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Enforcement issues: Taking control of goods

Recently the Commercial Court, in Midtown Acquisitions LP v Essar Global Fund Ltd & Ors [2017] EWHC 2206, considered attempts to take control of a private jet under the Tribunals, Courts and Enforcement Act 2007.

The Claimants had a judgment debt of US$194m against the Defendant based on a New York judgment which was sought to be enforced. The Claimants instigated enforcement proceedings against a Boeing 737-700 private jet valued at over US$60m. The private jet was subject to a Credit Suisse mortgage securing indebtedness in excess of US$100m.

The Claimant ascertained that the aircraft was at an airfield in Hampshire and obtained a writ of control of the aircraft and a warrant of entry for the airfield in Hampshire. En route to Hampshire the High Court Enforcement Officer (“HCEO”) learned that the aircraft was in fact at Stanstead airport. The HCEO subsequently went to Stanstead airport instead and on gaining access airside sought to take control of the aircraft.

The defendant sought to challenge the enforcement proceedings on the ground that the HCEO did not have lawful authority to take control of the aircraft under a writ of control where a warrant of entry was present but specified a different address. The defendants also sought to challenge proceedings on the ground that it would be unreasonable to allow goods to be taken into the control of the HCEO as their sale could not be expected to realise any money because all proceeds would be taken by Credit Suisse under the mortgage.

Decision

Blair J held that the HCEO could not properly rely on a writ of control to obtain airside access where there is no warrant of entry entitling such access.

However, he found in favour of the claimants in relation to the aircraft being subject to the Credit Suisse mortgage. Blair J held that it was not unreasonable for the Claimant to seek to take control over the aircraft where absence of control it was likely to leave the jurisdiction and not return. The purpose of taking control of goods is to facilitate recovery of the judgment debt and taking control may enhance the position of the judgment creditor especially if it reduces secured debts which take a priority over the judgment debt. In reaching this conclusion, Blair J, acknowledged that enforcement procedures must be used for genuine enforcement proceedings and not simply to put pressure on the debtor to pay.

Comment

This case is useful guidance that the taking control of goods procedure, under the Tribunals, Courts and Enforcement Act 2007, must be followed and a writ of control in the absence of the correct warrant of entry does not constitute lawful authority to take control of goods.

It is also helpful confirmation that a creditor can seek to take control of a debtor’s goods despite the goods being subject to secured obligations exceeding the value of the goods especially where the goods are likely to leave the jurisdiction and not return.

If you would like to discuss any issues raised further please speak to Christopher Louth.

 

This briefing was posted on 18 September 2017