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Cite as: [2000] EWCA Civ 218
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Case No: B2/99/0408 & B2/99/0609
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM H.H. JULIAN HALL
Royal Courts of Justice
Strand, London, WC2A 2LL
Date: Thursday 13 July 2000
LORD JUSTICE SIMON BROWN
LORD JUSTICE SCHIEMANN
and
LORD JUSTICE MUMMERY
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WILSON |
Respondent | |
- and - |
||
SOUTH KESTEVEN DISTRICT COUNCIL |
Appellant |
-
(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No: 0171 421 4040, Fax No: 0171 831 8838
Official Shorthand Writers to the Court)
- - - - - - - - - - - - - - - - - - - - -
Mr G. Pulman QC & Mr S. Livesey (instructed by Graham J Wood of 16-18 Station Road, Kettering, Northants NN15 7HH, solicitors)for the Respondent
Mr N. Pleming QC & Miss M. Macpherson (instructed by Hextall Erskine & Co of 28 Leman Street London E1 8ER, solicitors) for the Appellant
Judgment
As Approved by the Court
Crown Copyright ©
LORD JUSTICE SIMON BROWN:
If ever clarity were needed in the law it is surely with regard to the seizure and sale of a debtor's goods. What are the powers and obligations of the bailiff? What rights has the debtor? The answers to such questions should be simple and readily accessible. Yet the process of levying distress is an arcane one and the present law, as noted in the Law Commission's Working Paper (1986)(No. 97) on Distress for Rent, p.145, para. 5.1(1), "is riddled with inconsistencies, uncertainties, anomalies and archaisms".
The present appeal centres upon regulation 14 of The Non-Domestic Rating (Collection and Enforcement) (Local Lists) Regulations 1989 (the Regulations) and schedule 3 to those Regulations, and raises a number of issues of obvious importance. It is convenient at once to set out the relevant provisions and this I shall do by reference to their terms following minor amendment in 1990; the particular distraint with which this appeal is concerned occurred in September 1992 before certain further amendments were made in 1993.
"14 (1) Where a liability order has been made, the authority which applied for the order may levy the appropriate amount by distress and sale of the goods of the debtor against whom the order was made.
(2) The appropriate amount for the purposes of paragraph (1) is the aggregate of -
(a) an amount equal to any outstanding sum which is or forms part of the amount in respect of which the liability order was made, and
(b) a sum determined in accordance with Schedule 3 in respect of charges connected with the distress
(3) If, before any goods are seized, the appropriate amount (including charges arising up to the time of the payment or tender) is paid or tendered to the authority, the authority shall accept the amount and the levy shall not be proceeded with.
(4) Where an authority has seized goods of the debtor in pursuance of the distress, but before sale of those goods the appropriate amount (including charges arising up to the time of the payment or tender) is paid or tendered to the authority, the authority shall accept the amount, the sale shall not be proceeded with and the goods shall be made available for collection by the debtor.
(5) The person levying distress on behalf of an authority shall carry with him the written authorisation of the authority, which he shall show to the debtor if so requested; and he shall hand to the debtor or leave at the premises where the distress is levied a copy of this regulation and Schedule 3 and a memorandum setting out the appropriate amount, and shall hand to the debtor a copy of any close or walking possession agreement entered into.
...
(7) A distress shall not be deemed unlawful on account of any defect or want of form in the liability order, and no person making a distress shall be deemed a trespasser on that account; and no person making a distress shall be deemed a trespasser from the beginning on account of any subsequent irregularity in making the distress, but a person sustaining special damage by reason of the subsequent irregularity may recover full satisfaction for the special damage (and no more) by proceedings in trespass or otherwise."
(I omit paragraphs (6), (8) and (9) which are immaterial to this appeal).
CHARGES CONNECTED WITH DISTRESS
1. The sum in respect of charges connected with the distress which may be aggregated under regulation 14(2) shall be as set out in the following Table -
(1) A For making a visit to premises with a view to levying distress (whether the levy is made or not):
|
(2) |
Paragraph
2(1) makes provision for calculating a scale fee for heads A and B. Paragraph
2(3) describes what is meant in these regulations (see regulation 14(5) and
head D) by close possession and walking possession. Paragraph 3 provides for
taxation of the charges in the event of a dispute, such taxation to be carried
out by the local county court registrar who may give such directions as to the
costs of the taxation as he thinks fit, any costs payable by the debtor to be
added to the "appropriate amount" under regulation 14(2).
