hefty fines. In order to bring a successful committal application, the Judgment Creditor must demonstrate that:

1. The Judgment Debtor is required by a court order to take a particular step – in enforcement proceedings this is almost always payment of the judgment award to the Judgment Creditor.
2. The Judgment Debtor was aware of the action required has neglected to carry out this step within the time period specified by the order (knowing that such conduct constituted a breach) – i.e. the Judgment Debtor’s failure to pay.
3. The relevant order was personally served on the Judgment Debtor, before the expiration of the relevant time period.

If the Court finds that the Judgment Debtor is in contempt of court, then they will be sentenced, and may even be subject to an immediate custodial sentence. It is these severe consequences that make Committal Applications a handy instrument for enforcement. The threat of Contempt of Court and imprisonment is often enough to make a Judgment Debtor put forward serious proposals to settle the debt owed to the Judgment Creditor. Conclusion Ultimately, no enforcement method is perfect. Each involves their own costs and none of them guarantee the Judgment Creditor’s recovery from the Judgment Debtor. The best way to avoid the problems associated with cowboy builders is to spot the red-flags before you engage them. This can be difficult, but clients can protect themselves by:

1. Asking the builders to provide multiple references from previous clients and other evidence of previous work.
2. Ensuring that all agreements with the builders are committed to writing. Be clear with the builders that they will not be paid unless and until any agreements are set out in writing. Although sending a follow-up email can be a good way of documenting agreements, it is always best for the agreement to be set out in writing (via email) before any money changes hands.
3. NEVER making advance payments in cash.
4. Asking the director of the company to provide a personal guarantee that the company will fulfil its obligations under the building works contract. This means that it is easier to surpass the corporate veil and pursue the director in his personal capacity should the company breach its obligations. Personal liability is a very good incentive to ensure that the work is completed – no one wants to lose their house.
5. Request evidence of the builder’s insurance prior to entering into a contract with them.

The above protections are not fool proof – but will assist clients in knowing when to avoid a particular builder. For example, if the builder is unwilling or unable to provide client testimonials (which should be independently verified) or evidence of its insurance – then this is a red-flag and an indication that they are not trustworthy. If you have any questions please contact author Oliver Subhedar. Oliver is a solicitor within the firm’s Litigation team. He deals with all aspects of commercial and civil litigation, covering a wide range of litigious matters, including intellectual property; debt recovery and enforcement; professional negligence, and insolvency. He also handles various disputes including contract disputes, banking and finance disputes, and consumer disputes.