Scottish Sheriff Court Decisions

 

SQ108/09

 

SHERIFFDOM OF TAYSIDE CENTRAL AND FIFE at DUNDEE

 

Note by

SHERIFF GEORGE ALEXANDER WAY

 

in PETITION

 

 

NAMASIKU LIANDU residing at 119 Plazza 11, Avenue 22, Block 324 Alfateh, Juffair, Manama, Kingdom of Bahrain PETITIONER

 

against

 

GO DEBT LIMITED, a Company having it's Registered Office at Dumfries House

Dumfries Place, Cardiff CF10 3ZF RESPONDENTS

 

 

 

Dundee 9^th August 2010

 

The Sheriff, having resumed consideration of the cause, recalls the award of sequestration of the estates of the Petitioner in terms of section 17(1) of the Bankruptcy (Scotland) Act 1985 ( as amended); further, in terms of section 17 (3)

of the said Act finds the respondents liable to make payment of the proper and reasonable outlays and remuneration of the Accountant in Bankruptcy as interim trustee or trustee on the sequestrated estates of the petitioner; finds the respondents liable to the petitioner in the expenses of the petition as taxed by the Auditor of Court.

 

 

Sheriff

 

NOTE

 

1. Introduction

 

This is a petition, presented in terms of Sections 16 and 17 of the Bankruptcy (Scotland) Act 1985 ( as amended), for recall of the sequestration of the petitioner granted at Dundee Sheriff Court on 15^th December 2009. I shall hereafter refer to the statute as the 1985 Act. I would observe, at this stage, that petitions for recall were, until the passage of the Bankruptcy & Diligence etc (Scotland) Act 2007 the sole province of the Court of Session. The petitioner was represented by Mr. Lafferty and the respondents by Ms.Gallacher. The Accountant in Bankruptcy,as Interim Trustee, was represented by Mr.Murray but at the outset he indicated that his instructions extended only to the extent of ensuring that the Trustees costs were met in terms of Section 17(3) of the 1985 Act. The parties were agreed that Mr.Murray need hold a watching brief only and he took no part in the proceedings thereafter. I heard evidence and the parties made their submissions on the 14^th and 22^nd of July 2010. I made avizandum.

 

2. The Statutory Provisions

 

The Bankruptcy (Scotland) Act 1985 (as amended)

Section 5(2) provides inter alia:

'The sequestration of the estate of a living debtor shall be on the petition of . . .

(b)     a qualified creditor or qualified creditors, if the debtor is apparently insolvent. . . .'

Section 7(1) provides inter alia:

'A debtor's apparent insolvency shall be constituted, or where he is already apparently insolvent, constituted anew whenever . . .

 

(d)     a creditor of the debtor in respect of a liquid debt which amounts (or liquid debts which in aggregate amount) to not less than £750 or such sum as may be prescribed, has served on the debtor, by personal service by an officer of court, a demand in the prescribed form requiring him either to pay the debt (or debts) or to find security for its (or their) payment, and within three weeks after the date of service of the demand the debtor has not-

(i)     complied with the demand; or

(ii)     intimated to the creditor, by recorded delivery, that he denies that there is a debt or that the sum claimed by the creditor as the debt is immediately payable.'

 

The prescribed form of statutory demand for payment is contained in Form 1 of the Schedule to the Bankruptcy (Scotland) Regulations 1985 and the form includes 'Notes for Creditors'. Note (f) provides:

'Insert the reasons why it is claimed that the debt(s) forming the subject of the Demand are liquid. A debt is liquid where it is for a certain settled amount and is immediately payable by the debtor. There must also be clear evidence of the existence of the debt, for example, a written admission by the debtor or a document which establishes the debt (such as a court decree or contract).'

Section 11 provides inter alia:

'(1) Every creditor, being a petitioner for sequestration . . . shall produce an oath in the prescribed form made by him or on his behalf. . . .

 

(5) Every creditor must produce along with the oath an account or voucher (according to the nature of the debt) which constitutes prima facie evidence of the debt; and a petitioning creditor shall in addition produce such evidence as is available to him to show the apparent insolvency of the debtor.'

 

 

Section 16 provides inter alia :

 

(1) A petition for recall of an award of sequestration may be presented to the [sheriff]¹ by-

 

(a) the debtor, any creditor or any other person having an interest (notwithstanding that he was a petitioner, or concurred in the [debtor application] , for the sequestration);

 

(4) Subject to [sections 41(1)(b) and 41A(1)(b)]⁵ of this Act, a petition under this section may be presented-

(a) within 10 weeks after the date of [the award of]⁶ sequestration; but

 

(b) at any time if the petition is presented on any of the grounds mentioned in paragraphs (a) to (c) of section 17(1) of this Act.

 

(5) Notwithstanding that a petition has been presented under this section, the proceedings in the sequestration shall continue (subject to section 17(6) of this Act as if that petition had not been presented until the recall is granted.

 

Section 17 provides inter alia:

 

(1) The sheriff may recall an award of sequestration if he is satisfied that in all the circumstances of the case (including those arising after the date of the award of sequestration) it is appropriate to do so and, without prejudice to the foregoing generality, may recall the award if satisfied that-

(a) the debtor has paid his debts in full or has given sufficient security for their payment;

(b) a majority in value of the creditors reside in a country other than Scotland and that it is more appropriate for the debtor's estate to be administered in that other country; or

(c) one or more other awards of sequestration of the estate or analogous remedies (as defined in [section 10(7)] of this Act) have been granted.

