Scottish Court of Session Decisions

 

OUTER HOUSE, COURT OF SESSION   [2009] CSOH 33
P2828/07	OPINION OF MORAG WISE QC (Sitting as a Temporary Judge)   in the Petition of   JOSEPH DUNCAN CHAMPION ROSS Petitioner;   For recall of sequestration   ­­­­­­­­­­­­­­­­­________________

 

 

Petitioner: Party

Respondent: G McColl, Advocate; Harper MacLeod

10 March 2009

 

[1] In this petition, the petitioner, Mr Ross, seeks recall of an award of sequestration made against him on 3 September 2007 in the Sheriff Court at Glasgow. The award of sequestration proceeded upon a petition for sequestration at the instance of Patrick Leonard Hynds who, as petitioning creditor, had served a charge for payment of a debt of £159,737.40 on the present petitioner. The days of charge had expired without payment and accordingly Mr Ross was apparently insolvent under and in terms of section 7(1)(c)(ii) of the Bankruptcy (Scotland) Act 1985 ("the 1985 Act").

[2] Mr Hynds' petition called in Glasgow Sheriff Court for a hearing on 30 July 2007. Representations were made by the present petitioner to the sheriff on that occasion and during two subsequent hearings in the case. The matter was continued on each such occasion until at the fourth calling of the case on 3 September, sequestration was granted. The present petitioner did not appear before the court on 3 September 2007.

[3] When the hearing in the present petition took place before me on 24 September and 5 December 2008, the petitioner appeared on his own behalf and the respondent, The Accountant in Bankruptcy was represented by solicitors and by Counsel, Mr G McColl, Advocate.

Submissions for the Respondent

[4] Mr McColl's motion was to uphold the first plea in law for the Respondent, to dismiss the petition and to find the petitioner liable in expenses. In support of that motion he spoke to the Respondent's Note of Arguments (number 11 of Process). In essence he argued that the averments in the petition in support of recall of sequestration were irrelevant. His submissions were directed at the five issues raised in the petition. These were;-

1. The purported failure of the petition for sequestration to comply with formal requirements

2. The purported failure of the sheriff to give the petitioner a fair and proper hearing

3. The purported failure of the sheriff to take into account monies held by the petitioner's solicitors

4. The purported failure by the sheriff to take into account an offer to pay £152,000

5. The purported "extortionate" nature of the debt claimed by the creditor

Each of these was addressed in turn.

 

The purported failure of the petition for sequestration to comply with formal requirements

[5] The Petition as pled makes two complaints about formal requirements. First, it is said that the sequestration petition

" ... materially fails to comply with the terms of Standard Security 06/27351 executed on 16^th June 2006 in that to constitute the amount or balance of principal and interest due a Chartered Accountant's certificate is required...the creditor's petition contains no such Chartered Accountant certificate conform to Standard Security."

The relevant Standard Security is produced and its terms are held to be incorporated within the pleadings. Secondly, as a related point, it is said that the creditor's oath, which must be produced with the petition in accordance with section 11 of the 1985 Act, ought to have contained that Chartered Accountant's certificate. In essence, this part of the petition claimed that in the absence of a Chartered Accountant's certificate no relevant debt was constituted and thus the creditor's oath upon which the petition was based was not a proper one.

[6] In support of his contention that these claims were irrelevant, Mr McColl argued that, as the accountant's certificate referred to was not a requirement of the 1985 Act, it mattered not for the purposes of the sequestration petition whether or not a procedure referred to in the standard security had been adopted. This was a sequestration petition that proceeded upon the service of a charge and the expiry of the days of charge without payment or challenge to the validity of the charge itself. The terms of the standard security insofar as they mentioned a Chartered Accountant's certificate were, he said, a "red herring". It couldn't be said that no relevant debt existed without such a certificate.

