Office of Public Sector Information
375.The “net unpaid rent” is the amount of unpaid rent less any interest or VAT that may be payable on that amount and less any “permitted deductions”. Permitted deductions from rent are deductions that a tenant is presently entitled to make from his rent under statute, at common law and in equity. Examples include sums that may be deducted or recouped from, or set off against, rent:
under the terms of the lease;
in respect of damages for the landlord’s breach of his obligations to repair (or the cost of repairs, if carried out at the tenant’s expense);
in respect of damages for the landlord’s breach of the covenant of quiet enjoyment;
in respect of statutory compensation for improvements under section 11(2) of the Landlord and Tenant Act 1954.
376.The amount of rent that a landlord is entitled to recover by CRAR is the amount of unpaid rent less any permitted deductions that the tenant is entitled to make against that rent.
377.This section sets out the powers of the High Court or a county court, as rules of court may provide, to intervene in the exercise of CRAR. The court’s power arises only where the following conditions are met: firstly, notice of enforcement has been served on the tenant; secondly, the tenant has made an application to the court to intervene; and thirdly, the court is satisfied that the circumstances meet the prescribed grounds for intervening.
378.The court then has two options available to it. It may make an order to set aside the notice of enforcement, which effectively cancels that notice and prevents the landlord from taking any further steps under CRAR in relation to that notice. This would occur, for example, if the court considered that the preconditions for exercising CRAR had not been met.
379.Alternatively, the court may suspend the use of CRAR, by making an order that no further steps may be taken in exercise of CRAR without further order by the court. This might occur, for example, if there is a genuine dispute about the amount of rent in arrears or the calculation of the net unpaid rent. In those circumstances, the court may suspend the use of CRAR until that dispute is resolved.
380.This section deals with the use of CRAR after a lease has ended. The provisions of this section are intended broadly to reflect the current law governing the availability of distress for rent after a lease has ended. Subsection (1) sets out the general rule that, when the lease ends, CRAR will cease to be available. But that is subject to two exceptions.
381.The first exception is set out in subsection (2). This ensures that a landlord who has taken control of goods under CRAR before the lease comes to an end (or under the second exception, below), is not prevented from completing the process by selling those goods.
382.The second exception is set out in subsections (3) and (4) and this is intended to preserve the effect of sections 6 and 7 of the Landlord and Tenant Act 1709 after those provisions are repealed by this Act (see Schedule 14). This exception applies where the tenant remains in occupation after the lease comes to an end. It allows the landlord to use CRAR for no more than six months after the lease has come to an end, provided that the lease was not ended by forfeiture, the landlord and tenant remain the same and, if a new lease has been granted to the tenant, it must be a lease of commercial premises. For this purpose it does not matter whether the new lease of commercial premises is in writing or not because the section only permits the landlord to recover rent due under the expired lease of commercial premises, which must be in writing.
383.Subsection (7) defines when a lease ends for the purposes of this section.
384.This section makes a couple of special provisions in relation to the exercise of CRAR where the let premises is an agricultural holding. It is intended to preserve the effect of sections 16 and 17 of the Agricultural Holdings Act 1986 for the purposes of CRAR. (Sections 16 to 19 of that Act will be repealed by this Act; see Schedule 14).
385.First, there is a limitation on the rent that can be recovered by a landlord of an agricultural holding because CRAR cannot be used to recover rent that became due more than one year before the notice of enforcement is given. Second, any compensation that is due to the tenant under the Agricultural Holdings Act 1986 will be a “permitted deduction” for the purposes of CRAR, provided that the amount of compensation has been ascertained (for the meaning of “permitted deductions”, see section 77(7)).
386.This section makes provision for a landlord who is entitled to use CRAR against his immediate tenant to instead serve a notice on any sub-tenant requiring that sub-tenant to pay his rent directly to him, instead of paying it to his own landlord in the usual way. Its purpose is to allow the landlord to recover, from a sub-tenant, arrears of rent that are due to him from the immediate tenant.
