Bailiff at director’s home for company debt? Know your rights

Bailiffs attending a director's home for company debt

Separate legal personality of company and director

It is a well-established principle of company law that a limited company and its director are distinct legal persons. Section 1 of the Companies Act 2006 affirms that a company upon incorporation is to be treated in law as a body corporate, thereby conferring upon it separate legal personality from those who direct or own it. That foundational principle, deriving from Salomon v Salomon & Co Ltd [1897] AC 22, prohibits the transposition of liability from the company to its directors absent specific legal basis, such as a personal guarantee.

Enforcement must be directed at the debtor company

Where a bailiff attends the private address of a company director in order to enforce a judgment debt owed by the company, the enforcement will fail unless the director has personally guaranteed that debt. The proper and exclusive target of enforcement under a writ of control is the debtor as named in the writ, and enforcement agents may only take control of goods belonging to that debtor. This is enshrined in paragraph 10 of Schedule 12 to the Tribunals, Courts and Enforcement Act 2007, which confines the power of enforcement agents to goods owned by the debtor.

Restrictions on enforcement at a director's home

A director's home address cannot become subject to enforcement simply by virtue of their role within the company. Paragraph 14(6)(b) of Schedule 12 provides that enforcement may only be conducted at premises where the enforcement agent reasonably believes the debtor carries on a trade or business. A limited company, being a separate legal person, cannot live at a private residence, and the suggestion that a bailiff might enter a director’s domestic premises to seize goods belonging to the company is legally unsustainable unless the address is properly recorded as a place of trade for the company and supported by planning or operational evidence.

Court authority required for enforcement at a private residence

If an enforcement agent seeks to enter premises other than those ordinarily permissible, for example, a director's home where no trade is conducted, then they must first obtain express authority from the court under paragraph 15 of Schedule 12. Absent that judicial authority, any entry into such premises is without lawful foundation and renders the agent susceptible to a claim for breach of statutory duty under paragraph 66 of Schedule 12. That paragraph permits a debtor to bring proceedings in the High Court or County Court where an enforcement agent has breached a provision of the Schedule or has acted under a defective enforcement instrument. The available remedies include an order for the return of goods and damages for any loss suffered as a consequence of the breach.

Right to recover money wrongly taken

In the case where a bailiff has taken money from a director, ostensibly to satisfy the debt of the company, that director has a right of recovery both under common law principles and pursuant to section 69 of the County Courts Act 1984, which entitles a successful claimant to interest at the statutory rate of 8 percent per annum from the date the money was taken. Moreover, where the director had no personal liability, such payment was unlawfully extracted and is recoverable in full.

Third party claim to controlled goods

A director may also bring a claim under Civil Procedure Rule 85.6 where goods owned by the director have been taken under the mistaken belief that they belong to the debtor company. The Rule permits a third party to assert their claim to controlled goods and requires the enforcement agent to either admit the claim or compel interpleader proceedings. Should the director succeed, they are entitled to recover costs under CPR 44.2, and if acting as a litigant in person, may claim costs under CPR 46.5 and its accompanying Practice Direction.

Remedies for harassment by enforcement agents

In circumstances where enforcement agents repeatedly attend a director’s home in relation to a corporate debt, that behaviour may amount to harassment. Section 3 of the Protection from Harassment Act 1997 creates a civil cause of action for any individual subjected to a course of conduct that amounts to harassment contrary to section 1(1) of the Act. Remedies under section 3 include a claim for damages for anxiety and any consequential financial loss, as well as the power to seek injunctive relief to restrain further harassment. Should the enforcement agent breach such an injunction, the director may apply for the issue of a warrant of arrest under section 3(3), and the offender may face criminal liability under section 3(6).

Duty to produce authority upon request

It is also to be noted that under paragraph 26(1)(b) of Schedule 12, an enforcement agent must, on request, produce evidence of their authority to enter the premises. Failure to do so is a further breach of statutory duty and may justify immediate complaint or proceedings to restrain unlawful entry.

Statutory declaration to remove a private address

In the event the enforcement power incorrectly specifies the director's private address, a statutory declaration may be served by the director stating that the company does not keep goods at the premises. While this does not invalidate the enforcement power, it removes that address from the scope of further enforcement and provides the basis for challenging any subsequent attempts to enforce at that address.

Remedies for unlawful enforcement already carried out

Where enforcement has already taken place unlawfully, the director may initiate proceedings under paragraph 66 of Schedule 12 to seek return of any goods removed and an award of damages. It would also be appropriate to notify the creditor that the enforcement was conducted without authority and demand the immediate return of any sums or goods taken, failing which proceedings may follow.

Continuing unlawful enforcement and tortious conduct

If a bailiff continues to attend the director’s private residence despite being informed of the absence of a personal guarantee or the lack of trading activity at the address, that conduct may constitute a continuing tort and lend support to both a claim in harassment and a misfeasance in public office action if the agent is certified and operating under statutory warrant. In all such cases, the remedies are robust and supported by clear statutory foundation.

Conclusion and available legal redress

It is therefore imperative that directors are vigilant in protecting their private and personal property from such unlawful interference. Where enforcement agents have acted outside their lawful authority, swift legal redress should be sought, including injunctions, declarations of unlawful entry, claims for restitution of money taken, and damages for any loss or distress suffered. These actions are not only available as of right but, where substantiated by evidence, are likely to be granted by the court to prevent abuse of enforcement powers and uphold the integrity of company law.