[7] Mr McColl then referred to the relevant provisions of the 1985 Act. The sequestration petition was raised by Mr Hynds as a "qualified creditor" where the debtor was "apparently insolvent" in terms of section 5(2)(b) of the legislation. "Qualified creditor" is defined in section 5(4) of the Act as a creditor who, at the date of the presentation of the petition, is a creditor of the debtor in respect of liquid or illiquid debts (other than contingent or future debts), whether secured or unsecured, which amount to not less than a prescribed sum (currently £1,500). "Apparent insolvency" is in turn defined in section 7. The relevant provision for this petition was section 7(1)(c)(ii) which enacts that a debtor's apparent insolvency shall be constituted whenever "following the service on him of a duly executed charge for payment of a debt, the days of charge expire without payment". Any creditor who petitions for sequestration must, in terms of section 11 of the Act produce an oath in prescribed form made by him or on his behalf. In terms of section 11(2) that oath must be sworn before a Notary Public, being a person in this part of the United Kingdom entitled to administer an oath. There is no statutory requirement for anything other than the creditor's oath in prescribed form.

[8] According to Mr McColl, standing compliance with all of the above formalities of the 1985 Act, the sheriff in the sequestration petition was bound to award sequestration. It was mandatory to do so in terms of section 12(3) of the Act. Section 12(3), in the terms in force at the time of Mr Ross' sequestration, provided as follows ;-

"Where, on a petition for sequestration presented by a creditor or a trustee acting under a trust deed, the court is satisfied -

(a)    that, if the debtor has not appeared, proper citation has been made of the debtor;

(b)   that the petition has been presented in accordance with the provisions of this Act;

(c)    that the provisions of subsection (6) of section 5 of this Act have been complied with

(d)   that, in the case of a petition by a creditor, the requirements of this Act relating to apparent insolvency have been fulfilled; and

(e)    that in the case of a petition by a trustee, the averments in his petition as to any of the conditions in subsection (2C) of the said section 5 are true,

it shall, subject to subsection (3A) below, award sequestration forthwith."

 

Subsection (3A) provides ;-

 

"Sequestration shall not be awarded in pursuance of subsection (3) above if-

(a)    cause is shown why sequestration cannot competently be awarded; or

(b)   the debtor forthwith pays or satisfies, or produces written evidence of the payment or satisfaction of, or gives or shows that there is sufficient security for the payment of -

(i)                  the debt in respect of which he has become apparently insolvent; and

(ii)                any other debt due by him to the petitioner and any creditor concurring in the petition."

 

[9] In Mr McColl's submission the present petition did not amount to a case that either of these defences would have been available to Mr Ross. In the absence of a challenge to the charge or the days of charge having expired without payment, the only relevant defence would have been under subsection (3A)(b). He contended that the most that Mr Ross asserted was that a solicitor held some monies at the date of sequestration, not that those monies were sufficient to cover the whole debt due or that they were to be paid to the creditor. Thus he argued that the first two complaints in the petition (contained in paragraphs I -III of statement of fact 3) were irrelevant. Sequestration had proceeded upon a properly executed charge and the petition had been accompanied by a creditor's oath in prescribed form. The present petitioner had been duly cited. The sheriff had done the only thing he could have done in the circumstances, which was to award sequestration in terms of section 12(3).

 

[10] On an esto basis, Mr McColl argued that even if there was any need to look at the Standard Security, its terms did not in any event suggest that there was a need for a chartered accountant's certificate before the money would be due. Under reference to the standard security document (No 7/2/2of process), he said that the first six lines of that document clearly constituted a live debt. The document was dated16 June 2006. It was in the following terms;-

"I, JOSEPH DUNCAN CHAMPION ROSS, residing at Flat 1/2, 7 Beaconsfield Road, Glasgow G12 0PJ hereby undertake to pay PATRICK LEONARD HYNDS residing at Sixty One Manse Road, Wishaw the sum of ONE HUNDRED AND FIFTY THOUSAND POUNDS ( £150,000) STERLING on the Twentieth day of August Two thousand and six ("the Due Date") together with interest from the Due Date at four per cent per annum above the base lending rate of The Royal Bank of Scotland plc from time to time until payment has been made in full;"

 

Thereafter the document makes reference to a process by which a certificate signed a Chartered Accountant

"...shall ascertain and constitute the amount or balance of principal and interest due to the said Patrick Leonard Hynds by me at the date of such certificate..."

