I have presented a number of seminars recently focusing on the importance of properly advising your client when it comes to the enforcement of judgments, specifically in relation to debt recovery matters.

Some clients want to throw everything at a debtor – “Sue them! Bankrupt them! I don’t care!” – but suing someone or threatening bankruptcy doesn’t necessarily mean you will get your money. Indeed, a client may well spend a considerable amount more pursuing the debt than they are even likely to recover.

A recent decision handed down by the Court of Appeal in the matter of Michael Wilson & Partners Ltd v Sinclair & Ors [2021] EWCA Civ 505 proved just that, when the claimant petitioned for the defendant’s bankruptcy, only to then object when it was granted as it meant that they could not recover their own money!

The Facts

The claimant (MWP) held a substantial judgment against the defendant.  The claimant sought to enforce that judgment by way of a third party debt order. That application was refused and the claimant appealed. In the meantime, however the defendant had been made bankrupt on the claimant’s petition.

The Court of Appeal found that there was no prospect of the claimant being able to keep the benefit of the third party debt order (because of the bankruptcy) and therefore there was no substantive purpose in pursuing the appeal.

The court took no pity on MWP, who appeared to have shot themselves in the foot!

 “the current situation is one of MWP’s own making…. MWP chose to present and pursue the petition against Mr Sinclair to the point where it succeeded in having him made bankrupt. The consequences …  were consequences that it brought on itself”

They continued…

“Mr Wilson (MWP) says that he hoped that the pressure of bankruptcy would have induced Mr Sinclair and Mr Emmott to settle, but it did not, and instead Mr Sinclair was made bankrupt, which is what MWP itself had petitioned the Court to do. As I have already said, MWP cannot in my judgment then complain of the effect that the bankruptcy had on its application for a Third Party Debt Order”

In summary…

Whilst the use of Statutory Demands is currently prohibited under CIGA, do not forget that such demands should not be used solely as a threatening tactic – as evidenced in the case of Sinclair & Ors, this can backfire with serious and costly implications.

Furthermore, when considering methods of enforcement, choose carefully and choose wisely. Throwing everything at a debtor and seeing what sticks will not always prove successful and so approaching the matter tactically, having sought full and proper advice, is much more likely to work in your favour.

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This article was originally published on: 19 April 2021

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