Flying low

These are the dog days of the year, where phones do not ring, and emails are met by out-of-office-replies, so it is surprising that on 27th December the Ministry of Justice published a consultation paper on reforming the process relating to default judgments. A copy of the document can be found here: Default County Court Judgments Consultation.

The document explains it’s origins in these terms above the signature of Mr Raab MP

The Government announced in December 2016 that it would seek views on improving the process currently in place by which businesses or individuals who are owed money seek to recover it through the County Court in England and Wales. This followed concern about the potential adverse impact of a County Court judgment on individuals who, unaware that a judgment had been made against them, found months or years later that their credit rating had been damaged.

It is inevitable that, sometimes, people are unaware that they are subject to a County Court judgment, but there is concern that in some cases this may be happening because creditors deliberately use addresses for debtors that they know to be old. This deprives debtors the chance to defend the claim and having to suffer the consequences of possible enforcement as creditors use this as leverage for future debt recovery.

Since last year’s announcement the Ministry of Justice has engaged with a wide range of stakeholders from the advice sector, the debt management sector and from other Whitehall departments to look at ways to protect consumers better, including protecting their credit ratings from being damaged.

So far, so good. But as the Executive Summary makes clear, the paper really is a call for evidence on whether creditors are abusing the current rules for default judgment particularly the “deemed service” provisions and also the ability to use a last known address as an address for service:

This consultation broadly does three things.

First, it sets out proposals for informing consumers of their rights and responsibilities, for example what they should do to keep creditors updated with their contact details.

Second, it seeks views on a policy option to improve matters for defendants by the removal of an entry on the Register of Fines, Orders and Judgments when a defendant settles the claim immediately once a judgment is brought to their attention, provided they satisfy the court that they were not previously aware of the judgment.

Third, it seeks data on instances where a County Court judgment has been entered against a debtor without their knowledge, where a claim has been sent to an old or otherwise incorrect address as a result of deliberate flouting of the court rules by a claimant.

The consultation could therefore have significant consequences for credit hire claims, particularly where there may be an indemnity dispute between an insured and her insurance company, or where allegations of fraud may arise after the entry of a default judgment.

Having argued dozens of applications to set aside default judgment over the years, including a trip to the Court of Appeal in the case of Gentry v Miller and UK Insurance a perennial complaint of insurance companies is that solicitors acting for credit hire claimants “fly low” by sending them the bare minimum of correspondence in order to catch them off their guard and secure a default judgment.

Conversely, solicitors acting for claimants in such a case may point to a thick file of sent-but-unanswered-letters and allege insurance companies fail to staff their claims departments adequately leading to judgments being entered by default.

In a world where these applications are currently governed by the Mitchell/Denton criteria, it will be interesting to see if the court’s approach is softened by a procedural rule change some way down the line.

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