New Enforcement Rules: Good News for Creditors?

When a creditor successfully obtains a court judgment, they will undoubtedly want to enforce that judgment if the debtor continues to avoid making payment.  Torion Bowles, Litigation Solicitor, suggests that one might be forgiven for thinking that a surprise visit from a bailiff might encourage the debtor to immediately make arrangements to pay rather than risk having any valuable goods seized from their premises in lieu of the debt.  Although this has often been the case to date, creditors might not now be as successful.

As of 6 April 2014, the enforcement process was overhauled by the new Taking Control of Goods Regulations 2013 and Taking Control of Goods (Fees) Regulations 2014.  The enforcement of a High Court judgment or a County Court judgment transferred up to the High Court will now be processed in four distinct stages: The Compliance Stage, Enforcement Stage 1, Enforcement Stage 2 and the Sale/ Disposal of the Controlled Goods.

Perhaps the most worrying reform for creditors is the introduction of “The Compliance Stage”. An Enforcement Agent will now be obliged to serve a Notice of Enforcement on the debtor giving 7 days notice (excluding Sundays and Bank Holidays) before attending the premises.  The effect of this requirement is yet to be seen, although the rationale behind the Notice is to presumably encourage the debtor to pay upon receipt of the notice and avoid an Enforcement Agent’s visit.  However, the concern already being expressed by many is that by providing advance notice, some debtors may be tempted to remove all their goods from the premises to avoid the risk of their seizure by the Enforcement Agent.  The new legislation does however suggest that the notice period can be shortened by making an application to the Court with supporting evidence of the risk that the debtor will take steps to remove his goods.

All the previous rules and fees for enforcing a judgment by a Writ/Warrant have been replaced.  New terminology has been introduced with the “Writ of Fieri Facias” (Fi Fa) and “Warrants of Execution” being replaced with the term “Writ of Control”. The “Seizure of Goods” has been replaced by “Taking Control of Goods”; “Walking Possession Agreements” are now referred as “Controlled Goods Agreements”.

The term Bailiff has been replaced with the new title of Enforcement Agent.  All Enforcement Agents, including private and public sector, will be regulated and obliged to apply to the County Court to obtain a certificate to practice and a central register of Enforcement Agents will now be held by the County Court.  Applications need to be made by the end of July and currently certificated bailiffs must hold a level 2 NVQ in Control of Goods.

At each stage, a fixed fee will be payable by the debtor to the Enforcement Agent along with a percentage of the amount recovered in Enforcement Stage 1 and on the Sale/Disposal of the Controlled Goods. If enforcement is unsuccessful then the creditor will only have to pay the Compliance Fee (currently £75 plus VAT).  These changes will be welcomed by both creditors and debtors who will now have clearer information as to the enforcement charges. Torion advises that in one case he was previously instructed on, he had to argue that enforcement fees of £13,000 on a judgment debt of £2,500 were not disproportionate!

Time will tell how effective the new enforcement regulations will be for creditors, especially in light of the introduction of the Compliance Stage.  The regulation of Enforcement Agents and the creation of a transparent fee structure is welcome news particularly for debtors.  But Warner Goodman’s Commercial Litigation team will be watching carefully to see whether these new reforms will benefit the creditors who already face increased fees just to issue their debt claim from 22 April 2014.

For specialist advice on commencing legal actions and on all forms of enforcement of court judgments and orders, please contact Torion Bowles on 023 8071 7455, by email at torionbowles@warnergoodman.co.uk., or you can visit the section of the website here.

ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.