Third-Party claims to ownership of goods
Properly controlling and managing this area is essential to achieving a favorable 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, as a leading expert on the subject of Interpleader and Third Party Claims, ensures that we process the claims 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
The Rules of the Supreme Court, Order 17, laid out a clear process to manage claims from third parties, known as “Interpleader.” High Court Enforcement Officers replaced Sheriffs in 2004, but the Rule remained unchanged for another 10 years before the Civil Procedure Rules adopted it as Part 85.
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 inquire with the Judgment Creditor about their acceptance or dispute of the claim to the goods. If the claim is disputed, the Judgment Creditor or any other party with a claim to the goods must provide their decision in the form of a Counter-Notice, as outlined in 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
Regrettably, the drafters of the new Rules failed to consult adequately with experienced High Court Enforcement Officers (HCEOs) regarding Interpleader proceedings. As a result, a clear gap exists in the new Rule. The scenario in which the Judgment Creditor or others dispute a third-party claim to controlled goods, and the third party neglects or refuses to initiate an application under CPR Part 85 to seek the Court’s decision, lacks an effective resolution.
As a consequence, the High Court Enforcement Officer (HCEO) could be left holding goods in control, waiting for an undefined period for a third party to make the application. It leaves the whole situation in limbo.
Taking the Bull by The Horns!
Master McCloud, in true High Court Master style, has examined this gap in the wording of CPR Part 85 and presented a solution that propels HCEOs to take the lead in determining ownership when a third-party claim arises.
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 court decides on the third-party claim, it is possible that other goods remain available and within the control of the High Court Enforcement Officer (HCEO). This enables the HCEO to continue enforcing the Writ of Control, although it is important to check if an extension is necessary due to potential delays in the legal proceedings.
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.
In summary, her order is:
The Third Party must file and serve evidence setting out the basis for its asserted rival claim to the title by 4 pm on a date 14 days from the date of service of this order. It will be debarrred from relying on evidence of title to contradict that put forth by the HCEO unless it complies with this requirement.
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.
If the Third Party serves and files evidence as stated above and is not debarred, the HCEO will seek directions from this court regarding the determination of the issue of title and the management of the dispute, as well as the payment of the sums required by para 60(4)(a) of the Tribunals Courts and Enforcement Act 2007 Sch. 12. Thereafter, the court will proceed with the application in accordance with CPR Part 85, and it will reserve costs in such an event.
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.
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.
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.