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One debtor with three debts. What's the right thing to do?

09 June 2020

One debtor with three debts could be chased by three separate enforcement companies and charged three sets of enforcement fees. Is that the right thing to do?

In March 2020 in the case of 365 Business Finance Limited v Bellagio Hospitality WB Ltd that involved enforcement companies Marston and Court Enforcement Services (CES), Lord Justice Lewison upheld the Judgment made by Mr Justice Turner in July 2019 that ordered that CES send Marston the money they had collected from a debtor because priority existedMarston were entitled to the money as they received their Writ first, from a different creditor.  

Lord Justice Lewison said (to) not allow for priority would permit a disorderly race between enforcement agents, favouring the most aggressive and least forbearing. That in turn, Mr Ryan (who was representing Marston in Court) pointed out, would be contrary to one of the policy objectives of the reforms of the TCE Act, which was to encourage a proportionate and staged approach to the enforcement of judgment debts and discourage aggressive actions by enforcement agents. 


Why is this order from the Court important?  

The order clarifies, for the first time in modern history, a number of key areas of the law relating to enforcement; here we focus on priority: Priority does exist and is determined by the date and time the Writ is received by the enforcement officer

Example:

Let’s look at an example of what currently happens with enforcement and the issues that are createdTwo debts could be owed by the same person and as such are being pursued by two different creditors. 

 

So, what issues are created by this? 

1.  Regardless of when or which enforcement agent visits the debtor, Creditor X is entitled to their money first? 

  • If Enforcement Company 2 visits first on behalf of Creditor Y, then the money they collect is payable to Creditor X (if the Debt owed to Creditor X is still outstanding) and not their client
  • If Enforcement Company 2 visits and takes control of the debtor's goods and sets up a payment plan, Enforcement Company 1 can come along and tear up that payment plan and request that the money set aside to pay that debt is first used to discharge the debt owed to Creditor X, and
  • If Enforcement Company 1 visits first and sets up a suitable payment plan that is secured on the debtor's goods, their is usually no point in Enforcement Company 2 visiting until the payment plan completed

2.  This lack of regard of Priority results in:

  • A ‘first past the post’ enforcement process: enforcement companies may be less forbearing in an attempt to get their money first before another enforcement agent turns up  
  • Less effective and more stressful interactions: more letters, more calls and more visits and disjointed conversations depending on which company visited first` 
  • Higher fees being charged to the debtor: typically twice the amount as two separate enforcement companies need to be paid to do everything twice  
  • Creditor is paid slower, higher fees means longer repayment plans and, in some cases, make it just unaffordable causing the debtor greater indebtedness, and  
  • More risk, the money that was collected by one creditor, may be out of priority order and as such due a later claim by the other. 

When enforced together, the enforcement of the Writs becomes cheaper for the debtor to pay, cheaper for the enforcement company to enforce, and returns more of the money collected to the creditor to repay the principle amounts.   

What can be done to ensure priority is recognised, fees are minimised and creditors get their money in a timely manner and without delay? 


Summary  

It makes perfect sense to treat debtors fairly and in line with the law but as demonstrated above, it also benefits the enforcement company and the creditor too  


Just.

Find out more about the enforcement market integration approach we take and read testimonials from some of our customers who are the largest creditors in the UK. 


About the Author: Jamie Waller

Jamie Waller is an entrepreneur, investor, author, and philanthropist. In 2018 he was awarded the prestigious Cranfield Business School, Entrepreneur of the Year and has been responsible for the formation, development, and sale of two previous businesses in the financial services industry.

Jamie is the Chairman of the Arum Group of companies.