 

[11] Mr McColl accepted that the reference to "constitute" in the deed might be regarded as unfortunate as it might have given the debtor the opportunity to argue that, in the absence of a certificate, a debt in the amount claimed had not been properly constituted. However, he pointed out that that was not the case here, as there was and is no challenge to the arithmetic of the sum claimed by the petitioning creditor, who had chosen to adopt a particular route permitted by statute to establishing apparent insolvency rather than obtain an accountant's certificate in terms of the security document. While that certificate would have been determinative of the sum due under the standard security at any particular time, the outstanding principal and interest were still due and payable regardless of whether or not the certification process had been followed. In those circumstances, nothing turned on the absence of such a certificate.

The purported failure of the Sheriff to give the petitioner a fair and proper hearing

[12] Mr McColl submitted that nothing in the present petition suggested that the sequestration proceedings involved any breach under the European Convention on Human Rights ("ECHR") or of natural justice. He noted that the present petitioner had had a full opportunity to make representations and that there had, prior to 3 September 2007, been previous continuations of the sequestration petition. That said, the issue was simply whether or not a fair hearing had been given on 3 September. The present petitioner knew of that hearing, he had an opportunity to advance any argument that might be relevant and to organise representation if he thought fit. On previous occasions during the case he had been able to instruct a firm of solicitors to write letters to the court on his behalf. Against that background, it was difficult to see what possible basis there would have been for a further continuation of the case on 3 September.

[13] Mr McColl went on to argue that section 12(3) of the 1985 Act is fully ECHR compliant. It provides for a public hearing at which there is an opportunity for a respondent to make representations. Even if the present petitioner's account of the facts was accepted, the sheriff couldn't properly have done anything other than award sequestration on 3 September, so the outcome would have been no different had Mr Ross appeared or been represented on that date.

 

The purported failure of the sheriff to take into account monies held by the present petitioner's solicitors

 

[14] Mr McColl submitted that the averments at statement 3(V)(a) of the present petition to the effect that the sheriff erred in being satisfied that the petition had been presented in accordance with the 1985 Act as he had been advised that the present petitioner's solicitors were holding £252,000 on his behalf were irrelevant. Again he argued that in the absence of any challenge to the expiry of the days of charge without payment and the resulting apparent insolvency, the sheriff had no reason to refuse to award sequestration on the basis of such correspondence as had been tendered to the court about this. Reference was made to numbers 6/4, 6/5, 6/6 and 6/7 of process which together constitute the correspondence sent to the sheriff court on Mr Ross' behalf by a firm of solicitors, "NRBS". The first of these, 6/4, is dated 6 July 2007, prior to the date on which the petition was first due to call in court. That letter narrates that a company, Stanmore Holdings Limited had agreed to make payment to the petitioning creditor of a sum of £150,000, subject to secured lending being obtained against Mr Ross' home. No date for payment of the sum is given in the letter. The second letter, 6/5, is dated 13 August 2007. Mr McColl pointed out that that letter does no more than confirm that whatever funding was being organised with a view to paying the petitioning creditor, it was not in place at that time. The last two letters, 6/6 and 6/7 are both dated 3 September 2007. No 6/6 makes reference to the previous letter, 6/5 not having been lodged in court due to papers having gone astray. There is a reference to Mr Ross being "solvent" but, submitted Mr McColl, that term was clearly being used in a casual way, not in the statutory sense. The letter refers to NRBS being in funds that "...adequately cover Mr Hynds exit" but there is no reference to a specific amount. No 6/7 is a separate letter from the same firm of solicitors indicating that Mr Ross had suffered a heart attack and was in hospital. The letter requests a continuation and states that funds are available to "complete the case today". This is followed by an assertion that "The case would have settled last week had the pursuer accepted the sum of £152,000 in full and final settlement." All that could be taken from that, argued Mr McColl, was there was an offer to pay something less than the debt due in terms of the charge. For completeness Mr McColl referred to 6/12, a letter of 26 July 2007 from Catalyst, lenders, which on the face of it agreed in principle to lend Mr Ross the sum of £272,000. It was not clear whether or not this document had ever been before the sheriff. In any event, it was said that its terms are conditional. The offer included a number of special conditions and conditions precedent, a total of eleven conditions in all. None of this took the present petitioner anywhere said Mr McColl.