The appeal is brought by the appellant rating authority against the order of
Judge Julian Hall made in the Peterborough County Court on 18 March 1999,
entering judgment on the issue of liability in favour of the respondent debtor
for damages to be assessed for "unlawful distress starting on 22 September
1992". Ordinarily at this stage of the judgment I would set out at least the
basic facts of the case and the trial judge's main conclusions. However, for
reasons which will eventually become clear this would, I believe, tend to cloud
rather than illuminate the real issues arising. Instead, therefore, I turn at
once to these, different though they are from those regarded as determinative
below. As I see it, the critical issues are these:
1. Is a debtor entitled to halt the distraint process by payment or tender at
any time or only at either of two specific stages during the process,
respectively before seizure and before sale?
2. What should be stated in the memorandum required by regulation 14(5) and
when should it be handed over to the debtor or left at the premises?
3. What is the consequence of completing the distraint process without having
complied properly with the requirements of regulation 14(5)?
Issue 1 - When may the process be halted?
This dispute hitherto has been litigated on the basis that the debtor is
entitled to halt the distraint process by an appropriate payment or tender at
any time. The bailiffs advanced no contrary contention and, indeed, no one
questioned the correctness of that assumption until we ourselves questioned it
in the course of the appellant's submissions. Nor, surprisingly, did Mr
Pleming QC appear avid to encourage the court in its doubts. And yet I have
come to the clear conclusion that the assumption was wrong and that, so far
from the debtor having a continuous opportunity to end the process, that
opportunity arises only (a) before any goods are seized (regulation 14(3)), and
(b) after seizure and before sale (regulation 14(4)). There is, in short, no
opportunity to redeem the goods afforded during the period of seizure
itself.
We are, as it seems to me, driven to that conclusion both by the scheme and
language of the regulation and by consideration of the practicalities. As to
the former, it is evident that paragraphs (3) and (4) of the regulation are
directed at two distinct stages. Paragraph (3) in terms applies only to the
period "before any goods are seized" whilst paragraph (4) postulates that the
relevant goods have been seized and in terms applies to the next stage, "before
sale". Had it been intended to provide for payment or tender to halt the
actual process of seizure, there would have been no need for two separate
paragraphs framed as they are; rather a continuum of opportunity would have
been reflected in a single paragraph allowing for payment or tender at any time
before sale. And consider the practicalities. The payment or tender has to
include the accrued charges. These are readily calculable before the process
of seizure is begun. And after seizure and before sale comes an interval of
time sufficient to consider the charges and in the event of dispute have them
taxed, if necessary obtaining meantime a county court injunction to restrain
sale - see Steel Linings Limited and Harvey v Bibby & Co. [1993] RA
27. During seizure, however, the determination of the accrued charges will
almost inevitably be difficult. They are likely to be accruing minute by
minute. They may well depend upon the charges of others such as transport and
removal contractors. And, depending upon the precise point at which the
tender is made, they may also be affected by the debtor's own ability to undo
the seizure process, for example by unloading or collecting goods already
seized. All that, as will appear, is well illustrated by the facts of this
very case.
Issue 2 - What memorandum is required by Regulation 14(5)?
The only explicit requirements of paragraph (5) of the Memorandum are that it
shall set out "the appropriate amount", and that "the person levying distress"
shall hand it to the debtor or leave it at the premises. What, let us first
consider, is "the appropriate amount"? Were regulation 14 better drafted the
answer would be a good deal clearer than it is. The phrase, of course,
appears in each of the first five paragraphs of the regulation (and again,
indeed, in regulations 16 and 17). Paragraph (2) defines it as (a) the sum
due under the liability order (including the court costs - see regulation
12(6)(b)) and (b) the schedule 3 charges. Ostensibly, however, it defines it
only "for the purposes of paragraph (1)". Paragraphs (3) and (4) each refer
to "the appropriate amount (including charges arising up to the time of the
payment or tender)". Why, one wonders, was it thought necessary in these
paragraphs to specify that the appropriate amount includes accrued charges?
