Tuesday, 2 June 2015

Bankruptcy & bailiffs

I was recently asked for advice on a case involving the enforcement of a local authority penalty charge notice (PCN) against a bankrupt individual. This leads to a few interesting observations on insolvency in the wake of the implementation of the taking control of goods regime.
Although Sch.13 of the Enforcement Act 2007 amended many existing statutes in recognition of the repeal of powers of distress and execution, for reasons best known to themselves Ministry of Justice left the Insolvency Act 1986 untouched. The old terminology remains in place- and we must mentally correct it as we read. At the same time, it is worth remarking that 'execution' as a term describing the enforcement of court judgments is retained in the new Civil Procedure Rules Part 83- as, for that matter, is 'levying'.

Now, a county court order for the recovery of a local authority PCN is to be regarded as identical to a county court judgment. Likewise the warrant of control: it may be enforced by a certificated bailiff, but it is equivalent to a warrant issued to a county court bailiff. Certain special rules of conduct apply to such warrants (and writs) of control- see Insolvency Act s.346, but the basic rule is simple: under s.285(3) all enforcement action must cease once a bankruptcy order has been made. The only exception to this would be where permission of court has been obtained to continue with a levy- but this is unlikely to be granted in all but the most exceptional of cases. For certain tax debts only, bailiffs may continue to take control during the 12 months of the bankruptcy order, but this power contained in s.347(8) is NOT relevant to the recovery of PCNs by execution.

I was consulted in a case where enforcement action has continued for the best part of 9 months after the insolvency began.  This appears inexcusable: the council was informed that the debt was part of a bankruptcy, after which they permitted enforcement to continue.  Both the council and the bailiffs were directly contacted again by the Official Receiver to tell them to cease their recovery action.  This did not happen.  This failure to act correctly was componded by the fact that, when the agent arrived at the house he stated (it is alleged) that he was a police officer and that he was unaffected by the bankruptcy. This worked, in that he was paid £512, but this was a payment prejudicial to the others creditors in the insolvency and will have to be refunded.

The principal message is this: the interaction between insolvency and enforcement is unchanged by the implementation of the Enforcement Act 2007 and the basic rule of practice that continues to apply is simple- most attempts to take control of goods will be terminated by the bankruptcy, winding up etc.

The other message of this case is for the local authority and its enforcement agents: check the law, comply with it- and respond in a timely fashion to contacts.  They have so far received four letters each, including a draft county court claim, and the only response made to date was a very poorly informed letter from a complaints officer at the bailiff's company expressing the opinion (for it was no more than misguided prejudice) that PCNs were unlikely to be included in bankruptcy.  This was patently wrong and ignored the OR's specific guidance on the case.  The only thing to be said in their defence was that they inaccurately referred to the PCN as a parking 'fine'.  If it were a fine, then enforcement could continue- but it is not.....

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