The calm after the storm? – the Taking Control of Goods Regulations

Further to an article written by Ruth Pratt on the new rule of enforcement David Carter, Chief Executive of The Sheriffs Office, one of the largest firms of High Court Enforcement Officers (HCEOs), takes a look at the impact of the new rules since they were introduced in April 2014.

What at first looked like regulations that would deeply disadvantage creditors who wanted to enforce their judgments has turned out to have little effect on their recoverability.

The Taking Control of Goods Regulations 2013, SI 2013/1894, and their respective supporting regulations, were finally introduced in April 2014 after many, many years in the making.

The intention was to modernise enforcement making it clearer for all to understand - with particular importance placed on the fees and charges made during the various enforcement stages that were introduced. Emphasis was also placed on reducing the burden of fees upon the debtor where possible.

Two and half years later and complaints against Enforcement Agents are down - especially where fees and charges are concerned -  and recovery rates have remained largely the same.

However, some of the key points that we have seen in these early days are set out below.

Advance notice

A Notice of Enforcement (NoE) giving the debtor 7 clear days advance warning of impending enforcement visit must now be sent by the Enforcement Agent. This stage of enforcement is called the Compliance Stage and there is a £75 fixed fee that is charged.

The requirement to give advance notice led to serious concerns that it would enable a debtor to hide or sell assets prior to attendance and enforcement. The reality is that we have found it to have no detrimental effect on enforcement. However, if there is good reason to believe that valuable assets are in jeopardy then, on several occasions now, we have successfully made applications not to send the NoE (pursuant to Sch 12, para 15 of Tribunal, Courts and Enforcement Act 2007 (TCEA 2007)).

Enforcement Days

As Ruth mentioned in her article, Sunday is now a permitted enforcement day, however in our experience very few High Court Enforcment Officers actually attend on Sunday.

The introduction of a limit of £1,350 on tools of the trade has seen a dramatic reduction in the number of claims by debtors asserting that goods are exempt from seizure. This is a positive as, previously, we found many such claims to be of a spurious nature.

The new fee structure determines the amount of fees that can be charged at each stage of enforcement. Since the introduction of The Taking Control of Goods (Fees) Regulations 2014, SI 2014/1there has been a significant decline in complaints in relation to the fees charged and this is mainly due to the clear fee structure for each enforcement stage. The stages are:

Compliance Stage:           £75.00

Enforcement Stage 1:      £190.00 plus 7.5% of the debt above £1,000.

Enforcement Stage 2:     £495.00

Sale or Disposal Stage:   £525.00 plus 7.5% of the debt above £1,000

Anecdotal evidence from the industry suggests that between 6-8% of cases are paid in full once the NoE has been issued, attracting only £75 fee. The majority of all other cases that are escalated to the enforcement stage are resolved during either Enforcement Stage 1 or Enforcement Stage 2 with fewer cases going onto the Sale or Disposal Stage.

The ‘unintended consequences’

As a result of the regulations there have been some unintended consequences, some positive and some negative.

The first relates to the address to which the NoE is issued. If the debtor is a limited company or a sole trader, provided the NoE is sent to the limited company’s registered office or the sole trader’s home address, HCEOs are permitted to attend any address within England or Wales where the debtor trades from, without giving further notice.

However if the NoE is sent to a specific office or shop and there are no assets there, in order to attend another premises where there are assets the HCEO would have to send another NoE.

Another point to raise is that HCEOs are no longer allowed to attend a third party’s premises even though it may hold the debtor’s assets, for example, this could be a warehouse or a safety deposit box. However under TCEA 2007, sch 12, para 15 an application may be made to attend a third party’s premises to enforce.

We have also been successful in applying for a warrant to force entry to a residential premises where it is believed that valuable assets of the debtor are located at the address for enforcement.

Another unintended consequence relates to exempt goods or third party claims. As previously mentioned there has been a decrease in the number of these claims being made. It is believed that this is largely down to both introduction of the threshold amount of £1,350 and the fact  that, under CPR 85, when such a claim is made the claimant to the controlled goods (ie, the debtor or third party) must pay the value of the goods in question into the court when they are making their application, unless they seek a direction otherwise.

However, note that whereas under the old interpleader rules the HCEO would handle any claims making sure that timescales were adhered to and the application to the court was made; under the new CPR 85 this control has been removed from the HCEO and now lies with the claimant to the controlled goods. This means that the debtor (or third party) may make a claim against the goods, leaving the goods in ‘limbo’ until the court determines the matter without the HCEO being able to take any further action to progress the matter and achieve conclusion for the creditor. This can leave the creditor’s recoverability in an indeterminate state.

Tips for successful enforcement

The creditor can do a number of things to increase the chances of a successful enforcement:

1. Ensure that the correct entity has been sued. All too often we see either a non-entity or the wrong entity being sued. If they are a company either ensure ‘(a firm)’ or, if a registered company ‘Limited’ are used when identifying the debtor in the writ of control. If a sole trader then the name of the individual(s) t/a the name of the company should be used.
2. If the debtor is a limited company request that the NoE is sent to the registered office but ensure that you ask the HCEO to attend the address(es) where the company’s assets are located. All too often the registered office is that of an accountant and no assets will be available to take control of.
3. It is worth reminding the creditor, particularly in high value cases, that once a High Court writ is issued the goods are ‘bound’ and once the HCEO has taken control of the goods, interfering with them without lawful excuse is now a criminal offence under TCEA 2007, sch 12, para 68 and carries a maximum sentence of imprisonment for a term not exceeding 51 weeks, or a fine not exceeding level 4 (current £2,500) on the standard scale, or both.  

In conclusion

We believe that as far as the creditor is concerned they should notice little difference in the way the enforcement process is handled and that on the whole, barring a few anomalies, the new regime has worked well for all parties involved, whether they be the HCEO or the debtor, giving everyone a clearer understanding of the process and the fees charged.