Case No: A2/2016/3042
Neutral Citation Number: [2018] EWCA Civ 803
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE County Court at Central London
HH Judge Luba QC
1 RM 01256
Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 17 April 2018
Before :

LORD JUSTICE PATTEN
and
LORD JUSTICE FLOYD

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Between :

	Diana loson
	Appellant	
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	(1)	BRETT STACK
(2)	NEWLYN PLC	Defendants/
Respondents	

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Arfan Khan (instructed under Direct Access Scheme) for the Appellant
Adam Walker (instructed by Feltons Law) for the Respondents

Hearing date : 20 March 2018

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Judgment
Lord Justice Patten : 
1.	In May 2010 the appellant’s husband, Mr Tiki Emezie, was issued with a parking ticket by the London Borough of Camden (“the Council”).  Mr Emezie is a solicitor.  He appealed against the issue of the ticket to the Parking Adjudicator and then, when unsuccessful, proceeded to seek to challenge it by issuing proceedings for judicial review.  On 14 November 2011, at an oral hearing, the High Court refused permission for judicial review but Mr Emezie failed to pay the parking fine.  As a result, the Council issued a warrant for the possession of the car and instructed bailiffs to execute it.  The bailiffs (Newlyn plc) located the car and on 28 November 2011 the appellant, Ms Loson, returned from shopping to find that her car had been clamped.  Mr Stack, who was the bailiff on the site, arranged for the car to be removed to a pound.  
2.	On 1 December 2011 Ms Loson issued proceedings in the County Court against the bailiffs seeking an injunction to restrain them from disposing of the vehicle and damages for the loss of the use of the vehicle in the four or five days when it was in the pound.  The basis of the claim seems to have been that she had requested the bailiffs not to tow the car away until she (or her husband who was supposed to be dealing with the dispute about the parking ticket) had been given the opportunity to pay what was due.  The bailiffs’ defence was that Ms Loson was confrontational and unco-operative and that there was no prospect of payment. 
3.	The claim was struck out on 8 December 2011 for a failure to file proper particulars of claim but was re-instated on appeal in August 2012.  On 24 September 2013 the claim was tried by District Judge Jackson in the Central London County Court who held that the delay in recovering the vehicle was entirely due to the unjustified refusal by Mr Emezie to pay the parking fine and dismissed the claim.  I should add that she rejected the allegation that Ms Loson behaved either aggressively or unreasonably but the legal reality was that the fine which was due had not been paid and the bailiffs were therefore entitled to seize the vehicle.  The District Judge ordered Ms Loson to pay the costs of both defendants and to pay the sum of £5,000 on account of those costs by 4 pm on 31 October 2013. 
4.	Ms Loson applied for permission to appeal to the Court of Appeal but this was refused on 6 August 2014 as being totally without merit. 
5.	On 19 November 2014 Ms Loson applied for a stay or alternatively a variation of the costs order pending the determination of an application which the bailiffs had made to join Mr Emezie as a party for the purposes of costs.  For some reason (said to be an error on the part of the Court), Ms Loson’s application was not dealt with and on 27 November 2014 she was served by the defendant bailiffs with a statutory demand based on the interim costs order of 24 September 2013.  She applied to set it aside and, after an adjournment, the application was finally heard and dismissed by District Judge Goodchild on 26 May 2015.  The judge ordered Ms Loson to pay the costs which she summarily assessed in the sum of £3,000.  This was to be payable within 28 days. 
6.	On 30 September 2015 Ms Loson issued the application which is the subject of the present appeal.  She sought an order under CPR 40.9A for the variation of the two costs orders so as to allow her to pay the £8,000 by instalments of £50 per month.  In her application notice she set out details of her income and expenditure.  According to this, she earns £1,300 per month from working as a part-time sales consultant at Selfridges for L’Oreal, the cosmetics company.  Additional income in the form of child benefit, child tax credit and a student grant takes her monthly receipts to £1,925.  She has monthly expenditure of £1,858 which leaves her with a surplus of income over expenditure of £67 per month.  She has no savings but has loans and credit card debts in excess of £9,000.  
7.	Ms Loson is currently a student at Birkbeck College.  She has a young child.  In her application she said that she could afford to pay £50 per month towards her costs liability and that is what she offered.  The defendants, as judgment creditors, were given notice of the application in accordance with CPR 40.9A(10) and responded by objecting to the offer of payment of the costs by instalments.  They said that even without taking interest into account, it would require 160 months for the debt to be paid at the rate of £50 per month.  On 7 December 2015 they issued and served a bankruptcy petition based on the costs order of 24 September 2013. 