387.The section is intended to preserve the effect of sections 3 and 6 of the Law of Distress Amendment Act 1908 (which will be repealed by this Act, see Schedule 14) in a form that is consistent with the other provisions of CRAR.
388.Where a notice is given to a sub-tenant under this section, it must set out the amount of the arrears owed to the landlord (the superior landlord) by the immediate tenant. The notice must also require the sub-tenant to pay his rent directly to the superior landlord instead of paying it to his own landlord, until the amount of arrears specified in the notice have been paid off, or rent ceases to be payable by the sub-tenant (for example, if he moves on), or the notice is replaced or withdrawn by the superior landlord.
389.Subsection (5) enables regulations to determine when a notice given by the landlord on a sub-tenant under this section takes effect.
390.For as long as the notice has effect, the superior landlord will effectively stand in place of the sub-tenant’s landlord for the purpose of recovering, receiving or discharging any rent payable by the sub-tenant under the notice, but only for that purpose. This means that the superior landlord can recover from the sub-tenant the amount stated in the notice by using CRAR. But the superior landlord cannot recover that sum from the sub-tenant by serving another section 81 notice on an inferior sub- tenant (see section 84).
391.The superior landlord may serve more than one notice under this section, but any later notice replaces an earlier one and where the landlord serves a later notice on a different sub-tenant he must withdraw the earlier one (see section 83). This ensures that only one notice has effect at any one time.
392.This section applies where a landlord has given notice to a sub-tenant under section 81.
393.Any sums that the sub-tenant pays under the notice to the superior landlord will be deductible from the amount of rent he would otherwise have had to pay to his own landlord. So, if the sub-tenant is required to pay £250 a month to the superior landlord under a notice (i.e., until the stated arrears are paid off), then he is entitled to deduct £250 a month from his own rent for as long as he is required to continue making payments under that notice. If there is a hierarchy of sub-leases and the landlord serves notice on an inferior sub-tenant, then this diversion of rent may be passed up the hierarchy of superior sub-tenants until ultimately it is deducted from rent payable to the (defaulting) immediate tenant. For example, where the notice is served on sub- tenant C, he may deduct any sums paid to the superior landlord from rent due to his own landlord (sub-tenant B). Sub-tenant B may then deduct an equivalent amount from his landlord (sub-tenant A) and sub-tenant A may deduct an equivalent amount from his landlord (the immediate tenant).
394.Payments under a section 81 notice will continue to be deductible from rent in this way, even after the arrears stated in the notice have been paid or the notice has been replaced by one served on another sub-tenant, unless the sub-tenant is aware of those facts. So a payment under a section 81 notice will not be deductible from rent if, at the time it is made:
the landlord has already withdrawn the notice;
the paying sub-tenant has already made payments under the notice that total an amount at least equal to the arrears stated in that notice;
the paying sub-tenant knows that the arrears stated in the notice have already been paid off by some other means (e.g., by the immediate tenant).
395.Similarly, part of a payment under a section 81 notice will not be deductible from rent if, at the time it was made, that part of the payment, when added together with earlier payments made by the sub-tenant, at least equal the arrears stated in the notice.
396.If a landlord gives a section 81 notice to a sub-tenant, but subsequently gives another section 81 notice to the same or another sub-tenant for the same amount of arrears (or an amount including all or part of it) then the later notice will automatically replace the earlier notice. This ensures that, for any amount of arrears, there is no more than one notice in force at any one time. (There is an exception to this rule as explained in the next paragraph).
397.There may be cases where, for instance, a landlord (A) lets premises to tenant (B) and tenant (B) geographically divides the premises by letting, say, the ground floor to sub-tenant (C) and the first floor to sub-tenant (D). The rent owed to B in respect of the premises is, therefore, shared between C and D. Under the provisions of this section, were B to default on rent owed to A, A will be able to serve notices on both C and D since they are not inferior or superior to one another (see subsection 83(2)(b)) in the hierarchy of tenancies. However, in the scenario described above, if C and D were superior or inferior to one another in the hierarchy of sub-tenancies, A would have to decide whether to serve a notice either on C or on D but not on both of them.
