A Charging Order is a court order that secures a defendant’s asset for the judgment creditor so that if/when is it sold the creditor is entitled to recover the monies owed to them from the sale proceeds. To force a sale, the creditor needs to apply for an Order for Sale after a Charging Order has been granted.
There is a two stage process for obtaining a Charging Order, the first stage is to obtain an Interim Charging Order, this is obtained without notice to the defendant and the creditor should carry out land registry searches to check ownership of land, it is important to note that ‘Office copy entries’ should be attached to the application as evidence.
At the interim stage, a judge will deal with the application without a hearing. The judge could impose a charge over the defendant’s interest in the asset and list a further hearing for a final charging order, or he could refuse to make the interim order if the outstanding amount is too small to justify the end result which could be the defendant losing his home if the Final Charging Order becomes an Order for Sale. Creditors should register the interim order to stop the asset being sold.
The second stage is for a final charging order to be made, 21 days prior to the hearing the interim charging order together with the application notice and any other supporting documents must be served on the defendant and any creditors.
At a final charging order hearing, both parties have the opportunity to raise issues/disputes. If the defendant objects the application for a Charging Order, they must provide written evidence stating their grounds of objection seven days prior to the hearing.
Section 1(5) of the Charging Orders Act 1979 requires the court to consider all circumstances of the case and evidence, as to; the personal circumstances of the defendant; whether any other creditor of the debtor would be unduly prejudiced by the making of the order.
The court would decline a final charging order if the individual was made bankrupt before the final hearing but after interim order; this applies to company’s liquidating. Importantly, even if the defendant has entered into a payment arrangement and has not defaulted this does not prevent a final charging order from being made, even though a judge may be reluctant to grant the order under these circumstances, reference should be made to CPR 73.4.3 and also Section 1 (7) of the Tribunals, Courts and Enforcement Act 2007 , which states: he fact there has been no default in payment of the installments does not prevent a charging order from being made in respect of that sum”.
Naturally, after the final charging order has been granted the next step is to recover the entire debt by enforcing the sale of the asset. An application for sale of the property (or and) can be made under CPR 73.10 if the defendant is the sole owner; or a joint owner. If it is only the interest in a property with co-owners the application needs to be made under s.14 of the Trusts of Land and Appointment of Trustees Act 1996. The claimant must follow the CPR Pt 8 procedure and file a copy of the Charging Order along with the claim form then a hearing will be given on issue of the Pt 8 Claim Form.
About the Author: Poonam Chauhan
Poonam joined the immigration department at Duncan Lewis in May 2007. She is qualified under the Law Society Immigration & Asylum Accreditation Scheme as a Senior Caseworker. Her experience in Immigration ranges from Asylum, representing unaccompanied minors to those in detention.
Poonam has worked closely with senior counsel whilst representing a vulnerable client leading to the reported case of Ahmed, R (on the application of) v Secretary of State for the Home Department, Court of Appeal - [2013] EWHC 1536 (Admin). In May 2015, she was involved in a fact finding mission to Poland and involved in interviewing the Polish authorities discussing the widespread concerns about the effectiveness of the Dublin III system.
Currently, Poonam is based in the litigation department, working on a variety of matters such as debt recovery, bankruptcy, professional negligence as well as commercial contract disputes. She also undertakes her own advocacy at the County Court.