8.	Ms Loson’s application to vary that order was heard by District Judge Wright on 4 February 2016.  It is clear from the transcript of the hearing that his primary concern was the first of the two costs orders because that was the subject of the statutory demand and, since December 2015, the bankruptcy petition.  But both costs orders, as I have said, were part of the application and were dealt with by the District Judge.  He accepted on the evidence that the most that Ms Loson could actually afford to pay per month was the £50 which she had offered and the focus of the argument therefore became whether it was reasonable and proportionate for the creditors to be required to wait some 13 years in order for the debt (excluding interest) to be paid off.  They made it clear to the judge that they wished to be able to enforce the costs orders by whatever means was available to them which in this case was by petitioning for Ms Loson’s bankruptcy. 
9.	Ms Loson’s position before the District Judge was that she was in her second year at college studying for a degree in Business Human Resources and that once she has graduated she would have improved career prospects which would enable her to pay off the judgment debts more quickly.  Her former counsel submitted to the judge that bankruptcy was not a proportionate step for the creditors to take and was unlikely to put them into a better position than her offer. 
10.	The District Judge seems to have thought that the making of the instalment order would not prevent the defendants from proceeding to bankrupt Ms Loson and that an instalment order would not therefore foreclose that option for the judgment creditors.  He said:
“7. There was, I thought, an inference from Mr Canning that if I made an instalment order that might prove to be an obstacle in some way to the presentation of a bankruptcy petition.  Having thought about it I do not think that the making of such an order would be an obstacle to the presentation of a bankruptcy petition.  The issue would be whether the debtor has secured or compounded the debt to the reasonable satisfaction of the creditor, not to the satisfaction of the court.  I think Mr Canning agrees with me about that, but says that in essence the pivotal issue in the case is that it simply is not proportionate for there to be an order for these orders to be defrayed at the rate of £50 per month.
8. Mr Nkafu in response tells me that in fact his client does not have any real property.  She is not a homeowner.  Perhaps Mr Canning’s clients might want to take that into account when considering whether actually it is worth the candle to issue a bankruptcy petition, but, in any event, that is not my concern.  My concern today is whether it seems to me reasonable to make an instalment order at £50 per month, and it seems to me that it is so reasonable and proportionate to do so, given what I am told about Ms Loson’s financial situation.  I note that Mr Canning is not instructed to take issue with the factual matrix of Ms Loson’s financial position, as set out in her statement of means.  I shall order that the orders be defrayed at the rate of £50 per month.”
11.	It is, I think, common ground on this appeal that the District Judge was in error about the effect which his order would have on the pending bankruptcy petition.  His reference in [7] to the debtor having secured or compounded the debt to the satisfaction of the creditor is a reference to s.271 of the Insolvency Act 1986 which provides that the Court shall not make a bankruptcy order on a creditor’s petition unless the petition debt has been neither paid nor secured or is one which the debtor has no reasonable prospect of being able to pay when it falls due.  The District Judge was, I think, right to say that the petition debt in this case had not been secured or compounded within the meaning of s.271(1) (a) and because it was due and payable at the date of the presentation of the petition and was in a sum in excess of the bankruptcy level of £5,000 the petition was well founded: see s.267(2).  However, the effect of the instalment order was that the petition debt of £5,418.80 and the further costs order of £3,000 were no longer due and payable.  In these circumstances, although the Court has jurisdiction to make a bankruptcy order based on the position at the date when the petition was presented, it is bound in the exercise of its discretion to take into account the change of circumstances created by the instalment order and there must be a considerable doubt as to whether it would make a bankruptcy order on the existing petition.  Rule 10.24 of the Insolvency Rules 2016 provides:
“10.24.—(1) On the hearing of the petition, the court may make a bankruptcy order if satisfied that the statements in the petition are true, and that the debt on which it is founded has not been paid, or secured or compounded.
(2) If the petition is brought in relation to a judgment debt, or a sum ordered by any court to be paid, the court may stay or dismiss the petition on the ground that an appeal is pending from the judgment or order, or that execution of the judgment has been stayed.”
	The same must obviously apply when the judgement debt is no longer payable and any arrears are below the current bankruptcy level. 
12.	The defendant judgment creditors appealed against the instalment order with the permission of His Honour Judge Luba QC and on 8 July 2016 he heard and allowed their appeal.  He also took the view that the District Judge was wrong to suppose that the instalment order would have no effect on the creditor’s pending bankruptcy petition  But his principal reasons for allowing the appeal were that the District Judge had applied the wrong test in relation to the exercise of the power contained in CPR 40.9A and that his decision was perverse or irrational in that he appears to have left out of account the fact that when one adds statutory interest to the judgment debts then the instalment of £50 per month will not even discharge the interest accruing on the two costs orders.  The principal will never be paid.