398.A section 81 notice will cease to have effect when the amount of arrears stated in the notice has been paid off, or when the notice is replaced by a subsequent notice (see section 81). A paying sub-tenant will always know that a section 81 notice has ceased to have effect when he himself pays an amount equal to the stated amount of arrears. But he may not necessarily know, for example, that the immediate tenant has paid off the arrears, or that the landlord has served a replacement notice on another sub-tenant. For that reason, this section requires the landlord to withdraw a section 81 notice when that notice is replaced by another one, and when the amount in arrears is paid (unless it is paid wholly by the paying sub-tenant). This will ensure that the paying sub-tenant is fully informed about the status of the notice that has been given to him.
399.Subsections (1) and (2) deal with the recovery of sums due from a sub-tenant under a section 81 notice. If a notice has been given to a sub-tenant, but that sub-tenant fails to pay the amount of arrears stated in the notice, then the superior landlord can recover that amount from him and he may use CRAR to do so. But the superior landlord cannot recover that sum from the paying sub-tenant by giving another section 81 notice to an inferior sub-tenant (see section 84).
400.Subsections (3) and (4) deal with overpayments to the superior landlord under a section 81 notice which has ceased to have effect, for example, because the stated amount of arrears have been paid off or the landlord has given a replacement notice. These provisions ensure that any amount paid to the superior landlord under a section 81 notice will always count as if it were rent paid by the defaulting tenant (the immediate tenant). So any payment towards the stated amount of arrears will reduce those arrears and any overpayment (i.e. in excess of the stated amount of arrears) will constitute a credit against future rent due from the immediate tenant. If the immediate tenant has moved on, such that no future rent is due from him, then any overpayment under the notice will be treated as if it had been paid by him by mistake so that he may recover that payment from the superior landlord. But this does not affect any claim that the paying sub-tenant may have under the general law to recover or set-off the amount that he overpaid.
401.This section ensures that any contractual provision which gives a landlord a power to recover rent (or other similar types of payment) by taking control of, or selling, goods or which modifies a landlord’s right to commercial rent arrears recovery (CRAR), will be void, i.e., have no legal effect. A contractual provision that seeks to do any of these things will accordingly be unenforceable. But contracts will be valid and enforceable to the extent that they prevent or restrict the use of CRAR. For example, a contract may provide that:
the landlord may not use CRAR to recover arrears of rent under the lease, whether during a particular period or at all; or
he may use CRAR, but if he does so he may not take control of certain goods (which he would otherwise be entitled to take control of under paragraphs 3(1) and 9 of Schedule 12).
402.This section is accordingly intended to prevent a landlord from making contracts to enlarge his power to take control of goods by CRAR or side-step the abolition of rent distress. For example, it will prevent a landlord from including any of the following provisions in a contract:
a provision that gives a power to distrain for rent arrears, e.g., in relation to a lease of residential premises;
a provision that extends the right to use CRAR, e.g. in relation to payments that are not ‘rent’ for the purposes of CRAR;
a provision that modifies the procedures applying to CRAR, e.g. by dispensing with the need to give an enforcement notice.
403.This section introduces the minor and consequential amendments relating to this Chapter that are contained in Schedule 14. These include amendments to abolish statutory powers to distrain for rentcharges (conferred by, for example, section 121(2) of the Law of Property Act 1925).
404.It is not considered necessary to make any amendment to the Lodgers’ Goods Protection Act 1871. Although there has been some doubt as to the extent of its repeal under section 8 of the Law of Distress Amendment 1908, it is considered that the Act is now wholly repealed by virtue of that enactment and section 132 of, and Schedule 6 to, the Judgements (Enforcement) Act (Northern Ireland) 1969. In any event, if not wholly repealed, the Lodgers’ Goods Protection Act 1871 would now be superseded by the abolition of the common law to distrain for rent arrears under section 71.
