The recession is causing an explosion in the number of cases where awards for damages are never paid, according to solicitors. Stewart McCulloch, a partner in Mace & Jones, the Liverpool solicitors, and a spokesman for the Liverpool Law Society, handled a case recently which he says typifies his clients' experiences.
'The woman had central heating installed but it was faulty. Water had blown out of the system and damaged her house. We sued for about pounds 2,500 and got judgement against the contractor. But two days after the judgement, the company went into liquidation.'
In another case, Mr McCulloch represented a car mechanic who was owed pounds 2,000 by a customer. 'We got a judgement but it took two years to get the money out of the customer and it cost my client another pounds 900 in extra court costs and bailiffs' fees.'
The court awarded only pounds 600 towards these extra costs - the full bill could not be met because the court only had the power to award fixed amounts towards some of the legal costs - so Mr McCulloch's client ended up pounds 300 out of pocket.
Many people on the wrong end of court judgements will avoid paying, but in other cases they genuinely do not have the means. Mr McCulloch said: 'It is not unusual in my firm to employ someone to investigate the financial circumstances of the person we want to sue to see if they are likely to satisfy a judgement.' It is common for victors in civil suits to see their opponent go out of business, change their name, move money offshore or to another person. They may simply disappear. A favourite ploy among less-than-scrupulous businesses is to wind up one company and create a new one that mirrors the old one in all respects but name.
A debtor may also seek a voluntary arrangement, with the court's approval, where he proposes to pay all creditors a part of what they are owed. Once such an arrangement is in place, the creditor has no legal right to full repayment.
Elizabeth Crawford, a commercial litigation specialist at Nabarro Nathanson, the London solicitors, said: 'There are a lot of people who are very adept at avoiding creditors. It is a serious problem. People have this idea that justice will prevail if they are in the right, but it does not necessarily work out that way.'
When someone wins a civil suit, the court orders the money to be paid in 14 days. If it does not appear the 'judgement creditor' has a variety of options, all of which will involve extra legal costs which are not always recoverable.
They could get the court to call in bailiffs - or the sheriff if the action was in the High Court. But this has limited effect against individuals because the bailiff cannot seize assets without the individual's permission to enter their premises. 'You may also find that if the bailiff gets inside and starts to seize things, the husband or wife says 'You can't take that, it belongs to me'.'
This remedy is most effective against companies. The bailiff or sheriff will sell the assets and subtract their own fees - sure to be a minimum of pounds 100 - before passing the balance to the creditor.
Another alternative is to obtain a garnishee order from the court, which freezes money in the debtor's bank account and arranges for it to be paid out. This can only work if the creditor is knowledgeable about the debtor's finances. One way to find out is to call the debtor back to court for an 'oral examination'. But there is no guarantee they will appear. Mr McCulloch said: 'I went to Liverpool County Court for an oral examination a few weeks ago. Sixteen individuals were due to appear that day and only four turned up.' People who persistently fail to turn up can be sent to jail, but that might be for only 24 hours.
Another way of extracting money is to apply to the court for an 'attachment of earnings', where a regular sum is taken from the debtor's wages or salary. Miss Crawford says: 'This is effective for individuals in regular employment, but slow.'
Attachments of earnings can also break down if the individual moves or changes jobs.
Another option is to have the individual made bankrupt or, in the case of a company, to apply to have it wound up. 'This is the ultimate weapon,' says Miss Crawford, 'but it often results in nothing being available because the individual or company is insolvent. This method is for punishment rather than restitution.'
In the 'can't pay, won't pay' climate, anyone thinking of starting a civil action for compensation needs to think carefully. 'At the end of the day you can't get blood from a stone. Many learn by bitter experience that getting a judgement can be the beginning of the story rather than the end.'Reuse content