The purported failure by the sheriff to take into account an offer to pay £152,000

[15] The short submission in relation to this aspect was that an offer to pay something short of the debt is not a proper defence to a sequestration petition. Section 12(3A) is clear that it would require to relate to the whole debt due.

The purported "extortionate" nature of the debt claimed by the creditor

[16] In statement 3V(c) of the present petition, Mr Ross makes reference to extortionate interest having been claimed by the petitioning creditor Mr Hynds. It is said that the principal debt was in fact £100,000 and that the balance of £50,000 claimed as principal debt was in fact punitive or extortionate interest. Mr McColl submitted that Mr Ross did not, however, identify any basis in law upon which he maintained that the debt should be regarded as unenforceable and his bald statement about interest lacked specification. In any event, in the absence of any challenge to the standard security document, the principal debt on the face of that deed was £150,000. Thus Mr Ross' averments on this must be incorrect. Under reference to Murdoch v Newman Industrial Control Ltd 1980 SLT 13 and Wright v Tennant Caledonian Breweries Limited 1991 SLT 82, Mr McColl submitted that the proper course of action had Mr Ross wanted to pursue this argument would be by way of attack on the underlying document of debt. In Newman the Lord Ordinary had decided that where apparent insolvency had been constituted by a charge for payment of a debt which proceeded upon an extract decree for payment it was not a good ground for recall of sequestration that there was no debt due where no steps had been taken to reduce the decree for payment. In Wright a distinction was drawn between that situation and a challenge to the debt which could be resolved on documentary material without the need for proof, where recall of sequestration could be sought without first seeking to reduce the document of debt in question. In this case, Mr McColl argued, the face of the documentation did not support any suggestion of extortionate interest but appeared to create a principal debt of £150,000. Thus a separate enquiry in a separate process would be required if it was to be alleged at this stage that no debt was due. Newman was in point. In the absence of any challenge to the charge for payment or document of debt (the standard security) the present petitioner could not now contend that the debt may not properly be due.

The present petitioner's submissions

[17] Mr Ross presented his submissions clearly and with appropriate courtesy and restraint given the importance of the cause to him personally. In answering the various attacks made in support of the submission that the present petition was irrelevant, he began by describing his petition as an attempt to "legally challenge" the grant of sequestration by the sheriff on 3 September 2007. He presented his argument in the following two chapters;-

(i)                  The Right to a Fair Hearing

(ii)                The substantive arguments against sequestration being awarded

He addressed me on those topics in that order.

The Right to a Fair Hearing

[18] Mr Ross referred me to Article 6 ECHR and in particular to the right, in the determination of civil rights, to a fair and public hearing. He drew attention to Article 6(3) which he said entitled a party to defend himself in person. His argument was in short that he had not been given an opportunity to defend himself in person on 3 September 2007.

[19] He cited the case of The Royal Bank of Scotland v W.G.M. & C. Forbes 1988 SLT 73 in support of the proposition that the respondent in a sequestration petition who appears late should not be treated as not having appeared. In that case an order for intimation and service of a sequestration petition had allowed the debtors "to cause appearance to be entered on their behalf" within 14 days of such intimation and service. No appearance was entered timeously, but when the petitioners enrolled for the prayer of the petition to be granted and sequestration awarded, the respondents were represented by counsel. The Lord Ordinary was persuaded that there was a case to try on the issue of "sufficient security" in terms of s.12(3)(b) and (5) and allowed them to lodge answers at that stage.

