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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Sutherland v Lord Advocate [1998] ScotCS 25 (14 October 1998)
URL: http://www.bailii.org/scot/cases/ScotCS/1998/25.html
Cite as: [1998] ScotCS 25
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OPINION OF THE COURT
delivered by LORD MACFADYEN
in
RECLAIMING MOTION
in the cause
CHARLOTTE LISTON SUTHERLAND
Pursuer and Reclaimer;
against
THE LORD ADVOCATE, for and on behalf of THE COMMISSIONERS OF INLAND REVENUE
Defender and Respondent:
_______
14 October 1998
In this action the pursuer seeks reduction of an award of sequestration pronounced in respect of her estate on 9 March 1989. After debate on the procedure roll the Lord Ordinary on 14 November 1997 pronounced an interlocutor sustaining the defender's first plea-in-law and dismissing the action. The pursuer seeks review of that interlocutor.
The pursuer's principal argument against the validity of the award of sequestration arises in this way. Following presentation of the petition for sequestration, on 31 January 1989 the court granted warrant under section 12(2) of the Bankruptcy (Scotland) Act 1985 ("the 1985 Act") to cite the pursuer to appear on 16 February 1989 to show cause why sequestration should not be awarded. For reasons arising out of concern as to the adequacy of another part of the interlocutor of 31
January relating to the sequestration of the estate of a firm of which the pursuer was a partner, the defender did not effect the citation of the pursuer for which warrant had been granted. When the case called again on 16 February warrant to cite the pursuer was granted of new. That warrant was executed, and when the case called on 9 March, the pursuer was present and sequestration of her estate was awarded. A certified copy of the interlocutor of 31 January had been sent to the Keeper of the Register of Inhibitions and Adjudications ("the Keeper"), and a copy of the interlocutor had been sent to the Accountant in Bankruptcy, all in accordance with section 14(1) of the 1985 Act. No copy of the interlocutor of 16 February was sent to the Keeper, although the interlocutor contained a direction that that should be done. The pursuer's contention is that in these circumstances the award of sequestration is null and void.
The statutory provisions which bear on the issue raised by the pursuer are sections 12 and 14 of the 1985 Act (as they stood before they were amended by the Bankruptcy (Scotland) Act 1993). Section 12 provides inter alia:
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"(2) |
Where a petition for sequestration of a debtor's estate is presented by a creditor ... the court to which the petition is presented shall grant warrant to cite the debtor to appear before it on such date as shall be specified in the warrant, being a date not less than six nor more than 14 days after the date of citation, to show cause why sequestration should not be awarded. |
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(4) |
In this Act 'the date of sequestration' means if the petition is presented by ¾ |
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(b) |
a creditor ... the date on which the court grants warrant under subsection (2) above." |
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Section 14 provides inter alia:
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"(1) |
The clerk of the court shall forthwith after the date of sequestration send¾ |
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(a) |
a certified copy of the relevant court order to the keeper of the register of inhibitions and adjudications for recording in that register; and |
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(b) |
a copy of the order to the Accountant in Bankruptcy. |
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(2) |
Recording under subsection (1)(a) above shall have the effect as from the date of sequestration of an inhibition and of a citation in an adjudication of the debtor's heritable estate at the instance of the creditors who subsequently have claims in the sequestration accepted under section 49 of this Act. |
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(5) |
In this section "relevant court order" means, if the petition for sequestration is presented by ¾ |
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(b) |
a creditor ... the order of the court granting warrant under section 12(2) of this Act." |
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There was for a time controversy as to the date of sequestration in cases where more than one warrant to cite the debtor had been granted. In Campbell v Sheriff 1991 SLT (Sh Ct) 37 Sheriff Kelbie held that, where a second warrant was granted (a) it was the date of the second warrant which would become the date of sequestration by virtue of section 12(4)(b) once sequestration was awarded, and (b) it was that warrant which was the relevant court order copies of which required in terms of section 14(5)(b) to be sent to the Keeper and the Accountant in Bankruptcy. That decision was noted, but without expression of approval or disapproval, by Dr Coull in an article entitled "Developments in Personal Insolvency Law" 1991 SLT (News) 219 at 220. In August 1991, however, the Accountant in Bankruptcy prepared a paper entitled "Date of Sequestration - 'Re-service Cases'" in which he argued cogently the contrary position. After referring to the statutory provisions he said:
"The date of sequestration in a creditor's...petition is therefore derived from section 12(2). As this section appears to regulate what the Court must do when the petition is first presented, namely grant warrant to cite the debtor, it follows that it is the date of this warrant (i.e. the first warrant granted) that is the date of sequestration.
It is respectfully submitted that this approach is consistent with section 14(1)(a) of the 1985 Act. This requires the clerk of court forthwith after the date of sequestration to send a copy of 'the relevant order' to the Keeper. This order is defined in section 14(5)(b) as the order granting warrant to cite under section 12(2). As the Statute therefore requires the clerk of court to transmit a copy of the first warrant granted under section 12(2), it would seem Parliament, by fixing the time when the clerk of court has to act as forthwith after the date of sequestration, intended the first warrant to fix the date of sequestration. As the scheme of the 1985 Act would not seem to admit more than one date of sequestration in any case, it is my view, quantum valeat, that the date of sequestration in a petition presented by a creditor...will always be the date of the first warrant to cite irrespective of the granting of any subsequent warrant to re-serve, a practice which creates no difficulty for the administration of most sequestrations."