405.This section abolishes the rule that distraint for debts owed to the Crown takes priority over enforcement of other debts by seizure and sale of goods. This builds upon previous similar changes abolishing priority being given to debts owed to the Crown above other debts in matters of bankruptcy and insolvency.
406.This section provides that Part 3 of the Act applies to the Crown (so that the Crown is able to recover debts due to it by using the new procedure under Part 3, and may not use the old law of distress where Part 3 abolishes it) but that the enforcement powers created by Part 3 cannot be used to recover debts due from the Crown, to take control of or sell Crown goods or to enter premises which the Crown occupies.
407.This section contains definitions for “prescribed” and “regulations”, under which powers to make regulations under Part 3 are exercisable by the Lord Chancellor. It sets out the parliamentary scrutiny applying to regulations under this Part, and provides for the power to make regulations to include power to make supplementary, consequential or transitional provision. Parliamentary scrutiny will be by way of the negative resolution procedure, other than for those powers contained at paragraphs 24(2) and 31(5) of Schedule 12, which will be by way of the affirmative resolution procedure.
408.Part 4 of the Act makes a number of changes to existing court-based methods of enforcing debts in the civil courts. Part 4 also contains new provisions, including powers to obtain information about debtors.
409.An attachment of earnings order (AEO) is a means of securing payment of certain debts by requiring an employer to make deductions direct from an employed debtor’s earnings. Currently, the rate of deductions under an AEO made to secure payment of a judgment debt is calculated by a county court using information provided by the debtor.
410.Effective Enforcement identified weaknesses in the current system and in particular the fact that information provided by debtors is often unreliable. The Act tackles this by making provision for a new method of calculation of deductions from earnings based on fixed rates, similar to the system used for council tax AEOs. Another weakness of the AEO system is that if a debtor changes job and does not inform the court of his new employer’s details, the AEO lapses. The Act therefore enables the High Court, county courts, magistrates’ courts and fines officers to request the name and address of the debtor’s new employer from Her Majesty’s Revenue and Customs (“HMRC”), for the purpose of redirecting the AEO.
411.A charging order is a means of securing payment of a sum of money ordered to be paid under a judgment or order of the High Court or a county court by placing a charge onto the debtor’s property (usually a house or land or securities such as shares). A charging order can be made absolute or subject to conditions. Once an order is in place, a creditor can subsequently apply to court seeking an order for sale of the charged property.
412.At present, the court cannot make a charging order when payments due under an instalment order made to secure that same sum are not in arrears. In certain instances this can prejudice the creditor, allowing for example a debtor with large judgment debts, who is meeting his regular instalments, to benefit from the sale of a property without paying off the debt.
413.The Act removes this restriction and enables access to charging orders in circumstances where a debtor is not yet in arrears with an instalment order. As a safeguard, the Act allows the Lord Chancellor to set financial thresholds beneath which a court cannot make a charging order or order for sale, in order to ensure that charging orders are not used to secure payment of disproportionately small judgment debts.
414.Currently, the only means of creditors to obtain information to assist them in determining how to enforce a civil judgment debt is by way of an Order to Obtain Information. This requires the debtor to attend court, which is problematic if the debtor is not co-operating with the court. The Act enables the High Court and the county courts to request information from the DWP and Commissioners for HMRC, other government departments and/or prescribed third parties (including banks and credit reference agencies) on a judgment debtor who has failed to respond to the judgment or comply with court-based methods of enforcement to assist with the enforcement of a judgment debt. Such information will include name, address, date of birth, National Insurance number and the name and address of the debtor’s employer.
415.This section and Schedule 15 amend the Attachment of Earnings Act 1971 (the AEA 1971), by making provision for a fixed deductions scheme to introduce deductions from earnings at fixed rates for AEOs made by a county court to secure the payment of a judgment debt.
