If you are owed money, any delay in taking professional advice can have the serious consequence of pushing you to the back of a queue of creditors. The crucial role that timing and priorities play in debt recovery was underlined by a Court of Appeal test case.
The case concerned a hotel and restaurant operator who was in debt to two creditors, both of whom obtained money judgments against him. Each creditor engaged different debt recovery agencies and writs of control were obtained which enabled seizure and sale of the debtor’s goods. Creditor A’s writ was issued to an enforcement officer who worked for agency A. Agency B’s enforcement officer received creditor B’s writ about a month later.
An enforcement agent employed by agency A visited the debtor’s premises and took control of various goods. He entered into a controlled goods agreement with the debtor whereby the latter was permitted to retain physical custody of the goods on the basis that he would not remove or dispose of them before the debt was paid. The debtor also agreed to pay £10,000 within a month and £1,000 per month thereafter until the debt was paid in full.
Another enforcement agent, employed by agency B, later also attended the debtor’s premises. After the debtor showed him a copy of the controlled goods agreement, the agent phoned agency A’s enforcement officer. Despite the latter’s protestations that creditor A’s writ took priority, the agent proceeded with the enforcement. In order to forestall removal of his goods, the debtor paid £12,050 to agency B.
In ruling on the dispute between the two agencies that arose from those events, a judge found that creditor A’s writ took priority over creditor B’s, the former having been issued to an enforcement officer first. The latter writ could not therefore be enforced until after the former had been satisfied in full. Agency B was ordered to repay the £12,050 to agency A.
Dismissing agency B’s challenge to that outcome, the Court found that, where two or more writs of control are issued to recover judgment debts against the same debtor, priority in the enforcement of those writs is determined solely by the chronological order in which they were received by enforcement officers.
The Court found that, in attempting to enforce creditor B’s writ when they were aware of the controlled goods agreement, and on notice that creditor A’s writ had priority, agency B’s officer and agent had acted improperly and in a manner inconsistent with the conduct expected of officers of the court. It was therefore just that the money they had obtained from the debtor be paid over to agency A.