» Purpose and intended effect
» Options
» Consultation
» Benefits
» Oral examinations
» Judgment summonses
» Costs
» Reversal of proof in
interpleaders
» Enforcing orders of specific
delivery
» Oral examination
» Summary
The enforcement system is generally recognised to be less effective than it could, or should be. The review of enforcement was established to examine ways of improving the effectiveness of the system. The consultation paper sets out a number of preliminary proposals aimed at improving particular aspects of the enforcement system.
The paper makes a number of proposals, most of which will have little impact on business, charities or the voluntary sector, except in so far as a more effective enforcement system will assist businesses to recover debts. The following proposals may, however, have a more direct impact:
Making provision for information to support enforcement to be available, to allow more targeted and effective enforcement;
Abolishing automatic payment of conduct money in judgment summonses, so that creditors only have to make payments when the debtor wishes them to do so;
Reversing the burden of proof in interpleaders, so that the third party claiming ownership of the goods would have to show evidence of that ownership, rather than the creditor having to disprove ownership;
Making it compulsory to use court bailiffs, through a warrant of specific delivery, to recover protected goods, which would ensure proper regulation of the enforcement of orders for specific delivery.
The proposals set out in the paper will impact only on those persons actively involved with the enforcement process. They will affect individuals, both as creditors and debtors, and businesses, of all sizes, which grant credit to individuals or which trade on credit terms with other businesses or individuals and who need to take action through the courts to recover a debt.
Where there are several different options available, the pros and cons of each option are examined in detail in the consultation paper. This draft regulatory assessment should be read in conjunction with the paper. In general, there is widespread agreement that the enforcement system needs to be improved and that taking no action to do so could be seriously detrimental to the civil justice system as a whole.
The Lord Chancellor's Department's aim in conducting the review of enforcement has been to involve as wide a section of the enforcement community as possible in drawing up proposals to improve the enforcement system. This consultation paper, like the others before it, puts forward some preliminary proposals for wider discussion. We are keen to hear the views of those involved in enforcement before any details are settled. The expert panels have given some preliminary advice about whether certain proposals are likely to be feasible in practice. Responses to this consultation will be used to inform our final assessment of the various proposals, including the costs and benefits associated with them. When necessary, we will consult in more detail with representatives of those particularly affected by a proposal, but consultees are invited, in response to this paper, to identify and quantify any additional costs or savings that may arise from the proposals.
The proposals in this paper are aimed at producing a more successful enforcement system, reducing delays and leading to a higher rate of recovery on civil court judgment debts. It is impossible to estimate, for each proposal, what the impact on recovery rates might be and we make no attempt to do so at this stage. It may be possible to make more progress on this when the full package of proposals has been settled.
The proposals on oral examinations do, however, introduce two new ideas that could have a significant impact - the 'designated person' and data disclosure. The two ideas are closely linked. The 'designated person', responsible for obtaining information from debtors and taking forward enforcement on the creditor's behalf, is very much an embryonic idea at this stage. Proposals for data disclosure are a little more advanced, but the precise information to be disclosed and the mechanisms for obtaining that information remain to be fixed.
The impact of the proposals will depend very much on the shape that they eventually take. They could however bring substantial benefits to all those creditors who are at present unable to enforce simply because they lack information on the debtor's finances. More effective, better targeted enforcement based on good information could be expected to bring about higher recovery rates on judgment debts and, possibly, save creditors money in attempting to find out information for themselves.
In those cases where better information does not produce payment of the debt (for example, if the information shows that the debtor is unable to afford to pay), it would at least save further costs being incurred in fruitless enforcement.
Making the procedures for warrants and writs more effective and providing access to better information to support enforcement could potentially save creditors substantial amounts in court fees. In 1998, around 450,000 warrants of execution produced no payment for the creditor, because, for example, the debtor had no goods, or the warrant was addressed wrongly and the bailiffs were therefore unable to enforce the warrant. We estimate that the fees paid in respect of those warrants would, at current fee levels, amount to over £11 million a year. There is clearly room for substantial savings, to which would need to be added the cost of the creditor's time in pursuing the further enforcement and, in some cases, the cost of legal advice.
The proposals in respect of judgment summonses are not designed to fundamentally change the process. The proposals that are put forward are designed to reduce unnecessary burdens on creditors who use the procedure. In particular, it seems very wasteful for creditors to pay conduct money in all judgment summons cases. In 1998, there were 5,700 judgment summonses issued. Inland Revenue figures suggest that conduct money is only needed in 5% of cases. In the remaining 5,400 or so, the creditor will incur costs in processing the conduct money payments, both when they are issued and when the money is returned.
• Reversal of proof in interpleaders
The proposal which relates to the reversal of proof in interpleaders (see Warrants and Writs) would place an increased burden on those seeking to make a claim on goods seized by requiring them to prove that the goods belong to them. But this would be balanced to some degree by a reduction in the burden on creditors.
The number of interpleaders each year is relatively small - there were less than 1000 contested claims last year. We expect that the burden on those making a claim will be relatively small - it should not in most cases be difficult or expensive to prove ownership of goods.
• Enforcing orders of specific delivery
Creditors may, at present, seek to enforce an order of specific delivery using their own agents, rather than obtaining a warrant of specific delivery and using the county court bailiffs. No figures are available to indicate how often this happens, but we recognise that requiring all orders to be enforced via the county court bailiffs could have a compliance cost. Creditors who would be affected by this proposal are invited, in responding to this consultation, to set out what the costs may be.
The oral examination proposals, particularly those identified under 'benefits' above, would have more substantial costs associated with them. There would clearly be costs involved both in obtaining information from third parties and in setting up and running a 'designated person' system for handling the information. Again, the costs will depend upon the details of any final scheme.
The costs would eventually be borne by creditors and, where enforcement is successful, by debtors, through court fees. There is, therefore, a strong incentive to minimise costs. None of the costs of the proposals will, however, be compulsory for business or individuals using the court. Any service offered by way of information gathering or handling will only be used by creditors if, economically, it makes sense for them to do so.
Keeping costs down will be a central consideration in designing the new system. Measures such as allowing designated persons direct access to computer records, and restricting access so that only specified information can be obtained, will be considered. In making final recommendations arising from this aspect of the enforcement review, we will make a full assessment of the costs and the likely take-up of the service in the light of those costs. It is not possible to give even a preliminary estimate of the costs until the details about what information is available and how it is obtained have been settled.
It is anticipated that the regulatory impact of many of the proposals contained in the consultation paper will be small.
Businesses, of all sizes, should benefit from a more effective enforcement system that enables more outstanding debts to be recovered and allows creditors to identify at an early stage which debts are not worth pursuing. Obtaining information will have a cost attached to it, which we cannot quantify at present. That cost will have to be balanced against any potential benefits gained from higher recovery rates or savings made by not pursuing fruitless enforcement methods. Creditors will be in a position to judge for themselves whether or not the additional costs are worthwhile and will not be required to incur them if they think no overall benefit will be obtained.
We invite consultees, in response to this paper, to identify and quantify any additional costs or savings that may arise from the proposals.