Mercantile Credit Company Ltd v Huxtable; Mercantile Credit Company v Ellis and
Associated Actions COURT OF APPEAL (CIVIL DIVISION) 1987

This is an appeal by Mercantile Credit Company Limited against a judgment of His Honour Judge Harris
given in the Westminster County Court on the 12th December 1986, when the learned judge dismissed the
company’s appeal from an order of Mrs Deputy Registrar Vickers, in turn dismissing the company’s
application that a charging order made nisi should be made absolute, but discharging that order which had
been obtained by the company on the 8th September 1986.
The appeal in fact is a multiple appeal in relation to a number of respondents against whom charging orders
were made, and in respect of whose charging orders nisi the Deputy Registrar dismissed the company’s
application. I need therefore only deal with one of the appeals. The issues that arise in each appeal are
precisely equivalent, and they raise questions of very considerable importance to the appellants, upon whom
the incidence of the law in this respect may seem to lean adversely. Nothing that I say in this judgment
should be taken other than to be favourable to and understanding of the position of the appellants, who
provide an important and beneficial service to a very large number of members of society who require
financial assistance and receive it from them.
The problem that arises in connection with those debtors who for one reason or another, not by any means
adverse to themselves, find themselves unable to comply with the conditions under which the appellants
have made the loan to them in the first instance.
As the learned judge in his judgment records, the appellants are involved necessarily, because of the extent
of their business, with a very great amount of litigation which finds itself in the Westminster County Court,
and is described by the learned judge as a large part of the court’s work. There are some 80 to 100
applications made to the court every week, so it is against that background that anything than can
reasonably be done to facilitate the exercise of that litigation should be done. In the conclusions which the
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court reaches I hope it is clear that that sympathetic attitude will appear.
It is necessary to detail very shortly the process which takes place in each case. It is started — and I take
now the facts from the appeal involving Trevor Densroy Huxtable as respondent — by an application for a
loan to the appellants. On that form the applicant, Mr Huxtable, sets out his requirements and gives details of
his own personal and property position. For instance, in this case he discloses his employment, and says
that he is the owner of his house, where he has lived for 18 months, at an address in Birmingham. He gives
his earnings, and asks for a loan of £2,500. He discloses to the appellants the purpose for which the money
is required, and gives the name and address of his bankers. It is apparent from this form that the appellants
operate in a highly responsible way. It would be quite impracticable, from a commercial point of view, for
them to make an independent inquiry into all these facts, and although we have not been given any direct
information I would find it surprising if they did. There is no criticism of them in this context, that they should
trust the information that is given to them by the applicant himself.
The overall transaction is recorded on the application form. There is an initial payment of £204, presumably
for and in consideration of the service, and the amount of the loan, £2,500, is upgraded to £2,704. Then
there are added various other figures which I do not find it necessary to detail in this judgment, except to say
that they are of the nature of the cost of insurance cover and interest on the loan, so that the total sum
envisaged then rises to £3,929.40p, which is on the form, and the provision is that that amount should be
repaid in 60 instalments of £65.49p payable on the first day of each month, but the first payment is deferred
for a number of months, the date of the application being July 1984 and the first instalment not being due
until the 1st January 1985. Attached to the form, for those who wish to check, there are the full details of the
percentage rate of charge, and other financial details which I need not include in this judgment.
The next relevant stage is the point at which the borrower, for one reason or another, fails to comply with the
loan agreement. It is at this point that the County Court becomes involved. The appellants issue a plaint
note, and the debtor is then sent a form, provided under the County Court Forms Regulations, upon which he
(the debtor, and now the defendant to the plaint in the County Court) is invited to deal with the claim. That is
form N9. Upon it the defendant is asked whether he admits the claim in full, or if not, how much of it, and all
the other aspects; in particular, information which would be of relevance to the court in dealing with the claim
and the judgment to be entered against the defendant, if a judgment is to be entered. He is asked again to
give details of his occupation, the address of the employer, details of his pay, details of other basic liabilities,
such as mortgage instalments, and so on, the rates, details of dependents, and so on. At the end of the form
he is invited to suggest the method of settling the claim in an alternative way, either by offering to pay in full
the outstanding amount, and presumably costs, by a certain date, or as was the case with Mr Huxtable, by
instalments of £(blank) per month. In this “blank” the defendant completes what he presumably expects to be
able to pay. Mr Huxtable put in £80. The date of that document was the 17th June 1986.