13.	CPR 40.9A applies only to actions in the County Court.  It is the successor to the old CCR 22 r.10 which in turn was based on s.71 of the County Courts Act 1984 and provided:
“(1)     Where a judgment is given or an order is made by the county court under which a sum of money of any amount is payable, whether by way of satisfaction of the claim or counterclaim in the proceedings or by way of costs or otherwise, the court may, as it thinks fit, order the money to be paid either—
(a)     in one sum, whether forthwith or within such period as the court may fix; or
(b)     by such instalments payable at such times as the court may fix.
(2)     If at any time it appears to the satisfaction of the county court that any party to any proceedings in the court is unable from any cause to pay any sum recovered against him (whether by way of satisfaction of the claim or counterclaim in the proceedings or by way of costs or otherwise) or any instalment of such a sum, the court may, in its discretion, suspend or stay any judgment or order given or made in the proceedings for such time and on such terms as the court thinks fit, and so from time to time until it appears that the cause of inability has ceased.
(3)     Subsections (1) and (2), so far as relating to costs, apply in relation to the family court as they apply in relation to the county court.”
14.	CPR 40.9A states:
“(1) In this rule—
(a) 'creditor' means the person entitled to the benefit of a judgment or order;
(b) 'debtor' means the person liable to make the payment under the judgment or order; and
(c) 'debtor’s home court' means the court, or County Court hearing centre, serving the address of the debtor.
(2) Where a judgment or order has been given or made in the County Court for the payment of money, the creditor or, as the case may be, the debtor may apply in accordance with this rule for a variation in the date or rate of payment.
(3) The creditor may apply in writing, without notice being served on any other party, for an order that the money—
(a) if payable in one sum, be paid—
(i) at a later date than that by which it is due; or
(ii) by instalments; or
(b) if already payable by instalments, be paid by the same or smaller instalments,
and the court officer may make an order accordingly, subject to paragraph (4).
(4) If no payment has been made under the judgment or order for 6 years before the date of the application, the court officer must refer the application to the District Judge.
(5) The creditor may apply to the District Judge in writing and on notice for an order that the money—
(a) if payable in one sum, be paid at an earlier date than that by which it is due; or
(b) if payable by instalments, be paid in one sum or by larger instalments.
(6) Any application under paragraph (5) must state the proposed terms and the grounds on which it is made.
(7) Where an application is made under paragraph (5)—
(a) the proceedings will be automatically transferred to the debtor’s home court if the judgment or order was not given or made in that court; and
(b) the court officer will fix a day for the hearing of the application before the District Judge and give to the creditor and the debtor not less than 8 days’ notice of the day so fixed.
(8) The debtor may apply for an order that the money—
(a) if payable in one sum, be paid at a later date than that by which it is due or by instalments; or
(b) if already payable by instalments, be paid by smaller instalments.
(9) Any application under paragraph (8) must—
(a) be in the appropriate form;
(b) state the proposed terms;
(c) state the grounds on which it is made; and
(d) include a signed statement of the debtor’s means.
(10) Where an application is made under paragraph (8), the court officer will—
(a) send the creditor a copy of the debtor’s application and statement of means; and
(b) require the creditor to notify the court in writing, within 14 days of service of notification, giving reasons for any objection the creditor may have to the granting of the application.
(11) If the creditor does not notify the court of any objection within the time stated, the court officer will make an order in the terms applied for.
(12) Upon receipt of a notice from the creditor under paragraph (10), the court officer may determine the date and rate of payment and make an order accordingly.
(13) Any party affected by an order made under paragraph (12) may, within 14 days of service of the order and giving reasons, apply on notice for the order to be re-considered and, where such an application is made—
(a) the proceedings will be automatically transferred to the debtor’s home court if the judgment or order was not given or made in that court; and
(b) the court officer shall fix a day for the hearing of the application before the District Judge and give to the creditor and the debtor not less than 8 days’ notice of the day so fixed.
(14) On hearing an application under paragraph (13), the District Judge may confirm the order or set it aside and make such new order as the District Judge thinks fit and the order so made will be entered in the records of the court.
(15) Any order made under any of the foregoing paragraphs may be varied from time to time by a subsequent order made under any of those paragraphs.”