[20] Mr Ross told me that a soul and conscience medical certificate or report from his treating surgeon had been tendered at the bar of the court on 3 September by a Mr McLetchie who had been asked to go to court and seek a further continuation of the case. Mr McLetchie had no instructions other than to ask for that continuation. Mr Ross argued that the sheriff required to strike a balance on 3 September between the competing interests of the parties, including considerations of prejudice. He accepted that the fact that the case had been continued on a number of previous occasions was one of the factors that the sheriff could properly have taken into account. He argued that the sheriff should have regarded the prejudice to him in refusing to continue the matter as greater than the prejudice to Mr Hynds of a further delay. Mr Ross submitted that in aiming for the fair administration of justice a sheriff must look at the proceedings as a whole, but that it was wrong to grant sequestration after being informed of his (Mr Ross') medical condition.

[21] Mr Ross went on to explain that he had been Managing Director of Stanmore Holdings Limited and that he had held a 15% interest in the company. Stanmore had a number of subsidiaries, including Caledonian Park Limited. NRBS, solicitors, were acting for the group of companies in relation to the matter of funding for the purchase of property at Beaconsfield Road, Glasgow. He referred to No 6/8 of process which he said illustrated that funding of £1.8 million was to be provided by Lancashire Mortgage Corporation Limited in return for security being given over Beaconsfield House, a property known a Stobiesie House, Lanarkshire and a personal guarantee by Mr Ross himself. However, the vendor of Stobiesie House withdrew from the proposed sale and the mortgage offer from Lancashire fell through. Thereafter he said that arrangements were put in place to replace that property with one suitable to the lender and at the same time a separate application was made to Catalyst for borrowings to Mr Ross personally. He explained that NRBS had been acting for him as an individual as well as for Stanmore Holdings Limited. They were solicitors involved in commercial property work and were not court practitioners. However, they were aware of the sequestration proceedings and had tried to assist him with that, writing the letters already referred to, numbers 6/4 - 6/7 of process inclusive.

 

Reverting to what the sheriff ought to have done on 3 September, Mr Ross said that as there had been reasonable grounds for his absence in court, the sheriff should have continued the matter again as requested. He claimed that on a previous occasion the sheriff had indicated that in his view Mr Ross was not "insolvent" which strengthened the argument that a further chance to make representations should have been given.

[22] In relation to the question of whether an appearance would have made any difference to the sheriff's decision, Mr Ross first accepted that expiry of the days of charge without payment resulted in what he termed a "presumption of insolvency". He stated very clearly that he could take no issue with the validity of the charge or the fact that the days of charge had expired without payment or challenge. He went further and said that he accepted that a debt was due to the petitioning creditor at the time. He states that payment of that debt was being withheld by him "for other reasons", i.e. for reasons other than an inability to pay.

The substantive arguments against sequestration being awarded

[23] Mr Ross presented this chapter of his submissions as a summary of what he says he would have argued had he been present on 3 September 2007.

[24] First he referred to the Standard Security and to the narration of the undertaking in the first few lines thereof (see paragraph [10] above). He said that the issue of requiring a certificate from a chartered accountant had been the subject of discussion between him and Mr Hynds' solicitors at the time. He submitted that it was "not good enough" for a solicitor to swear what the debt was. While he accepted again that there had never been and was not now any challenge to the terms of the charge for payment, Mr Ross said that here had always been a dispute about whether or not a certificate from a chartered accountant was required. He told me that the issue had been raised before the sheriff at one of the hearings in the petition. While Mr Ross went on to argue that the issue of the certificate went to the issue of competence in terms of section 12(3A) of the 1985 Act, ultimately he acknowledged that in light of his inability to challenge the validity of the charge, it was difficult for him to pursue that line of argument.

