A recent freedom of information request revealed that council use of bailiffs has increased 16% in two years. Alistair Gregory, commercial litigation partner at Stephensons, explains some of the legal aspects of this trend.
This article was first published on Lexis®PSL Local Government on 11 September 2015. Click for a free trial of Lexis®PSL
What are local authority's powers to appoint bailiffs?
The local authority will be subject to its own 'good practice' guide or framework in relation to the preferred route of enforcement. This means that the local authority is, to a large extent, self-regulating in their preferred appointment of either a bailiff, High Court Enforcement Officer (HCEO) or another route of enforcement.
Currently, there is no overriding regulation in place, at any level of government, which controls the ability of local authorities to appoint a bailiff.
What are the cost implications for local authorities when appointing bailiffs? How does that balance with not getting payment for fines?
A local authority has a wide range of powers to appoint a bailiff to recover the unpaid debt. The enforcement route or type of debt in question will determine who the local authority can instruct to recover the outstanding monies. This will be either a private bailiff, county court bailiff or HCEO.
Should the local authority be in possession of a judgment of the court then this can be enforced by a county court bailiff under a warrant of execution. This costs £100 if the amount in question is £5,000 or less. This is considered a relatively cost-effective way of enforcing any outstanding debt.
However, provided that the debt is for £600 or more, the local authority may find appointing an HCEO more effective. The HCEO works under the authority of a writ of control (previously called a writ of fieri facias). This is issued when a county court judgment, order or tribunal award is transferred to the High Court for enforcement via Form N293A and a court fee of £60. The transfer process normally takes between five and 21 days.
An HCEO is able to collect the debt, the costs of taking the debt to court, the £60 transfer fee, the rate of interest at 8% and any enforcement fees incurred by the HCEO. The only cost to the local authority would be the £60 disbursement to transfer the matter to the High Court (subject to the compliance fee mentioned below).
HCEOs are, therefore, often more motivated to recover the debt as they earn their fees directly from the judgment debtor, but only when they collect. If the HCEO is unable to collect the debt, there is an industry regulated compliance fee of £75 plus VAT paid by the creditor to the HCEO. Other than the compliance fee, the HCEO receives no income for an unsuccessful enforcement.
How does the report fit in with the pressure on local authorities to manage/cut their budget?
Most local authorities argue that they only use bailiffs as a last resort, preferring to consider other approaches such as long or short term payment plans to work with the debtor. Appointing a bailiff is also expensive in comparison to other methods of debt collection. For example, an attachment of earnings application will cost the local authority £100 for the court fee alone.
However, with local authority budgets being squeezed, the need for councils to recover their debt has become more pressing in recent years. Some councils are owed tens of millions of pounds and are being forced to write off hundreds of thousands of pounds in debt each year. This comes as many local authorities are being forced to make significant savings, including job cuts.
Bailiffs provide a significant and often lucrative option in escalating the debt collection process.
What are the trends in this area and what are your predictions for the future?
There has been considerable criticism of the use of bailiffs by some councils in recent years. This is largely in reaction to an increase in the number of bailiffs being used by local authorities.
The use of bailiffs is up 16% in the past two years, with the figures in the Greater London region and Birmingham being particularly high. Most councils are employing the services of bailiffs for the recovery of unpaid council tax, shortly followed by unpaid parking fines and the recovery of social security overpayments, business rates and commercial rates.
The MAT has called the use of bailiffs 'excessive', saying that they can in fact deepen debt problems and have an impact on the wellbeing of those already in a vulnerable situation.
Conduct of local authority-appointed bailiffs is coming under increasing scrutiny and there are some calls for intervention by the government to control their use.
The Tribunals, Courts and Enforcement Act 2007, Pt 3 attempted to implement safeguards to protect the public from aggressive bailiffs. Most bailiffs work for private companies, even if they're collecting money for the council or the government, and are not required to be a member of a trade organisation. The Civil Enforcement and HCEO associations have been set up and can regulate their members but it is not a requirement for the bailiffs to apply for membership.
The government has set up a complaints procedure that the public can follow if they are unhappy with the actions of a bailiff.
With the increase in pressure on local authorities to increase the number of checks, balances and restrictions on the use of bailiffs, it is likely that the government will take further action in the near future.