In a previous column (see ‘Charging to the front of the queue’), I pointed out that the scope for the court to refuse a creditor a charging order over a debtor’s property was more limited than many debtors would wish.

What of the enforcement of charging orders by way of orders for sale?

It is trite that whether possession is sought against a sole owner or by way of an application under the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA), the court has a discretion as to whether to order a sale.

But while TOLATA explicitly requires the court to consider the welfare of children resident in the property, in Pickering v Wells [2002] EWHC 2540 (Ch), [2002] 2 FLR 798, David Oliver QC held that in the case of a sole owner the welfare and needs of those in occupation of the property were not a relevant consideration for the court at all.

And it was held by the Court of Appeal in Bank of Ireland Home Mortgages Ltd v Bell [2001] 2 All ER (Comm) 920 that it is generally unjust to keep a creditor out of its money if no payments are made.

Mr Justice Arnold in National Westminster Bank v Rushmer [2010] EWHC 554 (Ch) cited with approval two decisions of HHJ Purle QC, sitting as a Judge of the High Court, Close Invoice Finance Ltd v Pile [2008] EWHC 1580 (Ch), [2008] BPI 1465 and C Putnam & Sons v Taylor [2009] EWHC 317 (Ch), [2009] BPIR 769.

In the first of those cases, Judge Purle observed: ‘It will… be in the public interest to enforce charging orders generally because of the economic importance of ensuring that there is an efficient machinery for the enforcement of debt obligations...’

Mr Justice Arnold said: ‘I would not rule out the possibility that there may be circumstances in which it is necessary for the court explicitly to consider whether an order for sale is a proportionate interference with the article 8 rights of those affected, but I do not consider that this will always be necessary.’

However, I suggest that it is now clear that this no longer accurately represents the law. In Manchester City Council v Pinnock [2010] UKSC 45 at paragraph 39 Lord Neuberger, speaking for a unanimous Supreme Court, drew attention to Zehentner v Austria (App no 20082/02) ([2009] ECHR 1119, in which the European Court of Human Rights considered article 8 of the European Convention in the context of an order evicting the applicant from her home following a ‘judicial sale’, after the making of the Austrian equivalent of a charging order: ‘… the court … stated, at para 59, that a person at risk of eviction from their home should "be able to have the proportionality of the measure determined by an independent tribunal in the light of the relevant principles under article 8".’ (Emphasis supplied)

That proposition was at the heart of the Pinnock decision. Zehentner, moreover, was merely one case in what is now a steady stream of Strasbourg authority for it: McCann v UK [1995] ECHR 31; Cosi v Croatia [2009] ECHR 80; Pauli v Croatia [2009] ECHR 1614; Kay v UK [2008] ECHR 1193; and [2010] ECHR 1322; and others.

Threshold

When, then, will it be ‘proportionate’ to evict the debtor from his home in order to satisfy the creditor?

Section 94 of The Tribunals, Courts and Enforcement Act 2007 contains a power to introduce a threshold on applications for orders for sale. Although in March 2009 the former government indicated that it did not propose to implement it, consultation took place in early 2010 as to whether there should be such a minimum figure in respect of debts under the Consumer Credit Act.

A strikingly strong view found its way into the Coalition Agreement of May 2010, at page 12: ‘We will provide more protection against … unreasonable charging orders … and ban orders for sale on unsecured debts of less than £25,000.’

The present government does admittedly appear to have retreated somewhat from this position, presumably in the face of lobbying from the financial sector.

Solving disputes in the county courts: creating a simpler, quicker and more proportionate system (March 2011) embarked on further consultation as to whether there should be a threshold, the figure at which it should be set, and whether it should be limited to Consumer Credit Act debts.

The court will not normally take account of pending legislation, but Mr Justice Sedley, as he then was, said in Sparks v Harland (1996) The Times, 9 August, that ‘there was no rule of law that impending legislative change was never a material consideration in the exercise of the court’s powers and discretions’.

And I suggest that as it exercises the discretion that it undoubtedly has, it would be wrong for the court not to recognise which way the wind appears to be blowing.

If a creditor is owed many tens of thousands of pounds and can credibly say that absent an order for sale he is never likely to be paid at all (in Taylor, the judgment was for £47,675; in Bell £300,000; in Pile £319,000; in Rushmer an eye-watering £987,480), it will continue to be difficult for a debtor to resist such an order.

If, however, the debt is modest in size, the creditor will struggle to satisfy a court that it is proportionate to deprive the debtor of his home in order to satisfy it.

Any creditor seeking an order for sale in respect of a debt of under £25,000 will be well advised to address the issue of proportionality specifically, convincingly and in detail.

A further issue is that many creditors seeking charging orders have acquired the debts which they seek to enforce by purchasing them for a fraction of their face value – I have personally seen sales at four pence in the pound and there is talk of debt changing hands for as little as two pence in the pound.

While of course the creditor is entitled to be paid the full face value of his debt, in assessing the proportionality of forcibly evicting the debtor from his home it must be relevant to know whether the creditor is £20,000 out of pocket or only £400.

Again, creditors will be well advised to address this issue in their evidence to the court.

District Judge Neil Hickman sits at Milton Keynes County Court.

He is the General Editor of Civil Court Service (‘Jordans’)