[25] In relation to the argument about extortionate interest, Mr Ross argued that the principal debt due to Mr Hynds was £100,000 and that the additional £50,000 amounted to "extortionate interest". However he accepted that the terms of the Standard Security created, on the face of the document, a debt of £150,000 payable on 20 August 2006, with interest thereon at 4 per cent per annum above the bank base rate from time to time until payment.

[26] Mr Ross submitted that he had a defence to sequestration under section 12(3A)(b) that he would have advanced had be appeared or been represented on 3 September. He said that by that date the sheriff had before him letters from NRBS solicitors in relation to his financial position (Nos 6/6,6/7 and 6/12 of process). He accepted that the terms of 6/12 amounted to a conditional offer. He told me that a copy of that conditional offer had been before the court at an earlier stage in the proceedings. So far as the letter of 3 September 2007 was concerned (6/6), he stated that the funds referred to in that letter were the funds from Catalyst which were the loan funds on offer in 6/12. He submitted that the sheriff shouldn't have awarded sequestration where he had funds to pay the debt due. When I enquired what had happened since 3 September 2007, Mr Ross advised me that the funds held by NRBS had been returned to the solicitors for the lender. He said that had happened because of the sequestration.

 

[27] Mr Ross asked me to take into account the dramatic consequences for him of sequestration and his inability to resolve matters due to his being in hospital between 3 and 14 September 2007.

The respondent's reply

[28] Mr McColl responded to the submissions made by Mr Ross about Article 6 ECHR. He pointed out that Article 6(3) related to criminal cases. On the issue of substance about whether Mr Ross had been deprived of his right to a fair hearing, Mr McColl argued that when the sheriff was exercising his functions under the relevant provisions of the 1985 Act he was doing do through administrative act and not through the exercise of judicial discretion. If he was wrong about that Mr McColl submitted that in any event a full and proper opportunity was afforded to Mr Ross during the proceedings to appear or be represented and state any defence.

[29] Further, Mr McColl contended that Mr Ross had failed to show that his appearance in court on 3 September 2007 would have made any difference to the outcome. His arguments had not shown that there had been payment, satisfaction of the debt or security. So far as the issue of the certificate from a chartered accountant was concerned, Mr McColl submitted that Mr Ross seemed to equiperate the issue of such a certificate and the requirement to produce an oath by the creditor. The form of oath is prescribed and the requirements as to both form and substance had been complied with.

[30] Mr McColl argued that in the event that I was minded to place any reliance at all on what had been said about monies held by the NRBS and paid back after sequestration was awarded, I should note that if Mr Ross's account was correct in fact, the solicitors would have committed a wrong. The vesting provisions of section 31 of the 1985 Act would have obliged them, had they been holding funds for Mr Ross at the date of sequestration, to acknowledge that those funds vested in the trustee and remit them to him. In any event, an email had been sent by NRBS indicating that the funds were being held for a third party, not for Mr Ross, to explain why they were not paid over to the trustee in sequestration. Mr McColl invited me to make nothing of this part of Mr Ross' argument. He renewed his motion for dismissal.

The petitioner's further submission

[31] When the case called on 5 December 2008 Mr Ross made further submissions in relation to the argument about the sheriff's functions under the 1985 Act. In response to Mr McColl's argument, he said that he accepted that the sheriff's function under that legislation was administrative. However, he argued that the effect of Article 6 ECHR was to "increase" that function. He submitted that the court is a public authority in terms of section 6 of the Human Rights Act 1988. He reiterated his position that the sheriff should have continued the matter in light of the information received about the hospital admission.

Discussion

[32] This petition seeks to recall an award of sequestration on three separate grounds. First, on the basis of an alleged failure on the part of the then petitioning creditor to comply with the requirements of the 1985 Act and secondly on what is said to be the sheriff's failure to ensure that a fair hearing took place within the meaning of Article 6 ECHR, the specific alleged failure being to continue the petition again on hearing that Mr Ross had been admitted to hospital. The third general ground is that there were (and are) substantive reasons why sequestration should not have been awarded. That argument is inextricably linked with the second ground and I shall deal with them together. The present respondent argues that no relevant case is pled for any of these grounds.