416.This Schedule is in two parts. Part 1 contains the main amendments to the AEA 1971 and inserts new sections and a new Schedule to enable a fixed deductions scheme to operate and to allow for a change in the basis upon which deductions from earnings are made under county court AEOs to secure payment of judgment debts. Part 2 sets out consequential amendments to the AEA 1971.
417.Paragraph 2 amends section 6 of the AEA 1971 (effect and contents of order) by setting out the basis of deductions from earnings under different AEOs, and specifying that where an AEO is made by a county court to secure payment of a judgment debt, the AEO must specify that deductions under the order should be made in accordance with the fixed deductions scheme.
418.Paragraph 3 inserts a new section 6A into the AEA 1971 (the fixed deductions scheme) which defines the fixed deductions scheme and provides for the Lord Chancellor to set out the detail of the scheme in regulations, subject to the affirmative resolution procedure in the first instance. It is intended that such regulations will set out the scheme of deductions in tabular format, in a similar way as is presently used for deductions from earnings for the collection of council tax.
419.Paragraph 4 amends section 9 of the AEA 1971 (variation, lapse and discharge of orders) by specifying that the power of a court to vary an AEO is subject to Schedule 3A inserted by paragraph 7, which specifies circumstances in which a county court may, and circumstances in which a county court must vary an AEO made to secure the payment of a judgment debt.
420.Paragraph 5 inserts a new section 9A into the AEA 1971 (suspension of fixed deductions orders), and obliges a county court, in certain circumstances, to suspend an AEO made under the fixed deductions scheme (a fixed deductions order). Where such a suspension order is made, the employer will not have to make deductions from the debtor’s earnings and the debtor will make payments directly to the creditor in the manner specified by the court in the suspension order. Where a county court considers that a fixed deductions order is not appropriate (by way of example, because a county court considers that deductions should be more or less than the deductions specified in the fixed deductions scheme because of the personal circumstances of the debtor), it must make a suspension order. The aim of the suspension provisions is to simplify the position for employers (who should only ever have to make deductions from earnings for county court AEOs made to secure a judgment debt in accordance with the fixed deductions scheme). Such a suspension order will specify the rate and timings of repayments by the debtor to the creditor, and might specify other terms. If any of the terms of the suspension order are broken (by way of example, if the debtor fails to make payments to the creditor), then the court must revoke the suspension order and reinstate the AEO (requiring the employer to make deductions from the debtor’s earnings). Even where the terms of the suspension order have not been broken, the court may revoke the suspension order if it considers it appropriate to do so, and rules of court may specify the circumstances in which a court may make or revoke a suspension order of its own motion.
421.Paragraph 7 inserts a new Schedule 3A into the AEA 1971 (changing the basis of deductions). Part 1 of Schedule 3A provides for variations to the basis of deductions under an AEO made to secure a county court judgment debt, such a variation to be changing the basis of deductions from deductions made in accordance with Schedule 3 of the AEA 1971 (a Schedule 3 judgment debt order), to deductions made in accordance with the fixed deductions scheme (a fixed deductions order), therefore, varying an AEO so that the scheme of deductions changes from the current scheme to the new fixed tables scheme. Part 2 of Schedule 3A provides for an AEO made to secure a county court judgment debt to be changed from a fixed deductions order to a Schedule 3 judgment debt order.
422.Part 1 of Schedule 3A provides that a Schedule 3 judgment debt order can be varied to become a fixed deductions order, either on an application to the county court or of the court’s own motion. The court must vary a Schedule 3 judgment debt order by way of changing it to a fixed deductions order if a Schedule 3 judgment debt order lapses (because the debtor has changed employment) and is then re-directed to the debtor’s new employer (such a variation to take effect at the time of re-direction). Paragraph 6 of Schedule 3A enables the Lord Chancellor to specify by order a “changeover date” when all existing Schedule 3 judgment debt orders should become fixed deductions orders. Paragraph 7 of Schedule 3A provides that where an AEO is varied pursuant to Part 1 of Schedule 3A, the employer must comply with the varied order (but will not incur liability for non-compliance until 7 days have elapsed since service of the order as varied).