Would not the same result have been more simply achieved by extending the
paragraph (2) definition to paragraphs (3) and (4) as well? But more
importantly, what is the suggested meaning in paragraph (5) of the bare phrase
"the appropriate amount", there being in this paragraph (in contrast to
paragraphs (3) and (4)) no express inclusion of accrued charges?
For my part I would construe paragraph (5) purposively so as to ensure that the
memorandum achieves its maximum benefit. That must surely be to inform the
debtor as fully as possible of the nature and extent of his liability. To
that end "the appropriate amount" should, I think, include the basic scale
charge for the distress, i.e. that appropriate to head B "for levying distress"
which will by then have accrued. It might also with advantage specify the
stipulated head D daily charge, at all events in cases where the debtor has
been prepared to enter into a close or walking possession agreement.
To the same end it seems to me plainly desirable that the memorandum should be
handed over to the debtor at the earliest opportunity, ideally when the person
levying distress first enters the premises and thereby embarks upon the
distraint process. I suggested in Evans v South Ribble Borough Council
[1992] 1 QB 757, 764 when seeking to distill the relevant law into a number of
basic principles, that the first principle was this:
"The process of distress consists of three stages: the entry into the
premises, the seizure there of goods, and the subsequent securing of the goods
(generally called impounding)."
I would hold therefore that anyone entering the premises with a view to the
immediate seizure of some or all of the occupier's goods is a "person levying
distress" within the meaning of regulation 14(5). He must carry for the
purpose (and if requested show to the debtor) his written authorisation. He
does not need actually to seize (let alone remove) any goods before he comes
under this obligation. True, as Mr Pulman QC points out, head A of schedule 3
clearly contemplates that premises may be visited without any levying of
distress. I would construe this, however, to refer only to a preliminary
visit to premises, perhaps to see whether they have been vacated or are
otherwise worth distraining upon, and not to a visit upon which, for example,
the bailiff proposes to invite the debtor to sign a walking possession
agreement. I do not think any of this conflicts with what Donaldson J said in
Brintons Ltd v Wyre Forest District Council [1977] 1 QB 178. If,
however, it does, then I would overrule that decision.
The advantages of handing over the memorandum (and, of course, copies of
regulation 14 and schedule 3, as paragraph (5) specifies must also be done) as
soon as possible are surely obvious. The debtor will then be given the
maximum opportunity to pay off his liability before the process gets fully
under way and charges begin to escalate. Unless the debtor is shown
regulation 14(3) before seizure of goods begins, his chance of buying off the
bailiffs at that initial stage will obviously have gone before he even learns
of his rights.
I would accordingly construe regulation 14(5) to require the bailiff on or
shortly after entry onto the premises to hand over to the debtor (if present) a
memorandum setting out the sum owing including the schedule 3 scale charge for
the levying of distress under head B.
If the debtor is not present so that the memorandum (and copies of regulation
14 and schedule 3) will instead have to be left at the premises, then the
memorandum ought properly to alert the debtor to the fact that further schedule
3 charges under head C have already accrued (if goods have already been
removed) and/or are likely to accrue unless the appropriate sum is now paid.
I may perhaps note that the 1993 amending regulations introduced a new head C
into schedule 3, namely "For one attendance with a vehicle with a view to the
removal of goods (where, following the levy, goods are not removed):
Reasonable costs and fees incurred". Clearly, if that particular expense were
nowadays to be incurred, the memorandum should make express reference to it.
Issue 3 - What is the consequence of non-compliance with regulation
14(5)?
I can deal with this issue altogether more shortly. A failure to provide the
required memorandum and/or copies of regulation 14 and schedule 3 would clearly
constitute a "subsequent irregularity" within the meaning of regulation 14(7)
and would thus entitle the debtor to recover any special damage proved to have
resulted from it. Special damage has a wide meaning and covers all loss
occasioned by the irregularity - see Steel Linings Ltd v Bibby & Co.
[1993] RA 27, 34. The important point to note, however, is that causation
must be established; the distraint process itself is not rendered unlawful by
such an irregularity - see Quinlan v Hammersmith and Fulham London Borough
Council [1989] RA 43, 58.
With that approach to the Regulations in mind let me at last come to the facts
of the present case which, since it will be seen to have been litigated below
on a misconceived basis, I can take comparatively shortly.
