Third-Party claims to ownership of goods
This is an area that needs to be controlled and managed through to a proper outcome. If ignored third party claims can escalate and become an impediment to enforcing the court’s judgment.
The Civil Procedure Rules have anticipated this problem in Part 85 which deals specifically with the third party claims to controlled goods. The history of Part 85 is itself steeped in the English Common Law and the law, cases and rules relating to “Interpleader”.
Our CEO remains a leading expert on the subject of Interpleader and Third Party Claims which means the claims are processed to their eventual outcome as efficiently as possible. There is some anecdotal evidence that other High Court Enforcement Officers, ignore these claims, or fail to deal with them in accordance with the Rules. This is in our view a mistake. A third party can become aggrieved at any point in the enforcement process and it is best for the High Court Enforcement Officer to drive the third party claims to a proper conclusion contained in a court order which leaves no ambiguity, and no room for further litigation.
The Difference Between the Old Rule pre-2014 and the new Rules
Under the Rules of the Supreme Court, Order 17, the topic of “Interpleader” was laid out as a clear process to manage claims from third parties which had been taken into legal control. Even as Sheriffs changed to High Court Enforcement Officers in 2004 the Rule stood untouched for another 10 years before it was adopted into the Civil Procedure Rules as Part 85.
The key difference in the Rule change is that under the pre-2014 position, the High Court Enforcement Officer could make an application to Court immediately a valid third party claim was made to the goods taken into legal control. This meant the HCEO dealt with the claim, achieved a decision from the Court, and could either continue with the enforcement of the Writ of Control or withdraw from the possession of the third party’s goods because they were indeed found to belong to the third party.
The Third-Party Claim to the Controlled Goods Process
The CPR Part 85 process is very similar to the old Rules and in summary, looks like this:
A third party gives notice to the High Court Enforcement Officer, and Judgment Creditor that of a claim to the controlled goods – see CPR 85.4(1)
The HCEO will ask the Judgment Creditor if this claim to the goods is accepted or disputed. If the claim is disputed, the Judgment Creditor, or any other party with a claim to the goods, must respond with their decision in the form of a Counter-Notice – see CPR 85.4(3)
If the Judgment Creditor, or any other party claiming the goods, fails to give the notice required by CPR 85.4(3), the HCEO may apply to the court for directions and seek an order protecting him or herself against any further action
Where the claim of the third party is disputed, the party claiming the goods must issue an application to the court for determination, under CPR 85.5
Unfortunately, when the new Rules were drafted there was little or no consultation with HCEOs with experience of Interpleader proceedings, which led to the new Rule having a clear lacuna. It did not deal adequately with the situation of a third-party claim to controlled goods, which was disputed by the Judgment Creditor or others, and the third party failed or worse, refused to issue an application under CPR Part 85 to seek the Court’s decision.
The consequence of this was that the HCEO could be left holding goods in control for an undefined period waiting for a third party to make the application. It leaves the whole situation in limbo.
Taking the Bull by The Horns!
In true High Court Master style, Master McCloud has looked at this lacuna in the wording of CPR Part 85 and offered a way forward which puts HCEOs back on the front foot in driving out a decision on ownership when a third party claim is made.
In two cases heard by the Master in 2018, she suggests that going forward, HCEOs take the lead and make their own application to Court, supported by a short Witness Statement setting a Chronology of how the Writ of Control came into existence, along with evidence from the Judgment Creditor as to why they dispute the third party’s claim to the goods.
The application should be made on Form N244 and should ask the Court for an “Unless Order” so that the Court can make directions and a timetable for the proper exchange of evidence, and allow for a full hearing for the summary disposal of the issue.
Ultimately the Court will make a decision as to who owns the goods.
If they are found to belong to the third party claimant then assuming no wrongdoing on the part of the HCEO, the goods can be released, and the Court will make an order for “no action” against the High Court Enforcement Officer and High Court Enforcement Agents involved in the case.
We must underline that the cost implications of dealing with such an application are significant and all parties, including the HCEO, should be aware of how these can escalate. Often the costs can be larger than the value of the goods taken into legal control!
Once the third party claim has been decided on, it may be that other goods are still available and under the HCEO’s control. This means the HCEO can carry on with the enforcement of the Writ of Control (although a check should be made as to whether it needs to be extended due to the length of time proceedings can sometimes take).
If the Court finds that the goods do in fact belong to the Judgment Debtor, then the Court will bar the claim of the Third Party Claimant and will make an Order for the HCEO to enforce the Writ of Control immediately. The HCEO and Judgment Creditor can make applications for costs against the Third Party Claimant. Again, the position on costs is risky. Cost orders against Third Party’s are not always the most enforceable!
Once again, the HCEO can seek an Order protecting him or herself and agents acting in his name.
The Model Order for Third-Party Claims to Controlled Goods
Master McCloud has offered clear guidance on addressing the lacuna mentioned earlier and offers a solution to bring clarity to any given situation.
Below is her “model” order in which the HCEO makes an application for an “Unless Order” to ensure the third party’s claim is put before the court for adjudication.
In summary, her order is:
Unless by 4 pm on a date 14 days from the date of service of this order the Third Party files and serves evidence setting out its basis for its asserted rival claim to the title, it shall be debarred from relying on evidence of title to contradict that put forth by the HCEO.
In the event that the Third Party is so debarred then without further hearing the HCEO shall be entitled to a declaration that the judgment debtor was at the material time the person with title to the seized goods and consequent upon that declaration the HCEO shall be entitled to dispose of them in execution and shall be entitled to his reasonable costs summarily assessed in the sum of [£959.30 in Riaz, £681.50 in Celador] being the sum claimed for this application.
In the event that the Third Party serves and files evidence as above and is not debarred, the HCEO shall apply to this court for directions as to the determination of the issue of title and as to the management of the dispute and payment of the sums required by para 60(4)(a) of the Tribunals Courts and Enforcement Act 2007 Sch. 12, and for the application to proceed thereafter in accordance with CPR Part 85, and in that event, costs shall be reserved.
In the event that the Third Party serves and files evidence as above and is not debarred, any further evidence relied on by the judgment creditor in respect of the ownership of the [goods, in Riaz money in Celador] shall be provided by the Creditor, and the HCEO's witness evidence shall deal with enforcement steps taken insofar as not already detailed in the original application for this order.
Master McCloud has also suggested that the court make a decision about the sum to be paid into court by the Third Party at the same time as it makes the above order to remove the time and expense of having a further hearing which is certainly very welcome.
Ultimately Master McCloud’s thinking on this issue takes HCEO’s back to the position of being a “middleman” who puts the issue of the third party claim before the Court as a completely neutral party.
A third party claim to controlled goods should not be made lightly. The third-party claimant should have evidence in hand to back up their claim, be it in the form of receipts, purchase invoices, properly registered bills of sale, or a deed of gift.
Using such a claim to throw a “spanner in the works” will cause delay to the enforcement of a Writ of Control, but not as much as one might think now that the Master has made such a clear judgment on how to manage the situation.
As a matter of practice if Shergroup is met with a third-party claim to the goods taken into legal control, which is disputed by the Judgment Creditor, then we will make an application for an “unless order” immediately.