Acting upon that, on the 3rd July 1986, on form N30, which is a standard form, judgment was entered against
the plaintiff for the sum claimed, which he admits on his defence admission form, plus £111 for costs, giving
a total sum of £2,904.57p. The court ordered that to be paid by instalments of £80, which I note is the precise
figure suggested by Mr Huxtable, the first instalment again being deferred, this time by precisely one
calendar month. The first instalment was to be paid on the 3rd August 1986.
The position was then reached, almost certainly without the attendance at the court of the defendant, of a
judgment being entered against him, and an order being made for the satisfaction of that judgment by
instalments of a quantified amount. I pause only to record that in other cases, as we were told by Mr Evans,
sometimes the instalment is extremely small. The practice, which is understandable, is that almost invariably,
whatever the size of the instalment offered, the court makes that order, unless I suppose the appellants seek
to attend before the court and argue the contrary. Commercially the expense of such an operation would
probably not be justifiable. Therefore it is very nearly an automatic process, but it ends up with a judgment
and an order for payment by instalments.
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I should say here that the court makes that instalment order under the powers granted to it by Section 71 of
the County Courts Act 1984, and it does not require the assent of the plaintiffs. That power is in the court.
Clearly the plaintiffs can argue about it, and would be heard by the court, but in so far as the learned judge
commented in his judgment that the creditors had only themselves to blame for accepting an instalment
order, he was not strictly accurate in that comment. It does not, however, bear upon this appeal in any
relevant way.
The next stage is an application to the court, which in Mr Huxtable’s case was supported by an undated and
apparently unattested affidavit produced by a Mr Narendra Dyal, an assistant manager in the employment of
the appellants. He deposes to the making of the instalment order and says that Mr Huxtable is the owner of
the land and premises in question. For that I assume he relies on the information in the form, because he
produces that form as an exhibit to his affidavit. Then he deposes to one of three alternatives — in Mr
Huxtable’s case it is the second alternative — “(a) that at the date hereof the plaintiff is unaware that the
defendant has any other creditor; (b) that at the date hereof the plaintiff is aware that the defendant has other
creditors, but the plaintiff is unable to identify them sufficiently for the purpose of service; or (c) that at the
date hereof the plaintiff is aware that the defendant has other creditors as identified in the exhibit produced.”
In that affidavit a charging order is sought pursuant to Order 31, rule 1 of the County Court Rules 1981.
On the 8th September, on the application of the appellants, and on reading the affidavit of Narendra Dyal,
but so far as the face of the order shows, with no physical attendance, an order is made, described as a
charging order nisi, to the effect that unless sufficient cause to the contrary is shown before the Westminster
County Court at the address given on the 6th November 1986 at 10.30 o’clock the matter will be given further
consideration. In the meanwhile there is an interim order charging the property with the debt.
The matter then comes again before the Deputy Registrar. On this occasion the appellants appear, very
properly, by solicitors. The Registrar hears the solicitor for the appellants, and on the 6th November
discharged the order nisi. The appellants appealed to the judge, and after delivering a judgment, a note of
which is before us, the learned judge dismissed the appeal in each of the cases with which we are
concerned and purported to give leave to appeal on terms that any costs incurred be met by the plaintiff
Very properly, Mr Evans, who included in his Notice of Appeal a ground that that order as to the terms for
leave to appeal was outside the jurisdiction of the court, has indicated to the court that in any event the
plaintiffs would not be seeking costs, should they be successful on this appeal. Accordingly, that ground
does not really arise, but I feel constrained to remark that had it arisen, and noting that there has not been
any argument before the court, I would have had grave doubts as to the jurisdiction of the judge to impose
terms on his leave to appeal of the kind that he purported to impose in this case.