15.	The application in this case was made by Ms Loson under CPR 40.9A(8).  Although the application might have been determined by a court officer under CPR40.9A(12), it was in fact, as I have explained, referred for determination to the District Judge.
16.	There is no High Court equivalent to CPR 40.9A.  Under CPR 40.11:
“A party must comply with a judgment or order for the payment of an amount of money (including costs) within 14 days of the date of the judgment or order, unless –
(a) the judgment or order specifies a different date for compliance (including specifying payment by instalments);
(b) any of these Rules specifies a different date for compliance; or
(c) the court has stayed the proceedings or judgment.”
17.	Both the High Court and the County Court have power under this rule (as the County Court did under the old CCR 22 r.10) to provide for the judgment sum to be paid by way of instalments when making the original order.  But any variation of a High Court order for payment of the amount as a single sum must be made under the power contained in CPR 3.1(7) which in most cases will require the applicant for the variation to demonstrate a material change of circumstances.  There is no unqualified jurisdiction under this rule to vary what would otherwise be final orders of the Court: see Tibbles v SIG plc [2012] EWCA Civ 518. 
18.	In relation to the making of an instalment order under CPR 40.11, there is now some authority at High Court level as to the considerations which the judge should take into account when exercising what is, at least on its face, a broadly expressed power.  In Amsalem v Raivid [2008] EWHC 3226 (TCC) Akenhead J made an interim costs order of £100,000 against defendants who said that they could not afford to pay more than a nominal sum per month.  The judge approached the matter on the basis that the normal rule under CPR 40.11 was payment of the whole sum within 14 days and that any extended time for payment required to be justified.  The rules, he said, left it to the judgment creditor to decide how best to enforce a judgment in his favour and it would only be in an exceptional case that the court should interfere with those rights by postponing the debtor’s obligation to pay.  In a case where there was no realistic prospect of any substantial payment ever being made, the court should, he held, decline to extend the time for payment and should leave the judgment creditor free to enforce the judgment as he thought fit.  
19.	Field J took a similar course in Gulf International Bank v Al Ittefaq Steel Products Co [2010] EWHC 2601 (QB) where the defendants sought time to pay under CPR 14.9 and 14.10 following a judgment on admissions:
“21.     When exercising the discretion under CPR 14.10, this court is bound to have regard to the interests of the relevant parties. These will inevitably include the interests of the judgment creditor whose claim will be vindicated by a judgment and the interests of the judgment debtor who invariably will be a business entity, usually a corporation. The court will also bear in mind that where enforcement of the judgment can take place within the jurisdiction, the judgment creditor will be free to choose from the available methods of enforcement, including a petition to secure the bankruptcy or the winding-up of the debtor, as the case may be, as to which there is a statutory right providing that the preconditions of the making of such an order are met.
22.     In my opinion, Akenhead J's observation that inability to pay will usually not justify a pre-execution extension of time, with an insolvent debtor having to take the usual consequences of his or its insolvency, applies a fortiori where the parties are business entities. 
23.     Where the debtor is in a parlous financial situation, the interests of other creditors of the debtor and possibly those of the debtor's workforce and suppliers will be engaged. But since this country's bankruptcy and winding-up regimes are designed to take account of these interests and are supervised by specialist courts, these third party interests will, in my opinion, only very rarely, if at all, be a justification for an extension of time under CPR 14.10 or 40.11 where the debtor is liable to be wound up or made bankrupt within the jurisdiction. This approach will also likely be adopted when a debtor is liable to be wound up or made insolvent under a foreign insolvency regime, the protection of third party interests being a matter for that regime rather than this court.
24.     It follows that, in the ordinary way, this court will only exceptionally extend time under CPR 14.10 and 40.11 and then only where the judgment debtor is solvent and for relatively short periods of time and after which the whole judgment debt will become payable. Further, in reaching its decision, the court will give careful consideration as to whether some provision in respect of interest ought to be made in light of the fact that the judgment debtor will be being kept out of his money for the period of the extension.”
20.	Judge Luba considered that the District Judge in this case had failed properly to balance the interests of the judgment creditors against those of Ms Loson.  Instead he had simply asked himself what the appellant could afford to pay and made an order accordingly.  The District Judge had also failed, he said, to explain (and, by inference, to take into account) the calculations produced by the judgment creditors which indicated, as I have mentioned, that taking statutory interest into account the instalments would never reduce the principal.  Judge Luba therefore set the order of the District Judge aside and re-considered the matter.  It was submitted to him by Ms Loson’s former counsel that her financial circumstances could change once she was in full-time employment and that the respondent creditors could in such circumstances make their own application under CPR 40.9A for a further variation of the instalment order so as to increase the amount of the monthly payments.  Judge Luba rejected that:
“33. In my judgment, that will not do.  There was no material evidence – and I emphasise evidence as opposed to submissions – before the District Judge that anything was ever going to change.  This was, on the material before the District Judge, a question of a full-time student with a dependant child with no evidence as to likelihood of payment in the future. 
