Lord Chancellor's Department Enforcement Review – next phase

The first changes to the CPR in the area of enforcement were made in March 2002. Those changes implemented the initial phase of the Lord Chancellor's Department's ("LCD") review of enforcement. Since then, further proposals for revising enforcement law and procedure have been suggested in a White Paper issued by the LCD in March 2003. A consultation paper was also issued by the Department for Constitutional Affairs in July 2003 relating to proposals to reform the procedure for enforcing writs of Fieri Facias and possession. A brief summary of the main proposed changes are set out below.

Enforcement Agents

1. New regulatory regime

The thrust of the proposals is to put in place a single regulatory regime, law and fee structure for "warrant enforcement agents" (which will be the new name for bailiffs and sheriffs). In line with the Woolf purge on jargon, familiar terminology such as distress, distraint, execution, levy and walking possession will be replaced by a single concept of "taking legal control of goods".

The idea is for a body, such as the Security Industry Authority, to licence enforcement agents and regulate their activities. It is suggested that legislation should be put in place to govern the powers of such enforcement agents in taking legal control of the goods to include issues such as the following:-

• A list of goods which will be exempt from seizure;
• The powers of entry to property, including relevant times for doing so and particular information to be given to the debtor;
• A new notice requirement giving the debtor at least 7 days notice before any enforcement action can be taken;
• A right of the debtor or a third party claiming ownership of the goods to apply to the court for the goods to be released and a ban on the goods being sold for 7 days to enable the debtor/third party to make such an application.
• A new power giving licensed enforcement agents the ability to offer the debtor the option of repayment by instalments.

2. Commercial Rent Arrears Recovery

It is intended to abolish a landlord's right to distrain for unpaid rent in relation to residential premises. In relation to commercial property, the right to distrain will be replaced by a new system of "commercial rent arrears recovery", which can only be carried out by one of the licensed enforcement agents. Certain pre-conditions to being able to use the procedure are under consideration, such as whether a specific amount of rent has to be outstanding and whether to impose a minimum period of time before any action can be taken. It is envisaged that the tenant will get a minimum of 7 calendar days notice of any enforcement action and 14 days notice before any seized goods can be sold.

3. Fee Structure

An up-front fee is proposed, which is payable by the creditor but recoverable from the debtor when the enforcement is successful. The way in which the up-front fee will be fixed is still under consideration but it is likely to be determined by reference to a particular band depending on the value of the debt outstanding. One useful suggestion is that the fee should cover the production by the enforcement agent of a status report on the probability of enforcement. For any action taken thereafter, it is suggested that fixed fees should be charged depending on the particular activity e.g. visiting the debtor's premises, up to and including the point of taking legal control of the goods after entry. Thereafter, variable fees are suggested to cover actions, such as removal and storage of goods.

Data Disclosure Orders ("DDOs")

The idea behind DDOs is to enable judgment creditors to obtain information from relevant third parties to help them make an informed choice about how to enforce a judgment where a judgment debtor has failed to respond to the judgment or comply with enforcement procedures. Examples of when a creditor can apply for a DDO are where the creditor has obtained a judgment in default or the debtor has wilfully failed to respond to an order to seek information, defaulted on any instalment order or where an application for a third party debt order or attachment of earnings order has failed. The licensed enforcement agent would also be able to apply following an ineffective warrant for taking legal control of goods or wilful non-compliance by the debtor with such a warrant.

The relevant third parties from whom information can be sought are the Department of Work and Pensions ("DWP"), Inland Revenue, financial institutions and credit reference agencies. Where a licensed enforcement agent makes the application, the DDO will only be sent to the DWP and not the other third parties.

The creditor will not be sent the information obtained from the third parties directly but will be informed by the court of the enforcement options which could be facilitated by the DDO (e.g. if bank account details have been provided to the court, the creditor will be referred to the option of making a third party debt order application). There is then a second stage where the creditor has to apply to the court indicating the desired enforcement option and the court will then transfer the relevant information obtained by the DDO onto the relevant application form and process it. This is to ensure that data protection legislation is not contravened.

Attachment of Earnings Orders ("AEOs")

Means testing forms will no longer be required. Currently, these are filled in by a debtor for the purpose of calculating the normal deduction rate and protected earnings rate. The proposal is for to replace means testing with fixed percentage deduction rates which are determined by reference to the debtor's monthly net pay, where that pay exceeds £220. For example, where the net pay falls between £660 to £1040, the proposal is for 9% to be deducted. A review process would be put in place to enable creditors or debtors to prove that the fixed table deduction rate fell well above or below what could be afforded.

A tracking system is also proposed to enable the Inland Revenue employee records to be used to keep track of any changes in employment while an AEO is in place.

Charging Orders

The more radical proposal of abolishing orders for sale to enforce charging orders has been dropped. The proposed changes are mainly procedural:-

• Extending the availability of charging orders to cases where the debtor is not in arrears of an instalment order although precluding the creditor applying for an order for sale where the debtor is up to date with his instalments;
• Further, where a debtor has been keeping to the terms of an instalment order but wants to sell the property and feels he will be unduly prejudiced because of the charging order, the debtor can ask the court to consider whether the charging order should be removed to allow the sale to take place.

However, it is possible that in the future certain restrictions on the use of charging orders/orders for sale may be introduced, such as imposing financial thresholds below which a creditor could not apply for such orders, as the LC is to be granted the right to impose such restrictions by way of secondary legislation.

Third Party Debtor Order

One of the more radical proposals in the first phase of the enforcement review was that joint accounts could be made the subject of a third party debt order. However, this has now been abandoned. No other changes to the procedure are proposed at this stage.

County Court Administration Orders

The LCD White Paper concluded that in their current form, county court administration orders had not been successful in meeting their objectives. A range of options is to be considered with a view to suggesting reform of this area with the aim that such orders should seek to rehabilitate debtors.

High Court Enforcement – writs of Fieri Facias and possession

The consultation paper issued by the Department of Constitutional Affairs in July 2003 sets out proposals for changes to be made to the execution of writs of Fieri Facias in relation to goods and writs of possession in relation to land. The idea is that such changes should be implemented prior to the wider overhaul of bailiff law envisaged by the White Paper and referred to above and by no later than April 2004.

Clause 97 and schedule 6 of the Courts Bill provide the High Court with a new regime for enforcing writs of execution by abolishing the role of sheriffs. In their place, high court enforcement officers will be appointed and assigned to particular districts. Such officers will have to be members of the relevant professional body; the High Court Enforcement Officers' Association.

Judgment creditors will have the choice as to whether to address the writ to an individual enforcement officer or to the officers of a particular district. It is envisaged that the Sheriffs' Lodgement Centre will remain to deal with the writs, although no doubt under a new name.

The consultation paper seeks views in relation to the eligibility criteria for any applicants for the role of enforcement officers, the method for assigning an officer to a particular district and fee structure.

For further information please contact Rachel Rees at rachel.rees@cms-cmck.com or on + 44 (0)20 7367 2428