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Clause 88

Part of Tribunals, Courts and Enforcement Bill [Lords] – in a Public Bill Committee at 10:15 am on 22nd March 2007.

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Photo of Vera Baird Vera Baird Parliamentary Under-Secretary, Department for Constitutional Affairs 10:15 am, 22nd March 2007

I heard the hon. Member for North-West Norfolk compliment the hon. Member for North Southwark and Bermondsey on the way he put his argument, but as the former was reading from the speech made in the Lords by the latter’s party colleague, I have some doubts about what was said. I shall put my argument first and then consider the detail of what has been raised, and I shall be happy to give way if I do not get to the points the hon. Gentlemen are concerned about, although I think I have grasped them.

First, we are concerned that amendments Nos. 136 and 137 could be seen to interfere unduly with judicial impartiality and discretion when considering whether to grant an application for a charging order or anorder for sale—they are, of course, quite separate applications and procedures—in the case of debts that are regulated under the Consumer Credit Act 1974. Clearly, judges will consider applications for the granting of those orders in a proper way, but to require them to favour the debtor is dangerously close to leaving them open to a charge of bias.

The issue has been raised several times before, when the judicial viewpoint was that judges did not wish to have the responsibility to take the risk of looking as if their impartiality might be compromised. Their stance has not changed; in fact, Baroness Butler-Sloss, speaking in the Grand Committee in the other place on 14 December, reinforced the need for any decision about the granting of a charging order to be a judicial one subject to discretion and not in any way trammelled.

When judges consider whether to grant a charging order or, indeed, take the later step by granting an order for sale, they are looking at a judgment debt. The originating source of the debt is by and large immaterial, and it would be inappropriate to place a restriction only on debts regulated by the Consumer Credit Act 1974. The creditor, who has legitimately obtained the judgment, has the right to seek enforcement by the most appropriate means available, including by way of a charging order or an order for sale. Equally, the judge has the right to decide whether he or she shall have one or not.

Broadly, two concerns have been aired. The first is obtaining priority by being able to secure a debt that would otherwise not have priority. In fact, the terminology in the statute is such that the debt does not become a secured debt by the charging order process. It is the judgment that is secured on the property, so there is not an inappropriate impact on priority. I hope that that covers one issue.

The other issue is whether a charging order should be available to somebody when, as the hon. Member for North Southwark and Bermondsey put it, the judgment debtor is complying with their obligations to pay. Let me make it clear that we are not talking about an order for sale on the property; we are talking only about charging the debt on the property. That is intended to avoid the mischief of a person agreeing to pay £4 a week off a £10,000 debt when they have a property somewhere that was perhaps not known about when the original agreement was made. They will now be totally free to simply sell the property off, bring into their own resources an amount of money—for example £100,000—and carry on paying the debt off at a low level. It is far better for the creditor to have what would in every other circumstance lie as a dormant order over the property unless and until there is a need to apply for a sale. Such security should be left in place so that if an occurrence such as the one I have described takes place, people have the security and can get the money back appropriately rather than waiting for the instalments to tick over for years and years. However, I emphasise that there is a big difference between a charging order that simply sits on a property and an order for sale. There is a completely separate, additional procedure for the order for sale.