423.Part 2 of Schedule 3A deals with changing the basis of deductions under an AEO from a fixed deductions order to a Schedule 3 judgment debt order. Paragraph 10 provides that such a variation can only be made in accordance with Part 2 of Schedule 3A. Paragraph 11 of Schedule 3A specifies that where a county court directs that an existing fixed deductions order should take effect to secure payments under an administration order in accordance with section 5 of the AEA 1971, the AEO must be varied at the same time to specify that deductions under the AEO should be made in accordance with Schedule 3 to the AEA 1971. This is because, for an AEO made to secure payments under an administration order, the county court should retain the flexibility to specify different levels of deductions, and deductions at fixed rates are insufficiently flexible. Paragraph 8 of the Schedule makes a consequential amendment to section 5 of the AEA 1971 to this effect.
424.Part 2 of the Schedule makes consequential amendments to the AEA 1971 to enable operation of the fixed deductions scheme.
425.Paragraphs 9 to 15 amend section 14 of the AEA 1971, (power of the court to order the debtor and employer to provide specified information), in connection with the operation of fixed deductions orders to specify that unlike the position in connection with Schedule 3 deductions orders, the court will not need to order the debtor and/or the employer to provide particulars of the debtor’s earnings and anticipated earnings, and as to his resources and needs (as the court will not need to be made aware of such facts when it is not setting the level of deductions under the AEO as deductions are to be made in accordance with the fixed deductions scheme). Similarly, paragraph 16 amends section 15 of the AEA 1971 (obligation of debtor and employer to notify changes) to specify that for fixed deductions orders, the debtor and/or the employer are not obliged to notify the court of particulars of earnings or anticipated earnings.
426.Paragraph 17 makes various consequential amendments in connection with the operation of consolidated attachment orders and paragraph 18 specifies that the fixed deductions scheme should apply to a consolidated attachment order where, before the consolidated order is made, one or more of the AEOs to be consolidated is a Schedule 3 judgment debt order.
427.This section inserts sections 15A to 15D into the AEA 1971 to enable HMRC information to be provided to the courts for the purpose of re-directing a lapsed AEO.
428.Section 15A enables the High Court, county courts, magistrates’ courts and fines officers, where an AEO has lapsed (where the debtor has changed employment but has failed to notify the court in accordance with his obligations in section 15(a) of the AEA 1971), to request HMRC to provide the name and address of the debtor’s current employer for the purpose of re-directing the AEO. However, no request may be made under this section unless regulations governing the use and supply of debtor information are in force, having been made under section 15B(5) and (8). Section 15A enables HMRC to provide information to comply with a request, disapplies any legal restrictions that might otherwise apply in relation to the disclosure and also enables contractors who hold information on behalf of HMRC to disclose information pursuant to such a request.
429.Section 15B creates an offence where information obtained pursuant to section 15A is used or disclosed other than for a purpose connected with enforcement of the relevant AEO. Section 15C enables the Lord Chancellor to make regulations under section 15B, with the agreement of the Commissioners and subject to the affirmative resolution procedure. Section 15D sets out various definitions of terms used in sections 15A to 15C.
430.This section amends the Charging Orders Act 1979 (“the COA 1979”) enabling the High Court and county courts to make a charging order in cases where the debtor is not in default under an instalments order made in relation to the sum to be secured by the charging order.
431.Subsection (3) prevents the court from making an order for sale unless the debtor has defaulted in making any payment due under an instalments order. It also enables rules of court to specify limitations upon enforcement of a charging order after there has been default under an instalments order.
432.Subsection (5) provides that any restrictions on enforcement of a charge set out in the inserted subsections 3(4A) to (4E) of the COA 1979 will not apply to any charge put on a bankrupt’s home under section 313 of the Insolvency Act 1986.