Later in the paper he went on to identify certain practical considerations which he saw as supporting his view:
"If my interpretation is correct, the date of sequestration is set by the granting of the first warrant under section 12(2). This public act commences the sequestration process and is subsequently recorded in the Register of Inhibitions and Adjudications. The debtor is thereby inhibited from dealing with his heritable estate; the public are placed on notice that any dealings with the debtor might be susceptible to challenge under section 32(8); and creditors are made aware of their potential right to claim in the sequestration. To sweep all this aside and commence the process of new by a subsequent warrant to cite would it seems not only give rise to uncertainty (an element that perhaps should be absent from a process of diligence) but possibly prejudice the body of creditors as at the 'first' date of sequestration by increasing the number of creditors entitled to rank on the estate (paragraph 1(1) of Schedule 1 to the 1985 Act). Further, a gratuitous alienation or unfair preference previously falling within the statutory periods of challenge (sections 34(3) and 36 (1)) might now fall outside the appropriate period; diligence previously struck down might now be safe (section 37(2))."
That approach to the matter was subsequently adopted by Sheriff Principal Hay in MacDonald's Trustee v MacDonald 1992 SLT (Sh Ct) 25. Finally the point was decided in Arthur v H. M. Advocate 1993 JC 57. In that case the present pursuer was the second appellant. In the context of solemn criminal proceedings brought against her she took the same point as she takes in this present action. In the Opinion of the Court delivered by Lord Justice-Clerk Ross the conclusion was expressed as follows (at 61F-62C):
"We are satisfied that the sheriff reached the correct conclusion, that the views of Sheriff Principal Hay and the Accountant in Bankruptcy are to be preferred to those of Sheriff Kelbie, and that where it has been necessary to obtain a second warrant to cite, the date of sequestration is still the date of the first warrant .... Moreover, as the Accountant in Bankruptcy and the sheriff recognised, certain other steps are taken 'forthwith after the date of sequestration' in terms of section 14 of the Act of 1985. Copies of the order of the court are sent to the Keeper of the Register of Inhibitions and Adjudications and the Accountant in Bankruptcy. That falls to be done once the first warrant has been granted and if effect were given to the proposition that, where warrant to re-serve has to be obtained, the date of sequestration is the date of the subsequent warrant, there would be considerable confusion as regards recording in the Register of Inhibitions and Adjudications. Furthermore, as the sheriff observes, if sequestration was not to run until the date of the subsequent warrant, the result might be that the debtor was given an opportunity to make gratuitous alienations between the date of the first warrant and the date of the subsequent warrant.
In our opinion the words of sec. 12(4) of the Act of 1985 fall to be given their natural and ordinary meaning. In the present case warrant to cite was granted on 31st January 1989 and it follows that the date of sequestration is 31st January 1989, being the date upon which the court granted that warrant. There is no justification for the view that where re-service is required, the date of sequestration is to be the date of the subsequent warrant."
Section 12(4) was subsequently amended in the 1993 Act to make express provision to the effect that where there had been more than one warrant the date of the first was to be the date of sequestration. That, however, does not affect the present case, where the events in question antedate the amendment.
We agree with the conclusion of the High Court of Justiciary in Arthur v H. M. Advocate. In our opinion in the events which happened the date of the sequestration was 31 January 1989, and there was compliance with the requirements of section 14(1) by virtue of the transmission of copies of the order of that date to the Keeper and the Accountant in Bankruptcy. The validity of the sequestration is not affected either by the fact that before sequestration was awarded there had to be a second warrant for citation, or by the fact that no copy of the order of 16 February was sent to the Keeper.
The pursuer in paragraph 1 of her Grounds of Appeal makes reference to the fact that the averments in the petition for sequestration included reference to the sequestration of her partner, Douglas Andrew Arthur, and argues that he was not validly sequestrated, and that consequently that cross-reference invalidates her sequestration. Since the reference to Mr Arthur's position was not a necessary part of the basis for sequestration of the pursuer's estate, we see no merit in that point. In any event, Mr Arthur's attempt to reduce his sequestration has failed.
In paragraph 2 of her Grounds of Appeal the pursuer seeks to rely on certain actings on the part of her trustee and the Accountant in Bankruptcy subsequent to the award of sequestration. In our opinion, Mr Woolman, Q.C. who appeared for the defender, was correct in his submission that these subsequent events could have no effect on the validity of the sequestration.
Paragraph 3 of the pursuer's Grounds of Appeal seeks to spell out of the fact that her trustee and the Accountant in Bankruptcy did not answer a petition which she brought for suspension and interdict pending the present action of reduction a concession on their part that her attack on the validity of the sequestration is well founded. There is, in our opinion, no merit in that contention.
The pursuer has therefore failed to make good any of the grounds on which she challenges the validity of the sequestration. That being so, it is unnecessary for us to say anything about Mr Woolman's further submission that, even if the sequestration had been flawed, it would be inappropriate to grant decree of reduction. We shall refuse the reclaiming motion and adhere to the Lord Ordinary's interlocutor of 14 November 1997 sustaining the defender's first plea-in-law and dismissing the action.
OPINION OF THE COURT
delivered by LORD MACFADYEN
in
RECLAIMING MOTION
in the cause
CHARLOTTE LISTON SUTHERLAND
Pursuer and Reclaimer;
against
THE LORD ADVOCATE, for and on behalf of THE COMMISSIONERS OF INLAND REVENUE
Defender and Respondent:
_______
Act Party
(Pursuer and Reclaimer)
Alt Woolman, Q.C.
Solicitor of Inland Revenue
(Defender and Respondent)
14 October 1998
Lord President
Lord Sutherland
Lord Macfadyen