34. For all those reasons, I am satisfied that the learned Judge’s order was based on an exercise of judgment which was wrong and must be set aside.
35. In the course of exchanges with counsel I explored what might follow.  Is this a case in which one could sensibly remit the application to the learned District Judge for reconsideration?  Mr Canning urges upon me that that is not the appropriate course. Ms Loson has herself said that £50 is the amount per month she can afford and on the figures she has herself presented that is indeed the case.  There is no sense in remitting this for consideration because no different or alternative figures or arrangements are available or suggested to be available. 
36. It necessarily follows that this is an application which, if properly considered, the learned District Judge could only have dismissed and, in those circumstances I shall, in my turn, dismiss it.”
21.	Judge Luba was right in my view to consider that the District Judge had exercised his jurisdiction under CPR 40.9A on a wrong basis.  Out of fairness to the District Judge, it seems fairly clear from the passage in his judgment quoted above that he did not consider that his order would interfere with the current bankruptcy proceedings should the judgment creditors wish to pursue that course.  It looks as if he intended to preserve that option for them so that the instalment order would remain in effect only if and so long as no bankruptcy order was made.  But, for the reasons I have explained, that view is not necessarily correct and the District Judge should, I think, have considered the making of an instalment order on the assumption that it was likely to provide the regime of recovering payment of the judgment debts unless and until varied by a further order. 
22.	In those circumstances, the District Judge should have balanced the desire of the judgment debtor to extend the time for payment and so avoid enforcement of the judgment debt against the position and interests of the judgment creditors who had an order for costs in their favour and no prospect at all of the principal (or even the totality of the interest) ever being paid.
23.	The first instance decisions in relation to CPR 40.11 are not, of course, directly applicable to a variation application under CPR 40.9A.  But the approach which the judges there took to a postponement of the usual date for payment has an obvious relevance to the issue which we have to consider.  In a case such as this where the debtor cannot really pay anything, the correct course in my view is for the Court not to interfere with the judgment creditors’ right to seek enforcement of the judgment by whatever means are available to them and which they choose to adopt.  Although the power conferred on the Court by CPR 40.9A is not limited in terms or by authority to a material change of circumstances and CPR 40.9A(14) refers to the Court making such order as it thinks fit, the power does have to be exercised in a way which properly respects the rights of the judgment creditors which have been vindicated by the orders which the Court has made in their favour.  I would not myself describe the circumstances in which the debtor can successfully apply for an instalment order as exceptional.  Nor would I, in terms, endorse the view that the jurisdiction can only be exercised where the debtor is solvent.  Any case in which the debtor seeks time to pay is, in one sense, an instance of insolvency at least insofar as the debtor is unable to pay his or her debts as they fall due.  But I do accept that for the debtor to obtain the benefit of an instalment order, whether originally under CPR 40.11 or by way of variation under CPR 40.9A, the Court must be presented with a realistic repayment schedule backed up by evidence that the creditor can be expected to receive the amount of principal and any interest within a reasonable period of time.  To that extent, the interests of the creditor will be paramount.  Quite where the balance should be struck in terms of reasonable time will depend on the facts of each case.  I accept that in a purely commercial context (such as the situation in Gulf International Bank) there may be less room for allowing time for payment particularly where the creditor has its own cash-flow requirements to consider.  Equally there will be other cases where a limited period of time will enable the debt to be paid in full without any significant prejudice to the creditor particularly where interest is payable in the meantime. 
24.	In the present case I have considerable sympathy for Ms Loson.  The predicament in which she finds herself seems to be largely, if not entirely, down to the failure of her husband to pay a parking fine for which he was responsible.  As a result of his failed attempts to resist payment, Ms Loson finds herself on the verge of bankruptcy.  But she has no ability to pay nor, on the evidence, any realistic prospect of discharging in the reasonably near future or at all any significant part of her costs liability  The instalment order which the District Judge made does not even keep pace with the interest and cannot be supported.  But given Ms Loson’s financial position, no alternative is possible.  In these circumstances, Judge Luba was right in my view to set the District Judge’s order aside and to dismiss Ms Loson’s application.
25.	I would therefore dismiss this appeal. 

Lord Justice Floyd :
26.	I agree.