[33] Turning first to the issue of formal requirements, it is not in dispute that the document creating the debt between Mr Hynds as creditor and Mr Ross as debtor is the Standard Security No 7/2/2 of process, the material terms of which are reproduced in paragraph [10] above. The standard security is a dual purpose document, creating the debt itself and granting the security for it. It is accepted by Mr Ross that the sum of £150,000, however characterised, was due for payment on 20 August 2006, with interest from that date at the rate of four per cent above the Royal Bank of Scotland base lending rate. It is accepted that no sum had been paid by 17 May 2007 when the charge for payment of the sum of £159,737.40 was served. Further, it is accepted that the 14 days of charge expired without payment and that no challenge was made or is now made to the existence of the debt or the validity of the charge. Accordingly, the petitioning creditor was indisputably in a position to swear an oath in prescribed form on 7 June 2007, as he did, declaring that Mr Ross owed him as qualifying creditor the sum of £159,737.40 in terms of the standard security and relative charge for payment. At that time Mr Ross was "apparently insolvent" under and in terms of section 7(1)(c)(ii) of the 1985 Act, the days of charge having expired without payment.

[34] In my opinion, the contention in the petition that a certificate from a chartered accountant was required in terms of the standard security does not affect the undisputed facts about the debt due and is irrelevant to the issue of statutory requirements. The creditor Mr Hynds chose to serve a charge for payment on the basis of his own (or his advisers) calculations rather than on the basis of a certificate from a chartered accountant. It seems to me that he was entitled to take that course. The provision in the standard security provides a mechanism that could be used to avoid arguments about the precise level of debt or interest due. However, that mechanism is not necessary to create the debt. It may be that the use of the word "constitute" in the standard security in connection with the option of obtaining a certificate from a chartered accountant has caused confusion, but nothing in the document could be read as suggesting that without the certificate the debt is not constituted. The terms of the obligation to pay a sum of money by a certain date, with interest for late payment are clear and unambiguous. They are unaffected by the provision that follows. In any event, in light of the continued absence of any challenge to the validity of the charge it is difficult to see how it could now be argued that the absence of a chartered accountant's certificate provides a relevant basis for challenge to the award of sequestration. There does not appear to me to be any relevant challenge to the award of sequestration on the basis of failure to comply with formal requirements. I would add at this stage that there was no material to support the contention that the principal debt due was £100,000 with the balance being "extortionate interest", particularly in the absence of a challenge to the document creating the debt in these or in any other proceedings.

[35] The more substantive challenge to sequestration that the petition raises is the fair hearing argument. As indicated, I regard Mr Ross' arguments about the substantive reasons why sequestration should not have been awarded as falling within this chapter. For the deprivation of the right to a fair hearing to be meaningful, it has to be shown that compliance with Article 6 ECHR would have been likely to have had some effect.

[36] The chronology of events in the petition for sequestration can be summarised as follows. Warrant to cite the present petitioner was granted on 11 June 2007, at which time a diet was fixed for 9 July 2007 at which Mr Ross could appear to show cause why sequestration should not be awarded. It is not clear what procedure, if any, took place on 9 July , but the interlocutors record that the case called in court on 30 July 2007 when the sheriff, "on the petitioners motion and having heard debtor personally" continued the case to 13 August 2007 "for settlement". On13 August 2007 the petitioning creditor was again represented and the present petitioner appeared personally. The court granted warrant to cite Mr Ross of new and a hearing was fixed for 27 August 2007. The second letter from NRBS (6/5 of Process) relates to this period. On 27 August 2007, the sheriff, having heard again from the petitioning creditor's representative and Mr Ross personally continued the case to 3 September 2007, again "for settlement". The interlocutor of 3 September itself is in standard form. It records that the sheriff is satisfied that that the petition has been presented in accordance with the 1985 Act, that proper citation has been made to the debtor and that the requirements of the 1985 Act relating to apparent insolvency have been fulfilled. It records that the petitioning creditor was represented, the debit was absent but that a friend (Mr McLetchie) appeared for him. Accordingly it appears that this was a case where the court had granted two separate continuations for the specific purpose of settlement, albeit that one such continuation was prior to the apparent need to re cite the present petitioner.

