In our previous blog, we provided a summary of enforcement options once a judgment is obtained from the court.
In our next series of business debt recovery blogs, our dispute resolution solicitors will provide more information about these enforcement options, starting with enforcing a money judgment by taking control of goods.
Advantages of taking control of goods
Taking control of goods is a very popular method of enforcing a money judgment.
It requires the issue of a court document (in the High Court, a writ of control and the County Court, a warrant of control) which commands an enforcement agent (usually a High Court enforcement officer (HCEO) or a County Court bailiff) to seize and sell a judgment debtor’s goods and raise funds to satisfy the judgment debt.
County Court bailiffs can try to get back any amount up to a maximum of £5,000, but for any judgments over £600, typically HCEOs are instructed.
The Civil Procedure Rules (CPR) contain the procedural rules for obtaining and using a writ or warrant of control.
Taking control of goods may often be the quickest method of enforcement of a money judgment. The procedure is simple and straightforward.
It does not require a judicial decision as a writ or warrant of control can be issued, in most cases, administratively by the court office, following the production of the relevant documents and payment of a court fee.
At the time of issuing a writ or warrant, the judgment debtor does not need to be notified, although notice has to be given later by the enforcement agent. In most cases, the threat of enforcement may be enough to secure payment of a judgment debt.
Writs and warrants of control work well with respect to corporate debtors because the corporate debtor may have stock, machinery, office equipment or vehicles which can be taken and sold.
Generally, any goods belonging to the debtor can be taken control of for the purpose of this enforcement power unless they are exempt goods.
Exempt goods include items or equipment which are necessary for use personally by the debtor in the debtor’s employment, business, trade or profession, except that in any case, the aggregate value of the items or equipment to which this exemption shall apply shall not exceed £1,350.
It should also be noted that a writ or warrant of control can only be executed against the assets of a partnership where judgment has been entered against the partnership.
If the debt is just the debt of an individual partner or partners rather than the whole partnership, partnership property cannot be seized.
There are other exemptions which may apply depending on the type of business the debtor owns or runs.
Considerations before issuing a warrant or writ of control
Before issuing a warrant or writ of control, it is vital to:
- Consider whether the judgment debt is due and enforceable. Before the court issues a writ or warrant of control, the judgment debtor must either have failed to pay the amount they have been ordered to pay in the time allowed or fallen behind with at least one of their payments under an instalment order. It is generally the case that before most enforcement methods can be used, the judgment debtor must have been given an opportunity to pay the judgment debt.
- Assess what assets the debtor has. They must have either goods which can be sold at auction to raise a sum sufficient to meet the judgment debt (or a large part of it) or enough money to meet the judgment debt to stop goods from being taken and sold. If the judgment is sizeable, unless the debtor has particularly high-value goods, other methods of enforcement, such as a charging order or third-party debt order, may be better.
- Check for any other restrictions on enforcement. If a company goes into compulsory liquidation, it will not be possible to enforce a money judgment by taking control of goods without first obtaining the permission of the court. If a company has gone into administration, you will need either the administrator’s consent or the court’s permission to enforce a money judgment by taking control of goods.
- Check whether permission to issue a writ or warrant of control is required. For example, permission will be required where six years or more have elapsed since the date of the judgment.
Judgment creditors are entitled to recover from the judgment debtor fixed costs if a writ or warrant of control is issued.
The fixed costs will be the court fee for the issue of the writ or warrant plus a fixed sum in respect of the costs of using the writ or warrant of control.
If an application for permission to issue a writ or warrant of control was required, the costs of this application can also be claimed, although it will be at the court’s discretion whether or not the costs are awarded.
The enforcement agent will make a charge for their fees and expenses.
Fees are recoverable at a fixed rate based on the stage of the enforcement procedure, and additional fees are recovered as a percentage of the sum sought to be recovered.
Disbursements may also be sought in some cases.
Practical considerations for control of goods
An enforcement agent may only take control of goods if they are:
- On premises, they have the power to enter, which generally speaking are the premises where the debtor carries on trade or business.
- Goods of the debtor.
- Not exempt goods.
- In England and Wales.
Although an enforcement agent may take control of goods on any day of the week, there are prohibited hours for taking control.
These are before 6am and after 9pm on any day unless:
- The court orders otherwise.
- The debtor’s premises are open for the conduct of trade or business during those hours.
- The enforcement agent has begun to take control of goods during non-prohibited hours and needs to complete this, provided that the time spent is reasonable.
The process of taking control of goods
The process of taking control of goods has three stages:
- Notice of debtor of enforcement. The judgment must be given not less than seven clear days’ notice of enforcement before the enforcement agent takes control of their goods unless the court orders a shorter period. The period of days does not include Sundays, bank holidays, Good Friday or Christmas Day. The court may only order a shorter period of notice where it is satisfied that, if the order is not made, it is likely that the debtor’s goods will be moved or disposed of to prevent enforcement.
- Taking control of the goods by entry into premises and securing the goods or entering into a controlled goods agreement. Ways of securing goods include guarding them, storing them or fitting them with an immobilisation device, removing them and securing them elsewhere. A controlled goods agreement is an agreement under which the debtor is permitted to retain custody of the goods, acknowledges that the enforcement agent is taking control of them and agrees not to remove or dispose of them nor to permit anyone else to before the debt is paid.
- Notice after entry and inventory of goods. After entering the debtor’s premises, the enforcement agent must provide a notice for the debtor giving information about what the enforcement agent is doing. The enforcement agent must also leave a list of any goods taken away at the premises.
Payment by the debtor
The judgment debtor can make payment of the amount due under the writ or warrant of control at any time.
The enforcement agent may accept payment of the debt in instalments if the judgment creditor consents.
It may make sense, in some cases, to accept payment in instalments, particularly if there are insufficient assets to cover the full amount of the judgment.
Once payment of the debt is made in full, the judgment debtor will have satisfied their obligations, and no further enforcement action should be taken.
If the enforcement agent has removed goods, they should, as soon as reasonably practicable, make them available for collection by the debtor.
Sale of the goods
Unless the judgment debtor makes payment or suspends or sets aside enforcement, goods taken control of should subsequently be sold by the enforcement agent.
Neither the judgment creditor nor the enforcement agent can keep the goods.
An enforcement agent must sell or despite controlled goods for the best price that can reasonably be obtained.
There should be a seven-day minimum period before the sale from the time of removal of goods unless that would make the goods unsaleable or extinguish or substantially reduce their value.
Sale is normally by public auction, although goods can be sold by private tender with the court’s agreement.
The amount of the debt which remains unpaid (or an amount that the creditor agrees to accept in full satisfaction of the debt) should be paid over to the judgment creditor out of the proceeds of the sale. This normally happens after a period of 14 days.
If the proceeds of the sale are more than the amount outstanding, the surplus must be paid to the debtor.
If there is a co-owner of any of the goods, the co-owner must be paid a share of the proceeds proportionate to their interest.
The enforcement agent is also entitled to be paid their fees out of the proceeds of the sale.