What happens when two judgment creditors seek to enforce against the same goods at around the same time? How are the priorities determined?
These were questions which the Court of Appeal had to consider in 365 Business Finance Ltd v Bellagio Hospitality  EWCA Civ 588, an application between Court Enforcement Services Ltd and Burlington Credit Ltd (now called Marston Legal Services Ltd).
Since the Courts Act 2003, ancient systems of enforcement have been replaced by a statutory scheme, now set out in Part 3 of the Tribunals, Courts and Enforcement Act 2007. Writs of fieri facias (or fi fa) are now ‘writs of control’ and the power to recover money is exercisable by certified ‘enforcement agents’ using the procedure in Schedule 12 of the 2007 Act.
In 365 Business Finance, Tanveer Singh Handa and his hospitality company had fallen into debt and were the subject of two judgments. One, for £22,371.06, obtained on 4th June 2018, led to a writ being issued to Christopher Badger of Burlington Credit Limited (Marston) which he was granted on 12th June 2018. The other, a judgment for £8982.98 given on 2nd January 2018, saw a writ issued to Malcolm Davies of Court Enforcement Services Ltd (CES) on 16th July 2018. The earlier judgment was the CES judgment; the earlier writ was the Marston writ.
On 23rd July 2018, an enforcement agent acting for Marston took control of goods held at Mr Handa’s business premises. The agent and Mr Handa entered into a ‘controlled goods agreement’, the means by which a debtor can retain physical possession of goods which have technically been seized by an enforcement agent to satisfy a judgment (akin to a lien, which is effective whilst the debt is being paid off).
Mr Handa began paying off the judgment debt at an agreed rate, but had not paid it off in full when, on 21st August 2018, an enforcement agent for CES also attended his premises. The CES agent said that he would remove all goods up to the value of that debt, knowing both of the existence of the Marston writ and that it was not yet satisfied. Mr Handa decided to pay the full amount due under the CES writ, £12050, whilst a balance remained outstanding under the Marston writ.
Marston took the position that this money ought to be paid by CES to Marston. It claimed that satisfaction of the CES writ subverted the priority it had secured by obtaining its writ first. It therefore applied to the High Court for an order requiring the money to paid to it by CES, relying on CPR83.4(5) which provides:
(a) the priority of a relevant writ will be determined by reference to the time it is originally received by the person who is under a duty to endorse it; and
(b) the priority of a relevant warrant will be determined by reference to the date on which it was originally issued.
Master Eastman agreed, ordering CES to pay the £12050 to Marston. Turner J then dismissed an application to set Master Eastman’s order aside (see  EWHC 1920 (QB)), again on the basis that the Marston writ had been first in time.
CES appealed, arguing that there was no rule of law determining priority when different writs had been directed to different enforcement officers, or that any priority that did exist did not affect the payment it had by then received. It argued that one enforcement officer did not owe any duty to another and that CPR83.4 simply described procedure, not substantive law.
Lord Leggatt reviewed the authorities, setting out a history over some 400 years. “The upshot”, he concluded, “…is that, ever since the enactment of section 15 of the Statute of Frauds 1677, the relevant statutory provisions have consistently specified the effect of a writ of execution as being to ‘bind the property of the goods’ or ‘bind the property in the goods’ of the debtor from the time when the writ was delivered to the sheriff (or now when it received by the relevant enforcement officer). This language has been interpreted by the courts to mean that, although the delivery of a writ of execution to the sheriff/enforcement officer does not affect the title to the debtor’s goods, it renders the goods liable to be seized by the officer and sold to satisfy the debt”. He added “the applicable statutory provisions have, since 1856, also made it clear that the goods remain subject to the sheriff’s or enforcement officer’s power of seizure and sale until the writ has been executed notwithstanding any transfer of the title to the goods, unless the goods are acquired by a person in good faith, for valuable consideration and without notice of the writ” (paras.31-32).
As the statutory provisions had the effect of binding the property in the goods from the time of its receipt by the enforcement officer, it is logical to infer (he concluded) that a writ cannot be overtaken by a writ issued later. “This”, he said, “is the only fair arrangement” (para.33). As such, Schedule 12 should be interpreted to the effect that writs should be executed in the order of their receipt.
This position was not affected by the fact that there were two different enforcement officers rather than a single sheriff. Nor was the court persuaded that the rule ought not, as a matter of policy, apply between different enforcement agencies for fear of ‘anarchic consequences’ because “it is a rule of priority between writs which does not depend on who receives the writs concerned” (para.53).
Part of Marston’s case was that CES had converted the £12050 and should account for it. The relevant law was summarised by Lord Leggatt in this way: “a claimant must at the time of the alleged interference with the claimant’s right have had either actual possession of the goods or an immediate right to possession of them which is superior to the possessory right of the defendant. It is not necessary (or sufficient) that the claimant should be the owner of the goods” (para.59) and “there can be no doubt that an enforcement officer who has taken control of goods is entitled to sue for conversion someone who removes the goods from the officer’s control” (para.61).
Matters were complicated, however, by the fact that the money paid to CES was not covered by the controlled goods agreement. A debtor is entitled to deal freely with goods until taken into the control of the enforcement officer. As such the court concluded that the sum was not recoverable by Marston under principles of conversion.
Marston alternatively argued that the effect of the priority was not to prevent CES from enforcing, as such, but to compel it to apply amounts it recovered first to Marston before applying any balance to its own writ. The argument rested on whether the £12050 was taken in exercise of an enforcement power and was therefore ‘proceeds’ within the meaning of the legislation. Although Lord Leggatt found the wording of the Schedule ‘elliptical’, he preferred Marston’s argument that enforcement officers are for these purposes officers of the court performing a role in the administration of justice and “it is not inconsistent with the role of an enforcement officer or agent to require proceeds from the exercise of an enforcement power to be used to discharge another, prior liability of a debtor before any surplus may be used…” (para.82).
There was further debate as to whether ‘bank money’ (existing virtually, rather than as cash), which is intangible, could be taken in the exercise of the power conferred by the writ and controlled for the purposes of enforcement. Lord Leggatt preferred a broad interpretation with the effect that “proceeds from the exercise of an enforcement power are rationally regarded as including money paid to prevent goods from being seized” (para.104). Equally, cash and credit card payments to CES could not be distinguished and constituted the ‘proceeds’ of enforcement. It followed that all sums paid to CES whilst the Marston writ was unsatisfied could not lawfully be used to satisfy the CES writ.
The court was critical of the conduct of CES, as officers of the court, for the way in which Mr Handa had been coerced to pay over the money despite knowledge of the Marston writ and that Mr Handa intended to pay more towards it the very next day. This, the Judge said, did not infringe any legal right of Marston but was “conduct which no fair-minded person would regard as acceptable… calculated to disrupt the orderly process of enforcement of writs of control” (para.127). No similar criticism was, of course, made of Marston.
The moral of the story? Anyone with the benefit of an enforceable judgment, particularly against someone likely to have several judgment debts, would be wise to act swiftly at least to secure a writ of control at the earliest opportunity. Whatever the background to the debt and whenever execution actually takes place, it is critical that a writ of control is obtained first in time. Even in circumstances where an enforcement agent with a later-in-time writ does not know about an earlier writ, s/he will nevertheless be bound to respect its priority.