The respondent, Mrs Wilson, was the proprietor of the Stamford Post Hotel in
Stamford (the premises). She fell into debt. On 29 July 1992 a liability
order was made against her by the Stamford Magistrates in respect of unpaid
non-domestic rates due to the appellant authority in respect of the premises
for the year 1992/93. The liability order was in the sum of £3,266.25
for arrears plus £16 for court costs.
On 11 September 1992 bailiffs, Jefferies & Pennicott (Northern) Limited,
paid the first of three visits to the premises. The bailiffs, I should note,
were brought in by the defendant authority as third party to the action but
thereafter joined with the defendants in presenting a united front to Mrs
Wilson's claim and, indeed, became jointly represented below.
The bailiffs' representative on 11 September 1992 was a Mr Goodwin who is said
to have made an inventory of the premises' contents and who certainly handed
over to Mrs Wilson a completed proforma document purporting to be the required
regulation 14(5) memorandum. The document is headed "Notice of Seizure of
Goods and Inventory" and makes reference to the relevant 1989 Regulations.
It then identifies the debtor and the premises and continues:
"Amount for which this Distress is made:
Arrears due to Authority: £3266.25
Court Costs awarded by the Court 16.00
Levy Fee to scale schedule: 78.66
Statutory Walking Possession Fee
(15 days @ 45p per day) 7.93
Amount now due: £3368.84 A "
Having then stated that all payments must be made to the bailiffs and not to
the Authority, the form continues:
"Take notice that by virtue of an authority given to me by the above Council I
have this day seized and distrained on the premises situated at the address
shown above the goods specified in the following inventory for the sum due for
the arrears and costs under the liability order issued to the Council in the
Magistrates' Court as shown above - A.
And further take notice that unless the amounts be paid inclusive of all the
costs and charges of this Distress, within 6 days from the date hereof, the
goods listed below will be removed from the premises and sold according to the
law."
There then follows an inventory (which, on the copy produced, is unclear as to
the details), and, at the foot of the document, Mr Goodwin's signature and the
date. Schedule 3 (although not regulation 14) is printed on the reverse side
of the form.
I shall postpone until later my criticisms of that form.
In the week following Mr Goodwin's visit, Mrs Wilson paid off £200 towards
her outstanding liability but that, perhaps unsurprisingly, did not halt the
process of distraint.
On 22 September 1992 the bailiffs made their second visit to the premises,
intent this time on seizing (assuming seizure had not already constructively
taken place on 11 September), and more particularly upon removing (and thereby
impounding), the goods. On this occasion their representative was a Mr.
Harris and he attended with two lorries and two men hired from a firm in Louth
to assist him. The men seem to have been there at least intermittently from
about 4 pm to about 9 p.m. and, during this time, a number of crates of beers
and minerals were loaded onto the vehicles. The visit ended, however, when,
as the judgment below records, "he [Mr Harris] made the mistake, as she [Mrs
Wilson] saw it, of popping outside to talk to his fellow bailiff or fellow
helper, driver, and she took the opportunity to slam the door behind him,
locked all the other doors and kept him out. One way or another, his file
stayed in the hotel while he did not." The file was never recovered and thus
it is that the only copy of the memorandum of 11 September available is the one
with the unclear inventory produced on discovery by Mrs Wilson herself.
The bailiffs made their third and final visit the next day, 23 September, when
again Mr Harris attended with two drivers and two men hired from Louth. They
were accompanied by the police and were permitted entry and on this occasion,
over a period of many hours, the seizure and loading up of the contents of the
hotel onto the lorries was completed. At about 6 o'clock, however, whilst
the work was still under way, Mrs Wilson tendered £3,500 in cash in
discharge of her liability. £1,000 of this was produced by a friend and
backer, a Mr Brennan, whom the previous day she had asked for help and who had
brought the money down overnight from Darlington. The remaining £2,500
was cash which she had been keeping against her quarterly VAT return and which
she went to fetch that afternoon from a safe deposit box in her bank at Corby.
