The new legislation may improve the image of enforcement, but will it achieve the correct balance between the rights of creditors and those of debtors? Tom Bailey and Denise Cushine investigate
The word bailiff immediately conjures up images of a shaven-headed thug demanding money with menaces. Regrettably, there are a few who fit that description, but the vast majority employed by courts and law firms every day, up and down the country, do not. Nonetheless, the government is currently consulting on implementation of the provisions relating to bailiff enforcement with the Tribunals, Courts and Enforcement Act 2007, and a change both for the enforcement industry and for those who use their services is in the pipeline.
The stated aim of the legislation is to achieve a balance between the rights of the creditor to collect a lawfully due debt and the rights of the debtor not to fall victim to what the consultation calls aggressive bailiffs. This aggression is specifically identified as being a misrepresentation of legal authority, charging excessive fees and use of threatening behaviour.
In these austere times, enforcement of judgments and debts against goods is often the last and only option available to creditors. From the perspective of local authorities, this type of enforcement must be considered pursuant to their duties to recover sums due to the public purse.
There are several key areas that the consultation paper covers and the document itself runs to many pages. A change of particular interest is the proposal that a debtor must be informed of the decision to take bailiff action in all cases.
Currently, following judgment and after the High Court enforcement officer (HCEO) has received the completed N293a, the judgment is sent to the court to be transferred up to the High Court, and, as soon as the writ is returned, the HCEO arranges their first visit. The HCEO will make three visits at different times of the day and on different days of the week. At present there is no duty on the creditor to inform the debtor in advance of these visits.
It is proposed that the regulations contained within the Act contain a requirement that a debtor is given at least seven days’ notice of any enforcement action. This is said to be to enable the debtor “to identify the debt”; “[be] aware of the action they need to take to avoid further enforcement action”; and “[be] aware of the consequences of non-payment”. There is further provision for a court to order a lesser period upon application where there is a likelihood of goods being removed or disposed of to avoid enforcement.
There are clear issues that arise as a result of this proposal. How will the debtor react to such notice? Does such a notice really need to be given? What are the cost implications of applying for a lesser period of notice? What would the evidential requirements relating to such an application be?
The boxes on the right contain case studies that illustrate the potential impact of the proposed changes in two typical debt recovery situations.
David Carter, managing director of leading High Court enforcement firm The Sheriffs Office, comments: “It is the creditor that will inevitably suffer if the new proposals are bulldozed through. For example, the proposed requirement to notify a judgment debtor prior to the attendance of an enforcement agent will certainly have an effect on the ability to execute a warrant successfully. Experience tells us that goods will undoubtedly be sold or hidden prior to attendance with no real redress through the courts. We believe that a judgment debtor has had sufficient notice at every stage of the debt recovery process to fully understand the consequences of non-payment.”
If the industry itself is highlighting these concerns, what should firms using enforcement action be considering?
The consultation accepts that it is likely that a debtor has had at least four opportunities to pay sums due to a creditor. These will be an invoice, a reminder, a letter before action and commencement of legal proceedings. The implications of advance notice to a debtor are obvious and have been discussed above. There are two points to note here, given the possibility of applying to court to reduce the notice period. First, while the proposed regulation suggests that the court may lessen the notice period to be given, it does not suggest that notice can be dispensed with altogether. If this is envisaged then this should be made clear in the Act. Second, the Act should set out what, in broad terms, the considerations that the court should have regard to; for example, is a suspicion on the part of an HCEO enough? Does specific intelligence need to be gathered first? Can these costs be recovered from the debtor in all instances?
In many cases, for instance with recovery of rent arrears, the only avenue available to a local authority is enforcement against debtors’ goods. It follows that any notice to a debtor represents an opportunity to dispose of these goods (be it a motor vehicle or expensive electrical items). This is likely to close the door to the recovery of money owed to the public purse. Local authorities will be left in a difficult situation – do they consider every avenue available to recover sums due to them in the knowledge that by pursuing that avenue they are likely just to be throwing good money after bad?
Regrettably, any industry is often judged on the basis of the worst elements of it. Change might improve the image (cosmetically) of enforcement. Rotten apples lurking at the bottom of the barrel might be discarded on a permanent basis. But will the government’s pursuit of balancing the rights of creditors and debtors be achieved?
The non-responsive debtor
On the first visit the HCEO attended the enforcement address during an afternoon and reported that the property was a mid-terraced house in poor condition. The officer did not receive a response from the door and therefore hand delivered a notice of seizure through the debtor’s letterbox.
On the second visit, the HCEO attended the enforcement address, this time in the morning, and again received no reply from the debtor’s property. The officer delivered the relevant documents through the letterbox and on this visit made local enquiries in respect of the debtor but was unable to gain any information.
On the third visit, the HCEO attended the enforcement address on a late afternoon and again received no reply from the debtor’s door. Before leaving, the officer posted the documentation through the letterbox.
In a final attempt to make contact with the debtor, the HCEO wrote to the debtor requesting a response and/or a payment proposal to pay the outstanding debt.
The HCEO did not receive a response to the three visits, left paperwork or the letter requesting proposals. The HCEO therefore had no alternative but to close the file.
There are no proposals to allow the use of reasonable force to enter domestic premises, (the scope of which is outside the ambit of this article). The proposed change to notify the debtor of attendance in advance of the above visits is unlikely to have improved the chances of the creditor obtaining any sums due to it. It is highly likely that, if anything, the debtor would have made sure that they didn’t answer the door.
The debtor in this case was not previously known to the HCEO. It is difficult to envisage on what basis an application could have properly been made to court to lessen the notice period to be given to the debtor. Given that there was no success achieved without notice to the debtor, the costs of such an application would have been entirely wasted. In abortive cases such as this, the provisions of the Act are likely to have little impact.
Contact via a family member
On the first visit the HCEO attended the enforcement address during an afternoon and reported that the property was a terraced house in poor condition. The officer spoke to a family member of the debtor who confirmed that she was out and the officer advised the family member to get the debtor to contact the officer as a matter of urgency. The relevant paperwork was left with the family member.
After the visit, the HCEO received an offer from the debtor to pay by monthly instalments. This offer was acceptable by the client and the HCEO arranged for the instalment payments to be set up. The debtor has been paying instalments via the HCEO, which have remained regular and paid on time. If the debtor was to fail to make any of the instalments, the HCEO would attend the property to seek to recover any missed instalments or the balance in full.
Given the previous example, the obvious first implication is that the debtor might not have contacted the HCEO, having advance notice of the enforcement action. Given that first contact was made with a family member, it is also likely that the debtor might give instructions to neighbours of family members to look out for enforcement officers and not to provide any information. The final possibility, as is acknowledged by the consultation, is the possible removal of goods from the property so that there were none available to enforce against. As the debtor was unknown to the HCEO, an application to court would be subject to the difficulties discussed above.
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