‘Virtual’ Controlled Goods Agreements
A case law update looking at Just Digital Marketplace Ltd v High Court Enforcement Officers Association [2021] EWHC 15 (QB).
What the case was about
Just Digital Marketplace Ltd applied for a declaration to clarify whether it was possible to enter into a controlled goods agreement (CGA) ‘virtually’, without entering a debtor’s premises. This was a claim for ‘declaratory relief’, where the claimant asks the court to make a decision in respect of a specific question, rather than decide a claim by one party against another. The judge agreed that it would be in the public interest to resolve this question and make a declaration one way or the other. As the declaration was to be made in the High Court, it would be binding on all County Courts.
Just Digital Marketplace Ltd argued that the relevant legislation didn’t prohibit entering a CGA ‘virtually’. However, the two main trade bodies for bailiffs (CIVEA and HCEOA) argued that it was only possible to make a CGA by physically entering the premises. CIVEA and HCEOA were joined as interested parties to the proceedings and raised arguments against virtual enforcement.
The judge noted that, although there might well be advantages to ‘virtual’ enforcement, especially during a pandemic, the court was not able to introduce such a procedure if the current legislation did not allow it. The purpose of the hearing was simply to establish whether the statute allowed for ‘virtual’ enforcement and, if so, whether the existing regulations provided any mechanism to enable it to happen.
What the Court Decided
The power to enforce a writ, or warrant, of control is contained in schedule 12 to the Tribunals, Courts and Enforcement Act 2007. This sets out various methods of taking control, one of which is a Controlled Goods Agreement (CGA) whereby the debtor retains the use of the goods, on condition that agreed repayments are maintained. The first question for the court was whether the Act itself specifically allowed, or prevented, taking control of goods without first entering the property where the goods were kept.
Before making her decision, the judge set out a brief history of the legislation as well as explaining what factors should be taken into account when deciding how to interpret the meaning of an act of parliament. She also reviewed the main case law in the area of CGAs. Because the Act states that it replaces the previous common law rules, cases from before the Act came into force in 2014 were of limited relevance but might provide a useful background to help interpret the Act. The judge reviewed several cases, but concluded that none of them specifically addressed the question of whether a CGA could be entered into without attending the property.
The judge decided that the Act did not say anything which prevented entering into a CGA in circumstances where the enforcement officer is not physically present. In reaching this conclusion, she noted that paragraph 9 of schedule 12, states that a bailiff can take control of goods ‘on premises that he has power to enter’, and not on premises that he or she has entered. Similarly, paragraph 14 states that an enforcement agent ‘may enter relevant premises to search for and take control of goods’, not that they must do so.
An enforcement agent’s power to remove goods when a CGA has been breached is set out in paragraph 16 of schedule 12. This paragraph comes under the heading ‘re-entry’ and the trade bodies argued that this meant that a CGA must involve entry to the property, so that returning to enforce a breach would then be a ‘re’-entry.
However, the judge explained that paragraph 16 did not only deal with entry where a CGA had been breached but also included other scenarios where multiple visits were contemplated (such as repeat visits to inspect property) and the heading could be referring to that. In any case, 16 (2) specifically uses the word ‘enter’, not ‘re-enter’. The judge explained that headings are not debated by parliament and could only be drawn on to interpret meaning where the wording was not clear on its face. In this instance, the wording within paragraph 16 was already clear and so an alternative meaning could not be inferred from the heading.
Having decided that there was nothing in the primary legislation which prevented a CGA being made without physically attending the property, the judge then addressed the question of whether the regulations, as they currently stand, provide any mechanism for it to happen.
The judge noted that there were some inconsistencies between the regulations and the Act. However, this did not mean that the Act had a different meaning, just that there might need to be a review of the regulations if something permitted under the Act was not possible under the regulations.
It appears that the regulations did not envisage the possibility of making a CGA without visiting the property. One indication of this is that, under Regulation 6 of the Taking Control Of Goods (Fees) Regulations 2014, the first stage enforcement fees are only triggered by ‘the first attendance at the premises’. This means that if a bailiff choses to enter a CGA remotely, without a visit, then they will only be entitled to charge the £75 compliance stage fee.
Another issue was what powers a bailiff has under a virtual CGA if the debtor stops paying. For ‘traditional’ CGAs, paragraph 19A of Schedule 12 allows a bailiff to enter a property by force if the agreement is breached. However, the power to enter is on condition that the debtor is first served with a notice, and 19A(2) states that the notice must be in the prescribed form. The prescribed forms of notices are contained in the The Certification of Enforcement Agents Regulations 2014. The notice that a bailiff is going to force entry on breach of a CGA specifically refers to a ‘re-entry’. It therefore could not be used where this is the first time a bailiff enters the property.
The judge suggested that one possible solution could be for bailiffs who entered into a virtual CGA to subsequently visit the property under regulation 14 and enter peaceably, either to inspect the goods or to enter a new, traditional CGA. Following this peaceable entry, forced re-entry would be possible under regulation 19A if the virtual CGA was breached. Another possibility, it was suggested, could be to apply to court for a warrant giving specific permission to enter the property by force, although exactly how this might happen was not explored in any detail.
What this means for advisers
It is hard to say at this point whether entering into a virtual CGA would be in a client’s best interests. The main advantage, at least until the regulations are changed, is that if the client is happy to enter a CGA, it would save them at least £235 (£190 for a High Court case) to make the agreement remotely. However, if a client does not want to have the debt secured against their property then they should not sign a CGA at all. It might depend on whether they feel they could keep the door closed if a bailiff visits.
We are not expecting all clients to be offered a virtual controlled goods agreement. These are optional and, as far as we know, Just Digital Marketplace Ltd are the only firm currently pursuing virtual enforcement. Some bailiff firms might still prefer to make in-person agreements so that the enforcement fee can be added, although it is possible that they might want to use virtual CGAs, at least during the pandemic.
Just Digital Marketplace Ltd, HCEOA and CIVEA have already made a joint call to the Ministry of Justice to revisit the regulations in light of the judgement. As this is only secondary legislation this could happen relatively quickly.
Although we can’t say what changes will be made if, and when, the regulations are reviewed, it is possible that fees could be introduced for virtual enforcement. The regulations could also address the question of forced entry. The judgement notes that it does not seem to have been parliament’s intention that the first time a bailiff attends a property they are entitled to force entry (apart from specific circumstances) but it is possible that this may be allowed if the regulations are changed.
Advisers need to keep an eye out for any new regulations and may wish to contribute to any consultations nearer the time. Advisers should also be on the lookout for bailiffs who try to misuse the judgement. It is important to note that a CGA must always be signed — whether electronically or on paper — and so any bailiff who claims to have taken control of goods simply by looking through a window will need to be challenged.
Rachel Wilson is a member of the Debt Expert Advice Team at Citizens Advice.
