Important decision on Taking Control of Goods

Hamilton v Secretary of State for Business, Energy and Industrial Strategy
[2021] EWHC 2647 (QB)
On 6 October 2021 the High Court handed down an important decision on the interpretation of Schedule 12 of the Tribunals, Courts and Enforcement Act 2007, read with the Taking Control of Goods Regulations 2013.

The basic facts of the case were these. The first respondent (the Secretary of State for Business, Energy and Industrial Strategy) obtained costs decrees against the appellant (Mr Hamilton) in directors’ disqualification proceedings in Scotland. Those decrees were registered in England and Wales. A High Court Enforcement Officer (the HCEO) was instructed to obtain and enforce writs of control. The asset concerned was a boat, MV Samara, moored in St Katherine Dock in London.

On 10 April 2019 two writs of control were issued. On 18 April 2019 notices of enforcement were given to Mr Hamilton. On 30 April 2019 the second respondent (Mr Lucas Jones, an Enforcement Agent) attended at the MV Samara, and entered into two controlled goods agreements (the CGAs) with Mr Hamilton. Under the relevant legislation a CGA (what used to be called a walking possession agreement) is a form of taking control of the goods.

A Mr Newett made an application under CPR, r 85.4 alleging that it was he, and not Mr Hamilton, who had the relevant interest the MV Samara, which (it was said) was standing as security for a loan. That application, made late, eventually came on for hearing before Master Cook on 22 May 2020. It was dismissed on its merits. In his order dismissing the application Master Cook expressly ordered the HCEO to sell the MV Samara “pursuant to paragraph 60 of Schedule 12” of the 2007 Act.

Mr Hamilton applied to set aside the order made by Master Cook, but his application was dismissed in June 2020 and marked as being totally without merit. It was against those two orders of Master Cook that Mr Hamilton appealed. Mr Hamilton’s grounds of appeal did not themselves find favour with the court hearing the appeal (Mr Justice Lane). The applications for permission to appeal were described as having “no arguable merit”: [134], and as “unarguable”: [135]. They do not take up much of the judgment (only [126]-[135]).

The main issue on the appeal turned out to be whether the MV Samara had been abandoned by the Enforcement Agent, and what the court could do about it if it had been. This issue arises in this way. By reason of paragraphs 40(6), 53 and 54 of Schedule 12, the Enforcement Agent must give a notice of sale within 12 months of taking control, and if he does not give such a notice, the goods are abandoned and must be returned to the judgment debtor. Astute readers will note that the hearing in front of Master Cook was more than 12 months after the CGAs had been entered into. No notices of sale had been given. Prima facie, the vessel had been abandoned on 30 April 2020.

That 12 month period can be extended, but only by written agreement between the Enforcement Agent and the judgment debtor. It seems likely that this ability to extend will be used in vanishingly few cases: it is almost never in the judgment debtor’s interest to agree. Importantly the court is not given a residual power to extend the 12-month period for giving notice of sale.

What the court is given is a brace of powers to order sale attendant upon third party applications such as that made by Mr Newett in this case, by paragraphs 60(3) and 60(6) of Schedule 12. But both are tightly constrained, and their interaction with paragraphs 40(5), 53 and 54 is not at all clear on the face of the legislation. Although Master Cook had made an order for sale “pursuant to paragraph 60” it was not at all clear which of those powers he still had available to him having already determined Mr Newett’s application.

The Enforcement Agent argued, by extensive submissions on the interpretation of the legislation and the court’s ability to read in powers which are not express, that there must be a power to order sale at the end of a third party application. Lane J disagreed, holding (in effect) that at the date of abandonment the enforcement was at an end so there was nothing to sell. His Lordship partially allowed the appeal, but only to remove Master Cook’s order for sale and replace it with a declaration that the vessel had been abandoned.

This decision shows, perhaps more than any other, that Schedule 12 is not the most wonderful piece of drafting to have come from the usually excellent pen of the Parliamentary Draftsman’s office. The effect of this decision is that canny judgment debtors and third parties can spin out third party ownership applications until the 12 month period is up and then reap the consequences of the abandonment.

A fuller analysis of the judgment will appear in the Three Stone Review.

Simon Hunter
shunter@threestone.law