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With the average time from claim to trial being over 52 weeks. Is legal action always the best option?
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Is Court Action The Best Way Forward?
Number of Judgments Increasing
On 7th September 2023, the Ministry of Justice released their quarterly statistics for the second quarter of 2023, covering the period from April to June 2023.
During this period a total of 276,965 judgments were secured, marking an increase of 11,679 when compared to the previous quarter, which spanned from January to March 2023. It’s noteworthy that this figure represents the highest number of judgments secured since July to September 2021 when 285,560 secured judgments were registered.
Default Judgments
If the defendant fails to respond to the claim served to them within the 14 day period either by filing an acknowledgment of service providing them with an additional 14 days to raise their defence or by disputing the claim, then the judgment will be secured by default.
Out of the 276,965 judgments raised, 255,649 judgments (approximately 92%) were default judgments, an increase of 15,235 when compared to the prior quarter. Again this is the highest number of default judgments since July to September 2021 when 260,780 default judgments were secured.
Defended Cases
In cases where a defence is raised, both the claimant and defendant will receive a directors questionnaire. A judge will then assess the value of the debt as well as the completed questionnaires and will provide a decision on whether the claim should be treated as a small claim, placed on multi-track or placed on fast track. The difference between these three routes are as follows
The Different Court Tracks
Small Claims Track: Usually cases under £10,000, once the claim has been defended the costs cannot be recovered, if the claimant wins the case, they can however recover the court fee and solicitors cost for issuing the claim.
The statistics show that for the second quarter of 2023, 10,264 claims were classified as small claims. Which is a reduction of 1,585 compared to the previous quarter where there were 11,849 small claims. Despite the decrease in the number of small claims, the average time between the small claim being issued and the trial has increased to 52.3 weeks marking the longest lead time recorded since prior to 2009.
Fast Track (don’t be fooled by the name): These are usually cases over £10,000 but under £25,000. The cost for defending the claim can be recovered, however the costs will be assessed at the final hearing by a judge provided that the costs are reasonable.
Multi-Track: Usually cases over £25,000, costs can be recovered. An estimate is provided at the beginning of the claim, however no additional costs can be added on to the balance once the estimate has been provided to the court.
For fast track and multi-track trials, there has been a decrease of 542 claims issued, decreasing from 3,671 issued in the first quarter of 2023 to 3,129 in the second quarter. It is important to note however, in the third quarter of 2022 (July to September) the number of multi-track and fast track claims had decreased from 3,354 to 3,181 before sharply rising again in the first quarter of 2023.
The lead time between issuing a claim and trial for fast track and multi-track claims stands at a staggering 78.2 weeks, a slight decrease from the 80.2 weeks reported in the first quarter of 2023. This marks the first decrease in this figure since January to March 2022.
Enforcing a Judgment & Current Time Frames
Once judgment has been obtained, it becomes possible to enforce it. If the judgment amount is below £600, it can be enforced by County Court Bailiffs, while amounts exceeding £600 can be enforced either by a Bailiff or High Court Enforcement Officer and amounts over £5000 can only be enforced by a High Court Enforcement Officer.
A High Court Enforcement Officer (HCEO) operates under a writ of control and County Court Bailiffs under a warrant of control. In the period from April to June 2023, a total of 78,340 warrants were issued. This marks a substantial increase of 6,390, in comparison to the previous quarter where 71,348 warrants were issued. This is the highest number of warrants issued since January to March 2020.
Conclusion
In conclusion, the information above highlights the challenges with pursuing legal action, especially if the claim is defended. For small claims, the average lead time from issue to trial has reached its highest point in over a decade.
In the event that a judgment is secured, it does not guarantee payment, even if the judgment is enforced and it does not make the claimant a secured creditor should the debtor company enter into insolvency.
It is also highly important to consider the financial implications for both the claimant and defendant as defended claims can result in substantial expenses for both parties. We strongly recommend conducting a comprehensive credit check and an insolvency check on the debtor company before embarking on legal action. If the debt is disputed or is likely to be disputed, it may be more cost effective to consider an alternative route such as debt recovery before pursuing court action.
This proactive approach to due diligence is essential in making well-informed decisions regarding the suitability of pursuing legal action, especially in light of the ongoing upward trend in insolvency rates. This can aid in avoiding unnecessary costs and ensuring that the chosen legal route aligns with your specific circumstances and objectives.