I now turn to the judgment, which is a judgment in all the cases with which we are involved. I cite only at this
moment the report of the proceedings before the Deputy Registrar. It appears, and is conceded by Mr Evans,
that in the cases with which we are concerned there had been no default in the payment of the instalments
ordered by the judgment entered in this process which I have just described. The learned judge said this: “I
do not think the learned registrar had in fact made any note or judgment but she did provide for me a note
and she had taken the view on the facts” — and I emphasise the words “on the facts” — “that all the
defendants in those seven cases which were before her had complied with the instalment orders which had
been made and that they therefore were not in arrears under the order which the court had made. She also
thought that the plaintiffs had made no proper effort to identify or to notify other creditors. She relied on the
terms of Section 1, subsection (5) of the Charging Orders Act which provides that the court shall consider all
the circumstances of the case and in particular any evidence as to personal circumstances of the debtor.
She concluded that it was inequitable to make a charging order absolute where the debtor was not in default,
where the plaintiffs had not indicated at the time of the instalment order that they wanted some further and
additional remedy, and thirdly that she thought it inequitable that orders should be made when other possible
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creditors were kept, as it were, in the dark.”
I read that second-hand account of the reasoning of the registrar as disclosing an exercise of discretion
within Section 1 of the 1979 Act, in pursuance of the mandate that the court should consider all the
circumstances of the case, including the personal circumstances of the debtor. The hearing before the
learned judge is of course a rehearing, and he records that in his judgment.
For my part, I would hold that where the circumstances established that an order for payment by instalments
has been made and has been observed, then in any event it would be impossible to attack an exercise of
discretion where that discretion was exercised in favour of a debtor (now a judgment debtor) faithfully
discharging the terms of the judgment order itself.
That would be sufficient to dispose of this appeal, but out of respect for the cogent and attractive arguments
put forward by Mr Evans, which earned the commendation of the learned judge — which I repeat in this court
— I propose to consider very shortly the points that Mr Evans puts before us in relation to the effect of Section
1, subsection (1) of the Charging Orders Act 1979 in relation to the provisions of the Act itself and Section 36
of the Administration of Justice Act 1970, upon which Mr Evans relies.
The submission is put in this way. He submits that Section 1 of the Charging Orders Act refers to the power
in the court: “Where, under a judgment or order of the High Court or a County Court, a person (the ‘debtor’) is
required to pay a sum of money to another person (the ‘creditor’) then, for the purpose of enforcing that
judgment or order, the appropriate court may make an order in accordance with the provisions of this Act
imposing on any such property of the debtor as may be specified in the order a charge for securing the
payment of any money due or to become due under the judgment or order.”
Mr Evans then goes to Section 3, subsection (4) which reads: “Subject to the provisions of this Act, a charge
imposed by a charging order shall have the like effect and shall be enforceable in the same courts and in the
same manner as an equitable charge created by the debtor by writing under his hand.”
Section 36 of the Administration of Justice Act 1970 deals with actions by mortgagees for possession and
provides — it is not necessary to read the section — the protection against actions for possession by
mortgagees where dwelling houses are concerned.
Mr Evans submits that in Section 1 of the 1979 Act enforcement must be distinguished from execution in its
technical sense. He has referred, in support of that, in particular to a note in the Supreme Court Practice
under Order 50, rules 1-9, on pages 720 and 721, referring to this Section and reading as follows: “On the
other hand, the terms of Section 1(1) ‘a charge for securing the payment of any money due or to become due
under the judgment,’ make it clear that a charging order may be made in respect of a judgment debt payable
by instalments, even though no instalments are in arrears at the date of the application, thus perhaps
statutorily negativing Woodham-Smith v Edwards [1908] 2 KB 899.”
The importance of distinguishing “enforcement” under Section 1 of the 1979 Act from “execution” is because
of the provisions of Section 86 of the County Courts Act 1984, which although it is to be found in a section of
that Act entitled “Enforcement of judgments and orders” with a sub-heading “Execution against goods” Mr
Evans rightly concedes would apply if a charging order were made, to constitute the execution of the
judgment. Section 86(1) reads: “Where the court has made an order for payment of any sum of money by
instalments, execution on the order shall not be issued until after default in payment of some instalment
according to the order.”