[37] When the case called on 3 September 2007 the sheriff was not advised that settlement had been effected. On that date the court seems to have been advised of two matters. First, that Mr Ross was absent from court because he had been taken to hospital and secondly that NRBS, a firm of solicitors acting for both Mr Ross and for Stanmore Holdings Limited, had received an unspecified amount of funds on Friday 24 August 2007 ( Letters Nos 6/7 and 6/6 pf process respectively). The issue is whether, taking that material at face value, the present petitioner has a relevant claim that he was deprived of his right to a fair hearing and that he had a substantive defence to the petition that, had he not been so deprived, he would have advanced.

[38] In my opinion the terms of section 12(3) of the 1985 Act (set out at paragraph [8] above) are mandatory in the sense that they afford no discretion to the sheriff where no defence is stated under subsection (3A). To that extent I accept the submission that the sheriff's function may be characterised as administrative rather than the exercise of judicial discretion. The chronology of the proceedings summarised above indicates that where parties had agreed to continue the case for settlement to be effected the sheriff was willing to do so. There is no suggestion that the matter was being continued because the present petitioner wished to state a subsection (3A) defence. When the case called on 3 September 2008, in the absence of settlement, all that the sheriff had to satisfy himself about were that the debtor had properly been cited, that apparent insolvency had been created in terms of the statutory provisions and that the formalities of the 1985 Act (such as the creditors oath) had been complied with. Mr Ross did not seek to argue that the sheriff could not have been so satisfied, other than in relation to the standard security and its relationship to the creditors/oath, an argument that, for the reasons given, I have rejected. In my opinion there is no foundation for the argument that Mr Ross was deprived of the opportunity of a fair hearing. The legislation in question affords a debtor the opportunity to appear or be represented at a public hearing. There is no requirement for him to be present on the date sequestration is awarded. The nature and extent of the defences that may be stated to the Petition where the debtor does appear is understandably limited, given the prior procedure for creating apparent insolvency. Opportunities to deny that the debt is due arise at earlier stages, prior to the raising of the petition. The present petitioner had several opportunities to challenge that the debt was due, or to pay, or give sufficient security for, the debt. He had not done so by 3 September 2007. He had instructed solicitors to provide information on his behalf to the court and he had appeared in person on three occasions. In all the circumstances, I am of the view that there is no relevant argument that the requirements of Article 6 have not been met.

[39] Even if could be said that Mr Ross was deprived of the opportunity to make further representations on 3 September 2007 there is nothing in the present petition or said during the arguments before me to suggest that he had anything material to say that would have affected the outcome. It is apparent from the correspondence lodged (Nos 6/4,6/5, 6/6) that attempts were being made to raise funds to pay the petitioning creditor. That correspondence does not disclose that the funds being raised were sufficient to satisfy the debt in full. It is clear that a sum lower than the debt due had been offered by the present petitioner and rejected by the petitioning creditor. The correspondence is equivocal on the question of whether the funds the solicitors NRBS received on 24 August 2007 were being held by them for the present petitioner. No clear explanation was tendered as to why those funds had not been paid over immediately in part or in full satisfaction of the debt due. So far as the argument about "extortionate interest" is concerned, I cannot see that the sheriff could have taken any account of it, in light of the clear terms of the standard security and the absence of any challenge to the charge. In all the circumstances, I conclude that there is no material to suggest that the present petitioner had a clear defence to sequestration that he could have presented on 3 September had he been afforded the opportunity to do so.

 

 

Decision

[40] For the reasons given, I am of the opinion that the arguments presented on behalf of the respondent to the effect that the petition discloses no relevant basis for recall of sequestration are well founded. Accordingly, I shall sustain the first plea in law for the respondent and dismiss the petition, with expenses against the petitioner.