Service provisions for local authority debt recovery


13th March 2023

When it comes to debt recovery, local authorities will need to ensure that a debtor or debtor company has been correctly served in order to comply with the Civil Procedure Rules 1998, the Insolvency Rules 2016 and the Insolvency Act 1986. In this article, which was first published in IRRV Insights March 2023 edition, Blake Morgan Partner Paul Caldicott aims to discuss the different service provisions for each debt recovery option for a local authority.

Bankrupcy

Once the sealed bankruptcy petition has been received from the court, it is important that it is served upon the debtor 14 clear days before the date of the hearing. In section 2.8(3) of the Civil Procedure Rules 1998, clear days are described as ‘the day on which the period begins and if the end of the period is defined by reference to an event, the day on which that event occurs are not included’.

The sealed petition must be served personally upon the debtor, which means it is necessary to instruct a process server to serve the petition on the debtor and because evidence of service will be needed, a witness statement will need to follow. Although this may seem like a simple task, local authorities should be aware that it is not unreasonable to expect a debtor to purposely avoid service of the petition. Although this can be frustrating, if evasion is prolonged or service is simply never going to be achieved, a creditor can apply to the court for alternative service of the petition due to the circumstances. It is then at the court’s discretion whether an order for alternative service should be made so that service can be effected by either post or email, or advert in a local newspaper or as the court deems fit.

Winding-up

The process to serve a winding-up petition is similar to bankruptcy in that once the sealed petition has been received from court, it must be personally served upon the debtor company. Again, this means that local authorities will need to appoint a process server to serve the petition upon the debtor and thereafter produce a witness statement to evidence that service has been achieved. Local authorities may find that it is easier to serve a petition upon a debtor company because the petition is simply served at the debtor company’s registered office address. It does not have to be served on a director of the company, merely someone that has authority to accept service on behalf of the company, which can sometimes mean that it can simply be left at the registered office premises if attempted service on someone at those offices has been unsuccessful, usually when a letter of appointment has been missed.

If the bankruptcy petition or winding-up petition is not served upon the debtor or debtor company more than 14 days before the date of the hearing, a bankruptcy or winding-up order cannot be made at the hearing. In those cases, best to be proactive and explain the problems that have been faced, where It is likely that the hearing date will be adjourned to a later date to ensure the petition can be served correctly.

Charging order

When seeking to obtain a charging order, the Interim Charging Order and Final Charging Order should be served upon the debtor along with any secured creditors and persons who have interest in the property, for example a joint proprietor. The Civil Procedure Rules 1998 provides that the Charging Order should be served along with the following documents:

  • N379 Application for a Charging Order
  • Unpaid judgment for example Liability Orders
  • Land Registry Title
  • Sealed Charging Order

If the above documents are not properly served on the debtor, for example if any documents were missing, then the debtor would have reasonable prospects to dispute the charging order which would prove detrimental for the local authority who is owed the debt, especially where speed is important, for example there’s evidence of a sale of the property is a foot. It is therefore very important that all of the documents are served correctly.

Gone away owners

There may be times when local authorities need to explore their debt recovery options even if they are aware that a debtor is a ‘gone away owner’. Section 6.9 of the Civil Procedure Rules 1998 provides that if a claimant holds a reasonable belief that the defendant no longer resides at the address then reasonable enquiries should be made as to the individuals whereabouts; this can be undertaken by instructing a trace agent to make enquiries. If, however, despite their enquiries an alternative address has not been located then it would be appropriate to serve them at their last known address. This means that it is possible to continue with proceedings, even if an alternative address has not been discovered from a trace agent, if a debtor is known to be a gone away owner.

Service provisions conclusion

It is important that all service provision documents are served properly in order to comply with the Civil Procedure Rules and/or the Insolvency Act and ensure that a debtor has no reasonable prospects for dispute. If they are not served effectively, it may undermine the validity of the process and cause a bankruptcy order or winding-up order to be annulled, placing the debtor back in the position they were before proceedings had taken place which can also cause unnecessary legal fees for the creditor.

This article was first published in IRRV Insights Magazine March Edition. If you need legal advice on service provisions, insolvency and business support, please contact one of our experts.

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