Non payment of invoices is a common problem for all businesses and will naturally cause delays and disruption in your finances, productivity and your supply chain.
If we do proceed to Court and the Judge finds in your favour, the judgment must be served on your debtor with a request that the monies are paid to you. If they fail to make the payment even after the CCJ has been served, there are a number of options for you. We will discuss each of these routes with you and advise as to the most appropriate for your own situation, that of your business and that of your debtor:
1). Third party debt orders
It is possible to apply for an order from the Court that any third party who owes money to the debtor pays the amount of the judgment or part of it to you as judgment creditor. There are pros and cons to this route, which we can discuss with you.
2). Charging order
This is an application to register a charge over the debtor’s property, followed by an application for an order that such property be sold and payment of the debt be made from the proceeds of sale. This option can be weakened if any property is owned jointly and may not be appropriate depending on the nature of the debtor.
3). Execution Bailiffs
Bailiffs can be instructed to seize goods of the debtor, which can then be sold to pay the debt.
These acts fall under The Taking Control of Goods Regulations, part of the Tribunals, Courts and Enforcement Act 2007, which came into effect on 6th April 2014. The aim of these regulations was to bring conformity and clarity to the various forms of enforcement, with the main facets being:
- The enforcement process is now set out in four stages, each with defined fees.
- The first stage, the compliance stage, requires that High Court Enforcement Officers (HCEOs) must serve a Notice of Enforcement, giving the debtor 14 clear days to pay in full.
- Tools of the trade are only exempt to a maximum value of £1,350.
- Vehicles must be immobilised for two hours before they can be removed.
- The debtor must be given seven days’ notice of a sale.
Notice of EnforcementThis is perhaps the most controversial area of the reforms, with arguments for and against both sides. From the creditors’ point of view, this gives the debtor the opportunity to take goods and hide them.
Debtors have been reported to hide goods, and have even gone so far as to hide trades’ vehicles from the HCEOs. On the other hand, sending the debtor a notice in good time will give them a last opportunity to pay, without incurring the full Sheriff’s fee (only the Compliance fee would be payable at this stage).
Tools of the TradeTools of the trade are exempt up to the value of £1,350. These include items that are needed by the debtor to do their job/run their business, for example, tools, books and vehicles. The value limit means that small outfits are not forced out of business by creditors taking all available items. On the other hand, the creditor will still have the opportunity to make a recovery from larger, more expensive items, or smaller items that bring the grand total above this limit.
Immobilisation of Vehicles/Notice of SaleVehicles are immobilised for a period of 2 hours after which they can be seized (if the debtor hands over the keys initially, then there is no need for the 2 hour immobilisation period). After goods have been seized and are “controlled goods”, the debtor is given 7 days’ notice prior to their sale. These additions again give the debtor a final opportunity to pay off their debt, rather than losing their vehicle/goods.
In circumstances where the goods do not fulfil the debt, the HCEOs can return to the property to try and obtain further goods. A shorter notice period of 2 days is required for a return visit, and this can be shortened by the Court if it is believed that the debtor will try and dispose of goods in the interim.
Controlled Goods AgreementOnce the HCEOs have taken “control” of the goods, they need not physically take them then and there. A Controlled Goods Agreement (CGA) is drawn up, stating that goods cannot be sold on and, if they are, the HCEOs can enforce the agreement on the purchaser (whether or not they know of the CGA). The HCEOs can then re-enter and take the goods at any time, and can use force if necessary.
It is a criminal offence for the debtor to intentionally interfere with goods taken into control. If found guilty, the debtor can be sentenced to a prison sentence of up to 51 weeks month and/or a Level 4 fine (currently £2,500). They may also be subject to contempt of court proceedings if they are found to be removing, hiding or selling the goods taken into control.
Selling the GoodsOnce seized and the relevant notice periods have expired, goods will be sold at auction. It is important to note that, in reality, very few cases ever require the seizure of goods (less than 1% of cases in 2014 – 2015 resulted in the removal of goods). Therefore it appears that by going through the initial stages, debtors are prompted to make payment.
An alternative option could also be insolvency. While such proceedings should not be seen as a method of debt recovery, the threat of them often results in the debtor making payment.
We can assist with all aspects of debt recovery, from providing up-front advice on the right course of action based on your situation, through to enforcement of court judgment in England and Wales, as well as instructing search agents to trace debtors where ever they may be. To discuss recovering outstanding debs owed to you, you can contact Brian Kirby by calling 023 8071 7421 or email briankirby@warnergoodman.co.uk.
