Insolvency & Enforcement

The Insolvency Act 2000 has introduced a number of changes to the rules upon the interaction between insolvency and enforcement which are of significance to bailiffs.

Forfeiture

On 02 April 2001 s.9 of the Act came into force amending ss.10 & 11 of the Insolvency Act 1986 with regard to company Administration Orders. Previously these were unaffected by the making of an Administration Order. However it is now provided that the effects of an application for an Order include the fact that:

“s.10(1)(aa) no landlord… may exercise any right of forfeiture by peaceable re-entry in relation to premises let to the company in respect of a failure by the company to comply with any term or condition of it’s tenancy of such premises, except with the leave of the court and subject to such terms as the court may impose”.

Similarly, once an Order is made, under a new s.11(3)(ba) “no landlord … may exercise any right of forfeiture by peaceable re-entry … except with the consent of the administrator of the leave of the court and subject (where the court gives leave) to such terms as the court may impose”.

It should be noted that the Enterprise Act 2002 will further alter the procedure for Administration Orders by introducing an entirely new Part II to the Insolvency Act 1986.

Company Voluntary Arrangements

As of 01 January 2003 the remainder of the provisions of the Insolvency Act 2000 came into force. Company Voluntary Arrangements (CVA’s) have been brought into the line with individual Voluntary Arrangements (IVA’s) in that the courts are now given the power to order a moratorium of 28 days’ duration whilst the proposals for a CVA are formulated. Under Sch.A1 Part III para.12 of 2000 Act the impact of such moratorium is that:

“(f) no landlord … may exercise any right of forfeiture by peaceable re-entry … except with the leave of the court and subject to such terms as the court may impose,

(g) no other steps may be taken to enforce any security over the company’s property, or to repossess goods in the company’s possession under any hire-purchase agreement, except with the leave of the court and subject such terms as the court may impose, and

(h) no other proceedings and no execution or other legal process may be commenced or continued, and no distress may be levied, against the company or it’s property except with the leave of the court and subject to such terms as the court may impose.”

Individual Voluntary Arrangements

Schedule 3 of the 2000 Act amends the procedure for making IVAs for individual debtors in a number of ways. Whilst the requirement is removed for the debtor to apply for an Interim Order staying enforced whilst the proposal is being formulated, the terms of such an Order are amended.

Section 252(2) of the 1986 Act is amended to state that the effect of the 14 day Interim Order moratorium is that no landlord may exercise any right of forfeiture by peaceable re-entry except with the leave of the court, and no distress may be levied.

Similarly the court’s powers under s.254 to stay enforcement that whilst an application for an Interim Order is pending are amended to state that no landlord may exercise any right of forfeiture by peaceable re-entry except with the leave of the court, and that the court may also forbid the levying of any distress on the debtor’s property or it’s subsequent sale, or both.

This overturns the previous position as laid out in the case McMullen & Sons V Cerrone [1994]
(see Distress & Execution pp.186-7 s.9.6.3).

Comment

These changes end many of the anomalies and exceptions in Insolvency Law that permitted landlords to continue to exercise self help remedies despite the fact that the tenant has become bankrupt. The bankrupt’s position will be further improved by the introduction of many of the changes contained in the Enterprise Act 2002.

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