Mr Harris rejected the tender, however, on the grounds that it was by then
insufficient to meet Mrs Wilson's liability. He is said to have demanded an
additional £1300 or perhaps £1800 by way of charges. The removal
process therefore continued. Finally, by now late in the evening, when all
the contents of the hotel had been loaded onto the lorries, Mr Harris handed to
Mrs Wilson a further memorandum in similar form to that which Mr Goodwin had
previously left with her save that this second form (a) put the "amount now
due" at £3,360.91 (i.e. it omitted the suggested walking possession fee of
£7.93) and (b) had attached to it by way of Inventory a number of sheets
which listed every single item removed from the premises and stated:
"Re outstanding non-domestic rates - balance outstanding £3,271. plus
removal costs and storage fees and waiting time and auction fees - pursuant to
the above order, the items listed below have today been seized and will be sold
by public auction without reserve unless full payment including all costs are
paid into our office by 29 September 1992."
By the time the loading process was completed on 23 September it was too late
to deliver the goods to the auctioneers' sale room at Alford. They therefore
had to be taken that night to Louth and delivered to Alford the next day. In
due course they were all sold at auction in the course of three successive
sales, the sum realised being sufficient to meet the whole of Mrs Wilson's
liability including the full charges of the distress and sale, leaving her a
small credit balance of some £73. Precisely how much the charges were at
any particular stage it has proved impossible to discover. The action was not
brought until 1996 and the hearing in March 1999 took place over six years
after the events in question. But realistically these details do not matter.
The approach taken by the judge below, as he himself put it, "side-stepped the
question of what was owing". My own approach, different though it is,
likewise makes the details of the charges immaterial.
As already indicated, the case below was contested on the mistaken footing that
regulation 14(4) allowed the debtor to tender payment at any time, including
therefore in the middle of the removal process which was when finally Mrs
Wilson came to make her offer of £3,500. The evidence at the hearing
stretched over three days, the fourth day being devoted to legal submissions
and an extempore judgment. The first main factual issue at trial was whether
Mrs Wilson had ever in fact made any offer. Mr Harris denied this. That
issue, however, was resolved in Mrs Wilson's favour and the finding is, of
course, unassailable. The critical next issue arising was whether the offer
had been made in a sufficient sum given that charges had obviously been
accruing up to the point when it was made. The judge expressed his
conclusions upon that issue (the issue he plainly regarded as determinative) as
follows:
1. As to the memorandum which was handed over when the bailiffs finally left
the premises on 23 September 1992 (the defendants were not, apparently, relying
on the earlier memorandum of 11 September):
(a) that memorandum "was, by that time [i.e. by the time when the first seizure
was held to have been made on 22 September] not written. There was therefore
no memorandum, no copy of schedule 3, no copy of regulation 14 provided at the
time of seizure, and all those mean that there had been what I regard as a
gross breach of regulation 14."
(b) "The form of this memorandum, in my judgment, conceals the true position,
and is inadequate to alert the plaintiff to what the true position was. It is
positively misleading, I find."
2. "In my judgment, regulation 14(4) implies an obligation on the bailiffs to
know the up-to-date figure, and to be prepared to put it in writing. It seems
to me, and in my judgment I rule, that at the time when a document is served or
relied on, it must be as up to date as possible. In regulation 14(4) the
appropriate figure, on the face of the document, "amount now due", must reflect
the instant position. It is not enough to say that, "Oh, by the way,
everything else is covered by, `inclusive of all the costs and charges of the
distress'."
3. "Either this document does not conform with regulation 14(4), or in my
judgment, by their conduct and lack of knowledge, the bailiffs have precluded
the plaintiff from relying on a remedy by the Regulations. ... I find that
£3,500 was offered which was, in my judgment, more than enough to satisfy
what was then lawfully claimed, £3,360.91. As I say, in my judgment, by
producing a memorandum that is so misleading, the defendants have precluded the
plaintiff from relying on the remedy provided by the Regulations and are
precluded from relying on it. Either way, in my judgment, it was an unlawful
distress thereafter."
In short, the judge appears to have concluded that a tender of no more than
£3,360.91 was required to terminate this distraint under regulation 14(4)
unless and until a regulation 14(5) memorandum was handed over specifying some
larger sum to be due as a result of accrued charges, and that, of course, never
happened. In the result, Mrs Wilson's goods should never have been removed so
that she has become entitled to damages, apparently on the footing that, but
for this unlawful distress, she would have continued trading as the proprietor
of the Stamford Post Hotel.
