26 Jan 2021

Debt Recovery

Can bailiff visits really work online? Our view on the recent High Court ruling

As a landmark High Court judgment has ruled that bailiffs will be able to virtually take control of the belongings of people who are in debt, without physically attending inside their home, William Watkins, who heads up our debt recovery team gives his reaction.

How do bailiff visits currently work?

If someone owes you money under a CCJ and they fail to pay it, you can instruct bailiffs to attend their home or business with the aim of recovering payment or, if that is not possible, take goods to be sold at auction to clear the outstanding balance.

Where someone cannot afford to pay the debt in full, but is open to agreeing a payment plan, the parties can agree an instalment arrangement subject to a Controlled Goods Agreement (CGA).  This operates by allowing the person to retain their goods and have use of them in the interim, while they pay down the debt.  As long as payments are made, goods would not be removed.  If however, payments were to stop, the bailiffs would be entitled to re-enter the property to take those goods away to be sold at auction.

 

Why is there a need for change?

The Covid crisis has made it more difficult than ever for creditors to claim back what they are owed as ongoing lockdown restrictions have meant that High Court Bailiffs have  been unable to enter debtors’ homes.  However, a High Court ruling made earlier this month means that bailiffs can now conduct the visits virtually and agree CGAs, without having to physically enter the home.

These virtual enforcement visits were due to have launched back in August but were challenged by a number of firms who felt that taking control of goods virtually was unlawful and that a physical visit was always necessary.

 

How will the virtual visits work?

The two parties will set up a video conferencing call in which the debtor will be required to show the bailiff around their home while their household goods are all noted down. They will then agree a repayment plan for the person’s debt without having to come into contact with each other, reducing the risk of spreading Covid-19.

 

What happens now?

The current Taking Control of Goods regulations state that a visit needs to take place before goods can be taken into control but do not specify that this needs to be a physical visit. The Court has invited the Ministry of Justice to review the judgment and provide statutory guidance on whether amendments to the regulations are now required.  The guidance will also need to cover the processes to be followed if agents are required to re-enter the property, as well as any fees that may be applied.

 

Is this a positive move?

In theory, this is a positive ruling, particularly from the view of creditors as it will give them another tool for enforcement. Currently, due to Covid restrictions, High Court Bailiffs can be instructed to enforce but cannot enter residential homes, hindering their ability and forcing creditors to seek alternative and more costly methods of enforcement.

In practice however, there are a number of areas that need to be clarified before virtual attendances can be conducted effectively. Until proper guidelines are laid down and amendments are made to the regulations, there will likely be no wholesale uptake in the industry.  The advantage of a CGA to a creditor is that if the payment plan is breached, they can re-enter the property. Despite this latest ruling, there is currently no right for the enforcement agent to re-enter where the CGA is agreed virtually.

Additionally, with virtual visits reliant on debtors truthfully confirming their assets, mechanisms will need to be in place to verify what is being said is correct and allow action to be taken if the debtor does not provide full disclosure.

 

Will this ruling have a lasting impact on the way bailiffs operate?

Given that the Ministry of Justice has many other more pressing priorities at present, such as the huge backlog in the criminal courts, it would seem unlikely that any priority will be given to this issue.

While some areas of the justice system are clearly suited to remote working and virtual attendances, such as interim Court Hearings, it remains to be seen whether virtual bailiff visits will become the norm when restrictions are lifted.

William Watkins is a specialist in debt recovery and commercial litigation. He heads up the Debt Recovery team within our Dispute Resolution department at Harding Evans. Get in touch on 01633 244233 or hello@hevans.com.

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