In attempting to bring the law of distress into line with the ECHR, the government may have undermined its deterrent value. By Jacqui Joyce
In May, the Lord Chancellor’s department (LCD) issued its response to consultation on two recent papers on distress. Here, I provide a reminder of the main proposals, together with a round-up of where we are.
Notice
The proposal was that the creditor/landlord would be required to give 72 hours’ notice before he could distrain, to enable the debtor/tenant to obtain legal advice.
The LCD’s response does not make it clear whether this has to be a separate notice, or whether, in the case of distress for rent, a notice in the invoice will be sufficient. But the LCD has separately confirmed that the latter will be adequate provided it is clear, and it informs the tenant of the likely consequences of non-payment. The notice period must not include a weekend, a Bank Holiday, Good Friday or Christmas Day.
A creditor will be able to apply to the court to distrain without notice if he can prove that the debtor is likely to remove goods or hinder the procedure if notified.
Information
It was proposed that distrainors should be required to carry an identity card and to give a minimum amount of information to debtors. This should include: details of the statutory liability or judgment giving rise to the debt; the authority for the distress; the amount due; the charges made; how to pay; advice that goods will be sold if the debt and costs are not paid; and outline details of any rights of appeal or avenues of complaint. An inventory should also be provided.
No other major suggestions arose from the consultation. The LCD considers that other issues, eg verbal explanations and translation documents, can be covered in a code of practice, which it envisages will be created.
Time
Distress for rent, it was proposed, could take place between 8am and 8pm, and for other distraints between the hours of 6am and 9pm. The process for distress for rent falls outside the court procedure, and greater safeguards are therefore needed.
However, distraint on business premises will be permitted at any hour during which trading takes place. Distraint will not be allowed on a Sunday, Bank Holiday, Good Friday or Christmas Day (but, again, it would be allowed at business premises on any trading days). The LCD stated that it would be impractical to legislate specifically on exemptions for other religious or cultural festivals. This was seen as more appropriate for a code of practice.
Service charges
The proposal here was that distress would be available only for rent arrears, and not for service or other associated charges. The response is unclear, but the LCD has intimated that only “pure” rent will be recoverable. In particular, no service charges will be recoverable by distress, even if these are payable as fixed amounts each quarter.
Forcible entry
The aim was to clarify the rules for forcible entry. The proposals were that normal/peaceable entry can be made only by normal means, that is, through an open or unlocked door without the dissent or objection of the owner or occupier. Forced entry should take place only by prior judicial authority. Prior notice of forced entry would need to be given. The proposal then, unhelpfully, referred to a separate distinction between “domestic” and “non-domestic” premises, without providing any definitions, and with seemingly different rules.
The LCD’s response does not clarify matters. It states that a decision cannot be made on this issue until it is known what statutory regulation will be in place to oversee the whole enforcement process. Some sort of commission is envisaged to take up this role. While this is evolving, no forced entry to any premises should take place without judicial authority, except where goods have been levied on and attempts to re-enter are being frustrated. Legislation should provide guidelines as to what is a “normal” means of entry.
Outstanding rent
Distress should be levied only if the outstanding rent exceeds one-quarter of the annual sum. The LCD will consider reducing the period to four weeks, or one calendar month. A landlord could then distrain for a quarter’s rent as soon as the lease allows. Tenants who pay weekly will benefit the most from the revised proposals.
Value of goods seized
The bailiff would need to value the goods on the premises, and would not be allowed to take or to sell the goods if they do not cover expenses plus 10% of the debt, or £50 (whichever is less).
The LCD is concerned that this may involve further costs for the tenant. It concluded that the proposals are more suited to a code of guidance and stated:
“All enforcement agents should be concerned to avoid either excessive distress or the situation where the proceeds of sale are so small that they are entirely or almost entirely swallowed by the costs of the distress and the sale, so that the debtor is deprived of his possessions but there is little or no reduction in the debt.”
Legal control of goods
Three forms of legal control were proposed: (1) taking the goods away from the premises and securing them; (2) securing them on the premises; and (3) a form based upon walking possession. Walking possession might need two different forms of documentation; one for when an agreement is signed by the debtor, and another that is unsigned because the debtor has refused to agree to the procedure but the seizure is legal.
The LCD has restated its agreement in principle to these proposals, but has said that this cannot be taken forward until “there is some form of regulation in place which would monitor the use of taking control of goods without a signed agreement”. But it has stated that there is no need to have a formal agreement on continued trading in seized stock. Enforcement agents could continue to come to informal arrangements without a specific power.
Exempted goods
The proposal suggested a list of exempted goods: either a broad statement, as used by the Insolvency Service, or a definitive list. The LCD is “persuaded quite strongly” that the insolvency-type statement should be enshrined in legislation with the more detailed lists either in secondary legislation or in a code of practice. It recognises that more work is needed to provide clarification of particular issues, such as tools of the trade, cars and computers.
Remedies
It was proposed to abolish poundbreach. The remedy against a tenant who interferes with goods subject to walking possession was to be ordinary compensatory damages. This proposal has not changed.
The proposal for remedies available to debtors foresaw a simplified remedial procedure based upon the concepts of illegal distraint and irregular distraint (both defined in the second paper), along with proposed remedies ranging from automatic return of the goods to compensatory damages. The LCD retains this view, and would prefer to see a scheme of statutory compensation, with the court remaining as an alternative process or as an appeal route.
Fees
This is a major issue. The LCD has stated that “no policy decisions have been made”, deciding that further consideration is needed. It will be consulting various bodies.
Priorities
The proposals were to remove a landlord’s priority in respect of distress for rent and to retain Crown priority over any earlier distraint. Both are now likely to be removed.
Closing thoughts
The LCD hopes to publish a white paper early in 2003. It appears that many of the issues will not form part of any legislation, but will be covered in codes of practice. In essence, this will have the same effect, since bailiffs will have to comply with the codes in order to keep their certificates.
Some of the proposals are sensible, but the LCD seems to have overlooked the deterrent value of distress. If the proposals are enacted, the remedy will be so heavily fettered that it will no longer be quick, cheap and effective.
Jacqui Joyce is a professional support lawyer in the property litigation group at Lovells
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Consultation papers |
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The main proposals |
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The first paper, Enforcement Review Consultation Paper 5: Distress for Rent, was published on 8 May 2001. This focused solely upon distress as it applies to rent. These proposals were considered in detail in my article of 22 September 2001, p186. The second paper, Towards Effective Enforcement – A Single Piece of Bailiff Law and a Regulatory Structure for Enforcement, was published on 9 July 2001. This formed part of a review of the entire enforcement process in England and Wales. One of the main parts of the paper was entitled “A Single Piece of Bailiff Law”. As well as covering distress carried out by, or on behalf of, private landlords, the proposals also apply to all those situations where distress is used, for example civil and criminal court debts, taxes, and so on. This paper discussed in more detail various aspects of distress, such as forced entry and remedies for illegal or irregular distraint. |