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As I have indicated in this judgment when dealing with the exercise of discretion, the faithful observance of
an instalment order would appear to be very good grounds for not imposing any further inhibition upon a
judgment debtor who is obeying the order of the court. I refer only to the case of Woodham-Smith v Edwards
to which the note in the Supreme Court Practice refers. It dealt with a different rule and statute, and I need
only make two comments. One is that it is quite clear from the judgment of Lord Justice Fletcher-Moulton that
there a charging order was considered as execution. I do not myself find the insertion of the words “sum due
or to become due” in Section 1(1) of the 1979 Act any cogent reason for overruling that authority.
Moreover, when one looks at the remaining provisions of the 1979 Act, and in particular Section 4, it is quite
clear that the draftsman of the Act considered, notwithstanding the use of the word “enforcement” in Section
1, that a charging order was execution of the judgment. Section 4 concerns the particular position which
arises under the Bankruptcy Act 1914, Section 40, and the then equivalent Companies Act (now re-enacted
in Section 621 of the 1985 Act) where the expression “completed execution” is of statutory significance.
Section 4(2) provides: “For the purposes of this Act (a) an execution against goods is completed by seizure
and sale or by the making of a charging order under Section 1 of the Charging Orders Act 1979.”
It would be quite an inconsistent interpretation of the 1979 statute if in the context of the indication given by
Section 4 a different or distinguishing interpretation, based upon enforcement as opposed to execution, were
to be given to the charging order for which provision is made in Section 1 of the 1979 Act. I only mention,
without going into details, that there are other judgments in this court, notably one by Lord Denning, where a
charging order is clearly envisaged as being in the nature of execution.
Notwithstanding, therefore, the very able submissions of Mr Evans I am wholly unpersuaded that there would
be any point in distinguishing, on the basis of the provisions of the Administration of Justice Act, a charging
order as not being execution of a judgment or part of it. Therefore the section of the County Courts Act which
enforces execution of payment by instalments under Section 86 must apply to Section 1 of the 1979 Act, and
if it were necessary so to hold, I would hold that there was not jurisdiction in the court to make a charging
order as long as the instalments were being regularly paid by the judgment debtor. As I have said, however,
it is not necessary for the disposal of these appeals for that conclusion to be reached, and I would dismiss
the appeal both on the question of discretion and also on the grounds that a charging order is part of a
process of execution of a judgment falling within Section 86 of the County Courts Act. I would dismiss all
these appeals.
I agree. I have nothing to add on the question of discretion. I consider that the learned registrar was entirely
right in exercising the discretion in the way she did.
So far as the jurisdiction point is concerned I have only one matter to add. Reliance was placed on the fact
that under Section 1(1) of the Charging Orders Act 1979 the charge may be imposed in order to secure “the
payment of any money due or to become due under the judgment or order.” Those words appear to me to be
wholly without significance for present purposes, when one observes that Section 86 of the County Courts
Act 1984, having first imposed an embargo on the execution of the order until after default in payment of
some instalment according to the order, goes on to provide by subsection (3) as follows: “Except so far as
may be otherwise provided by county court rules made for those purposes, execution or successive
executions may issue if there is any such default for the whole of the said sum of money and costs then
remaining unpaid or for such part as the court may order either at the time of the original order or at any
subsequent time; but except so far as may be otherwise provided by such rules, no execution shall issue
unless at the time when it issues the whole or some part of an instalment which has already become due
remains unpaid.”
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It is therefore apparent that if there is default in one instalment there is under Section 86 power to issue
execution in respect not merely of that instalment but for the whole of the remaining instalments which have
not yet become due. That can be done by means of a charging order.
So far as the meaning of “execution” is concerned, in my view the wording of the Act is itself plain and makes
it clear beyond argument that for the purposes of the Act execution is considered to issue when a charging
order is made. That construction of the Act accords with the two cases in this court where charging orders
have been considered as execution, namely in re Overseas Aviation Engineering (GB) Limited [1963] 1 Ch
24, [1962] 3 All ER 12, and Woodham-Smith v Edwards [1908] 2 KB 899, which has already been referred
to. Mr Evans has very properly, appearing as he does without opposition, drawn both those cases to our
attention. Both of them are against him and they appear to me to be conclusive. I also would dismiss these
I agree with each of the judgments delivered by my Lords and there is nothing I wish to add.
Thank you very much, Mr Evans, for your assistance. The appeals will all be dismissed.
Appeals dismissed. No order as to costs