UK: Orders For Sale

Last Updated: 19 August 2010
Article by Christopher Hill, Steve Abraham and Donald Warnock

The following decision is notable for the robust judgment of Mr Justice Coulson when considering whether to order a sale of property owned by a judgment debtor.

The case is related to the case of Mentmore Towers & others v Packman Lucas [2010] EWHC 457 which we reported in our June Updater.

Packman Lucas Limited v Mentmore Towers [2010] EWHC 1037 (TCC)

The employer failed to pay outstanding fees to the engineer in relation to the engineering services carried out by the engineer in relation to the redevelopment of certain properties in Piccadilly and Mayfair.

The employer was in serious and "contumelious default" in failing to honour the debts and comply with numerous court orders. As a result of the continuing non-payment of the outstanding sums, final charging orders were made against the employer relating to the Piccadilly and Mayfair properties. The total debt was £190,201.67 plus costs on the Piccadilly property, and £24,222.38, plus costs on the Mayfair properties.

The employer was also in dispute with the architect, Fiztroy Robinson Limited, concerning its unpaid fees on the Piccadilly and Mayfair properties.

The court acknowledged that an order for sale was an extreme sanction and that "all circumstances would have to be considered" before the court exercised its discretion to made an order for sale under CPR 73.10. As an order for sale took the sale of a potentially valuable asset out of the hands of its owner, it was important to protect that owner from the risk of a fire sale which did not recoup the true worth of the asset.

Orders for sale: the Piccadilly and Mayfair properties

The parties were agreed that an order for sale was appropriate in relation to the Piccadilly property but did not agree on the minimum price to be achieved by any sale. The court took a conservative approach when identifying the minimum sale price and concluded that the minimum figure of £16 million was appropriate - the evidence put the value of the property between £10 million and £28 million but there was little evidence of the likely cost of repairing the Piccadilly property.

However, the employer resisted the sale of the Mayfair property as a matter of principle, on the ground that the judgment debt was too small in relation to the value of the property to justify an order for sale. The employer also argued that the property was going to be sold imminently.

The size of the debt

The court considered that it was potentially dangerous for a court to identify any hard and fast rules that sought to link the size of the debt with the ability to obtain an order for sale. A debt of £1,000 would mean very little to a large commercial concern, but for a small trader it might be the difference between bankruptcy and solvency.

Comparing the size of the debt with the value of the asset concerned was equally fraught with difficulty. Comparing the disparity between the debt and the asset value would mean that that the greater the value of the asset (and therefore the greater the default on the part of the debtor in failing to realise any part of that asset to pay the debt), the greater the chance the debtor would have of avoiding an order for sale.

The court considered that the size of the debt, and its value relative to the debt, were matters which should be taken into account in the exercise of the court's discretion under CPR 73.10. But the parties' conduct and the absence of any other enforcement options and the like were also factors for the court to take into account.

Evidence of imminent sale

The possibility of an imminent sale of the Mayfair property had been identified in the evidence. It was inevitably a matter to which the court must pay particular attention when deciding whether or not to cut across that arrangement, and potentially undermine it, by making an order for sale.

Order for sale: The court's view

As a result, the court held that it would not be appropriate to make an order for sale in respect of the Mayfair because of the imminent sale, taken together with the disparity between the debt and the asset value.

However, given the employer's intransigent conduct, and the absence of other enforcement options, an order for sale would have been made, notwithstanding the apparent disparity between the debt and the value of the property, were it not for the possibility of an imminent sale.

An order for sale might be appropriate in the near future, but the court was prepared to grant one final opportunity either to pay the outstanding sums or to realise their own sale of the property.

Editors' comments

In deciding that the disparity between the size of the debt and the value of the asset was one of a number of factors to be considered by the court when deciding whether to grant an order for sale, the court distinguished previous authority which had suggested that it would not be a proper exercise of the court's discretion to make an order in such circumstances (Robinson v Bailey [1942] 1 Ch 268).

The case is a reminder that obtaining a charging order and an order for sale may be a useful mode of enforcement of adjudicator's decisions or judgment debts.

View: Packman Lucas Limited v Mentmore Towers [2010] EWHC 1037 (TCC)

This article was first published in the Norton Rose Construction and infrastructure updater July 2010

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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