433.This section inserts a new section 3A into the COA 1979 to provide a power for the Lord Chancellor to specify financial thresholds below which a court cannot make i) a charging order and/or ii) an order for sale. The first of such regulations is to be subject to the affirmative resolution procedure, and any subsequent regulations are to be subject to the negative resolution procedure.
434.This section enables a judgment creditor to apply to the High Court or a county court for information about what type of court based action it would be appropriate to take to recover his debt (an information application), such court-based methods being, for example, a warrant of control, a third party debt order or an AEO.
435.This section enables the High Court or a county court, where the creditor has made an information application, to either make a departmental information request or an information order, requesting or ordering a person to provide information to the court to assist with the creditor’s information application. The debtor will be notified that the court intends to make an information request or order to give him an opportunity to object. However, the court may not make a departmental information request to HMRC unless regulations made under section 102(4) and (7) are in force. They must relate to the use or disclosure of debtor information disclosed by HMRC. Subsection (6) enables the court to disclose information about the debtor to a recipient of an information order or request to enable that recipient to identify the debtor in his records (such information being, for example, the known name and address of the debtor). Subsection (7) disapplies any legal restrictions that might otherwise apply in relation to a disclosure under subsection (6).
436.This section specifies the information that may be requested by the court from government departments. Subsection (3) specifies information that may be requested from “the designated Secretary of State” (the Secretary of State for Work and Pensions will be designated for this purpose) and subsection (4) specifies the information that may be requested from HMRC. Subsection (5) enables the court to request prescribed information from other government departments. Such government departments will be requested rather than ordered to provide information and non-legislative agreements will set out arrangements for the respective government departments to deal with such requests.
437.This section enables the court to make information orders requiring prescribed third parties to provide prescribed information about the debtor. It is envisaged that credit reference agencies and banks are likely to be recipients of such information orders.
438.This section enables a government department in receipt of an information request to disclose information that it considers is necessary to comply with the request and also enables disclosure of information where such information is held by a government contractor. The section disapplies any legal restrictions that might otherwise apply to such a disclosure. Arrangements concerning compliance with such requests will be set out in non-legislative agreements between MoJ and the respective departments.
439.This section enables a recipient of an information order (the “information discloser”) to avoid liability for failure to comply with the order where the information discloser:
does not hold the relevant information and it is not being held on his behalf;
is unable to ascertain whether he holds the information (by way of example, where the information supplied by the court to the recipient of the information order is not sufficient to enable the recipient of the order to identify information that relates to the debtor in its records); or
would incur an unreasonable effort or expense if he complied with the order.
440.The information discloser is required to comply with the information order, but may produce a certificate to the relevant court showing that one of the three bullet-points above applies.
441.This section specifies how information obtained via an information order or departmental information request can be used by the court. Such information can be used by the court:
to enable it to make a further departmental information request or information order in relation to the debtor (by way of example to further disclose information to enable a recipient of an order or request to identify the debtor more easily from records, such as date of birth information);
to provide the creditor with information about what court based action he could take to seek to recover his judgment debt;
to enable a court to take any such action that is initiated by the creditor, by way of example, to enable the court to make and enforce an AEO in relation to the debtor, (and to enable information to be disclosed between courts for the purpose of enforcement).
442.Regulations will further restrict how information obtained via an information order or request can be further used or disclosed by the court to ensure protection of the debtor’s rights and to prevent the unlawful use of information.
443.This section creates an offence where information obtained pursuant to an information order or request is used or disclosed otherwise than in accordance with the purposes intended.
444.This section creates a power for the Lord Chancellor to make regulations relating to sections 95 to 102, with a requirement to seek the agreement of HMRC in relation to any regulations governing the use and disclosure of information disclosed by that Department.
445.This section defines terms used in sections 95 to 103.
446.This section establishes the application of the provisions and sets out the transitional provision.
