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Recovering debts during the COVID-19 pandemic

The COVID pandemic has placed many businesses in the difficult position of needing to recover debt. However, obtaining a court judgment is only part of the process. When a judgment debt is not paid, taking steps to enforce payment from the debtor will often be necessary.

A writ of control is one of the most popular ways of enforcing a judgment debt but the COVID pandemic has put severe constraints on this method of enforcement because it involves an enforcement agent visiting the debtor’s residential property or business with the purpose of identifying and taking control of goods.

Understandably with these extraordinary times limiting contact to ensure personal safety is at the forefront of a multitude of decision-making, and indeed in several scenarios is prohibited by law. This has impacted a number of legal processes, including in-person visits to enforce a judgment debt by enforcement agents, many of which have largely been suspended as a result.

However, it is not recommended that judgment creditors cease debt recovery action pending the expiry of the current or future lockdowns. First, writs of control will be given priority in the order in which they are lodged with the High Court Enforcement Officer. Priority will be particularly important where a business is likely to have a number of creditors. Taking action immediately will put a creditor ahead of others who may also issue a writ.

Further, before their visit, a HCEO will send a letter giving seven days’ notice to the debtor of the intention to visit. This will often prompt payment (either in full or in instalments if agreed) without further action. Where this occurs, this will be a swift and relatively cheap resolution for the judgment creditor because the enforcement agent’s costs for this stage are limited.

Where no such payment is made, the enforcement agent will usually then proceed to physically visit the premises of the judgment debtor (where the debtor lives or carries on business) to seek payment. If that payment is still not forthcoming, the enforcement agent will proceed to identify items of potential value which may be taken into the agent’s control and ultimately taken away, liquidated and applied towards the judgment debt.

Importantly if the debtor is unable to make payment in full at the time of the agent’s visit and requires time to pay a debtor can enter into a ‘controlled goods agreement’ with the enforcement agent. Such an agreement will set out that the debtor is not to remove or dispose of the goods until they have made full payment of the judgment debt by a set date or completed repayment by way of an agreed instalment plan with the creditor. A controlled goods agreement can be very beneficial to all parties as it provides control and priority for the creditor but still allows, for example, a business to retain assets so that it can continue to operate its business and generate profit to pay the judgment debt in full. During the lifetime of the controlled goods agreement, the enforcement agent may inspect the goods and if the debtor defaults the enforcement agent may re-enter the property to remove and sell the goods and apply the proceeds to the debt.

A controlled goods agreement is an essential part of the debt recovery toolkit and therefore creditors should note that, following the recent case of Just Digital Marketplace Limited (enforcement – controlled goods agreements – taking control of goods) [2021] EWHC 15 (QB) An enforcement agent can enter into a controlled goods agreement with a judgment debtor virtually by means of a video conference rendering actual physical attendance unnecessary. As a result of this case, an enforcement agent can undertake a video conference ‘tour’ to identify goods. Once goods have been identified they can then be subject to the controlled goods agreement.

Owen Williams, head of the Commercial & Private Client Litigation team at Clarke Willmott, and co-author of the textbook ‘Commercial Enforcement’ (Bloomsbury, 2021) notes with caution that whilst this can be seen as a welcome interpretation of the legislation in the light of COVID-19 restrictions, unfortunately the existing legislation does not set out a procedure for future enforcement if the debtor defaults on the virtual controlled goods agreement. There is also a lack of clarity as to the fees payable by a debtor to the enforcement agent if there is a video agreement so care must be taken for creditors not be liable for considerable sums in return for weak agreements.

If you are an individual or business considering what enforcement action to take in respect of an unpaid judgment at these uncertain times, then please contact Cathy Harris for advice.

Commercial Enforcement’ by Owen Williams and Michelle Kemp contains a detailed analysis of the legal issues and underlying case law surrounding each method of enforcement, providing essential background materials and commentary.


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