That conclusion is, no doubt, understandable given the way the case was
conducted below. But it is not to my mind a conclusion which is sustainable
in the light of what I would hold to be the correct approach to regulation 14.
In my judgment Mrs Wilson had no legal right to buy off this distraint process
on 23 September 1992. The whole of that day was devoted to the seizure and
removal of her goods and it fell, therefore, between the two opportunities for
tender afforded respectively by regulation 14(3) (before seizure began) and by
regulation 14(4) (after seizure ended and before sale). Of course debtors can
always hope to persuade bailiffs to call off a distraint by making a sufficient
offer during the seizure process. But they cannot compel this and can hardly
complain if the bailiffs demand as the price of cooperation the full payment of
all their charges (which is likely to be put at a round figure broadly
calculated to meet all expenses incurred). Take this very case. It seems to
me entirely unsurprising that by 6 pm or thereabouts on 23 September the
bailiffs were demanding accrued charges substantially exceeding the £340
representing the difference between (a) the amount due under the liability
order, £3,360.91, and (b) the £200 already paid together with the
£3,500 tendered.
As for the memoranda dated respectively 11 September and 23 September, it seems
to me that the former (handed over as it was before the seizure process began)
was altogether a better candidate than the latter for satisfying the
requirements of regulation 14(5). The former gave the debtor a six day
opportunity (which continued in fact for eleven days) to buy off the distraint
process for £3,368.84. The latter really was of very little value to
the debtor, telling her no more than that various unspecified further charges
would accrue and have to be paid within six days if the sale of the goods
thereafter was to be prevented. Why then should the appellants not rely on
the earlier memorandum? True, its inclusion of a statutory walking possession
fee of £7.93 was incorrect (a) because the figure itself is a plain
miscalculation and, (b) more fundamentally, because no walking possession
agreement was in fact entered into. True too the form by its first recital
states that the bailiff's representative has "this day seized and distrained
... the goods specified in the ... inventory" whereas, certainly on the judge's
finding, no such seizure took place that day. That first recital, of course,
contrasts with the second recital which threatens removal and sale after a
further six days, apparently inferring that once the goods have been removed
there will be no further opportunity to redeem them. Better, surely, that
the memorandum should specify the sum to be paid to halt the process before
seizure (in the sense of removal) begins, and should then indicate that, if the
goods have to be removed for sale, further charges will accrue and have to be
paid if such a sale is thereafter to be prevented. But none of these
criticisms were apparently advanced by the debtor; rather her case appears to
have been that the tender which she made on 23 September could only lawfully be
refused if a memorandum specifying charges which took the outstanding total to
above £3,500 had already been (or perhaps was then and there) served upon
her, to my mind an impossible argument.
Let it be assumed, however, that neither of the memoranda served in this case
strictly satisfied the requirements of regulation 14(5). That failure, just
as the bailiffs' failure (as the judge also found) to serve on the debtor a
copy of regulation 14, would clearly constitute an irregularity in the process.
But would such irregularities of themselves entitle the debtor to succeed in
her claim for damages for unlawful distress? In my judgment they would not
and nor, indeed, do I understand the judge to have concluded otherwise. His
judgment, as already indicated, was squarely based upon his conclusion that the
bailiffs were legally bound to accept the debtor's tender. Assume, as I would
hold, that they were not so bound. The debtor would then need to establish
that, because of the non-service upon her of (a) a memorandum in different form
or at an earlier time than those served and/or (b) a copy of regulation 14, she
failed by payment or tender to halt this distress and sale which otherwise she
would have done. On no view of the evidence, as it seems to me, could such a
conclusion be reached.
From all this it follows that I for my part, whilst naturally accepting all the
judge's findings of fact, would hold his conclusions to be unsustainable. I
would allow this appeal.
Lord Justice Schiemann:
I agree that the appeal must be allowed for the reasons given by Simon Brown
LJ.
Lord Justice Mummery:
I also agree.
Order: Appeal allowed. The order of the judge below substituted by an order
for judgment for the defendants. No order for costs either here or below.
Permission to appeal to the House of Lords refused. Detailed assessment of the
respondent's costs, his contribution assessed as nil.
(Order not part of approved judgment.)