447.Part 5 of the Act makes changes to two statutory debt-management schemes, Administration Orders (Chapter 1) and Enforcement Restriction Orders (Chapter 2).
448.Part 5, Chapter 3, also amends the Insolvency Act 1986 to allow for the introduction of a new form of personal insolvency procedure that entails the making, administratively by the official receiver, of a debt relief order (DRO) on the application of an individual debtor who meets specified criteria as regards his assets, income and liabilities. The effect of the order is to stay enforcement of the debts by creditors, the debts being discharged after a period of one year. While the order is in force, the debtor will be subject to similar restrictions and obligations as if he had been adjudged bankrupt.
449.Chapter 4 of Part 5 of the Act empowers the Lord Chancellor (or his delegate) to approve Debt Management Schemes (“DMSs”) operated by any body of persons. Approved schemes will be able to arrange Debt Repayment Plans (“DRPs”) for individual debtors. Subject to prescribed restrictions, schemes will in effect be able to compel creditor participation and plans will be able to compose (i.e. reduce or partially write off) debts. These schemes could be operated by a variety of service providers. Existing providers of debt management advice and assistance do not have the power of compulsion and composition. In future, they will be able to choose whether to offer an ‘approved scheme’ as part of their service.
450.It is intended that DRPs will sit alongside and complement statutory schemes, such as Administration Orders (“AOs"), DROs and Individual Voluntary Arrangements (“IVAs”). The intention is to provide a range of options giving more choice and flexibility to assist the rehabilitation of over-indebted people. The most appropriate scheme to use will depend on the particular circumstances.
451.Administration Orders (“AOs”) are a court-administered debt management scheme for those with multiple debts totalling no more than £5,000, one of which must be a judgment debt. The provisions governing AOs are set out in sections 112-117 of the County Courts Act 1984.
452.The 1985 Civil Justice Review recommended a number of changes to the AO scheme and these were taken forward in section 13 of the Courts and Legal Services Act 1990 (“the CLSA 1990”). The changes included removal of the need for a judgment debt, an increase in the debt limit and the introduction of a strict three-year limit to the order. Section 13 also included, for the first time, an explicit power for the court to grant an order restricting enforcement where it considered that this would be more appropriate than an AO. Such an order, once made, would provide temporary relief from enforcement for those unable to meet their commitments for a period to be defined by each order. However, as concerns were raised about the viability of section 13, it has never been brought into force.
453.So, in July 2004 the Government consulted on a range of targeted options to offer better assistance to people with multiple debts (the Choice of Paths Consultation), including reform to the existing AO scheme and a revised and targeted Enforcement Restriction Order (“ERO”) scheme. The Government’s response paper on the consultation, published in March 2005, committed to a number of changes to the AO scheme including an increase in the debt ceiling and a time limit to orders. The paper also committed to a revised and more workable version of the ERO to address the deficiencies identified in section 13 of the CLSA 1990. Part 5 of the Act takes forward these changes.
454.At present if an individual encounters difficulty paying his debts, the remedies that are available to him either require him to have assets or funds available to distribute to his creditors on a regular basis (for example IVA, county court AO or a non statutory debt management plan) or, as with bankruptcy, there is a fee to access the remedy. This means that the procedures that are currently available are inaccessible to some people, since they do not have the financial means to use them.
455.Such people often have relatively low levels of liabilities, no assets over and above a nominal amount and no surplus income with which to come to an arrangement with their creditors.
456.The DRO has been devised following the Choice of Paths consultation, which determined that there was a perceived need for a remedy for people who are financially excluded from the current debt solution procedures, and a further consultation by The Insolvency Service in 2005 (“Relief for the Indebted – an Alternative to Bankruptcy?”) on the detail of how it might operate. It is a procedure that will enable some individuals, who meet specified criteria as regards liabilities, assets and income, to seek relief from certain debts.
Tribunals, Courts and Enforcement Act 2007