(2) Where one or more awards of sequestration of the debtor's estate have been granted, the [sheriff]⁴ may, after such intimation as [he] considers necessary, recall an award whether or not the one in respect of which the petition for recall was presented.

(3) On recalling an award of sequestration, the [sheriff]-

(a) shall make provision for the payment of the outlays and remuneration of the interim trustee and [the]⁷ trustee by directing that such payment shall be made out of the debtor's estate or by requiring any person who was a party to the petition for sequestration [ or, as the case may be, the debtor application] to pay the whole or any part of the said outlays and remuneration;

(b) without prejudice to subsection (7) below, may direct that payment of the expenses of a creditor who was a [debtor application], or concurred in the petition, for sequestration shall be made out of the debtor's estate;

(c) may make any further order that [he]considers necessary or reasonable in all the circumstances of the case.

 

(7) The sheriff may make such order in relation to the expenses in a petition for recall as he thinks fit.

 

 

3. The Facts

 

i)                    The petitioner is 51 and a chartered accountant who has pursued a career in academia. He was, until March 2007, resident in Dundee where he was a Lecturer in a local University. Since then he has been living and working in the Kingdom of Bahrain. He has maintained his former home at 31 Oak Loan Baldovie Broughty Ferry Dundee as a residence for his son, Maliwa Liandu who is a student in the City. He shares that property with another student. Maliwa Liandu is 21.

 

ii)                   The petitioner purchased a Ford Mondeo Motor Car in November 2003. He financed this by entering into a Conditional Sale Agreement with Direct Auto Financial Services Limited ( Direct Auto) At the same time he entered into a collateral Credit Agreement to fund premiums for Payment Protection Insurance, Mechanical Breakdown Insurance and GAP insurance. The last item is insurance that funds any difference between the written off value of the motor vehicle should it be damaged in some way and any sum due under the Conditional Sale Agreement. These two agreements are contained in one document. The parties accepted that the agreements are subject to Scots Law.

 

 

iii)                 The total sum due under the agreements was £12,334.08. In or around November 2004 Direct Auto served a Notice of Default alleging the petitioner was in arrears of payment. The history of the petitioners consumer credit account is not relevant to this case and I will simply observe that the agreements were terminated sometime prior to May 2005. The petitioner surrendered the vehicle to Direct Auto for resale. On 7^th May 2005 Direct Auto wrote to the petitioner seeking payment of a final balance of £7028.60. The petitioner did not accept that he was liable for such a sum and did not pay it.

 

iv)                 On 13^th July 2005 Direct Auto entered into a contract to assign their rights in certain agreements, including that of the petitioner, to the respondents, Go Debt Limited. The respondents then sought to recover money from the petitioner. On 28^th July 2008 Go Debt Limited wrote to the petitioner by email addressed to him at his employers the Bahrain Institute of Banking and Finance ( 5/1/3 of Process). The email informed him that they had traced him as the debtor under an agreement with Direct Auto who had previously lived in Dundee and worked for the University of Abertay. They warned that they were considering raising proceedings with a view to obtaining a County Court Judgement which they would then apply to be transferred to the jurisdiction of the Bahrain legal system. They offered to accept the sum of £4000.00 in full and final settlement if paid by 30^th July 2008 or £5500.00 by end of August 2008. The petitioner replied by return email informing the respondents that they had accessed his employers business email address which should not be used for private correspondence. He provided alternative contact details.

 

v)                  The respondents subsequently instructed solicitors in Scotland. On 25^th August 2009 Mr. Stephen Cowan Solicitor signed a demand purporting to be in terms of Section 7(1)(d) of the 1985 Act. The demand ( 5/1/1 of Process) states that the petitioner owes Go Debt Limited, " the sum of £7028.60 in respect of finance provided to the defender around November 2003 for which satisfactory payment has not been received and is now due to be paid to the Creditor". The demand goes on to state at paragraph three: " the sum demanded is immediately payable and consists of a liquid debt or debts in that - reminders have been issued but no payments have been forthcoming." The demand has no other details of the alleged debt but attached to the end of the document is a two page A4 printout with what appears to be a statement of account dated 23/02/2007. This is not on official stationary and does not state who has issued it. It is addressed to the petitioner at an address in Dundee. It shows an opening balance of £12,334.08 as at 21/11/2003. It lists a series of payments which reduce the balance to £7028.60 as at 06/05/2005. The final entry is dated 01/08/2005 which narrates " write off amount" £7028.60 - balance £0.00.

 

vi)                 Sheriff Officers were instructed to serve the demand. The officer concerned, Mr Alan Moulds, explained to me that he fully understood that for demands to comply with section 7 of the 1985 Act they must be served on the alleged debtor in person. It cannot be left at an address or given to any other person who might be there at the time. Mr.Moulds told me that he had been to Oak Loan Baldovie Broughty Ferry looking for the petitioner but without success. On 16^th September 2009 Mr.Moulds and a witness attended at Oak Loan. They saw a black male emerge from the house. They had deduced from the alleged debtor's name that they were looking for what they described as a "person of colour". They accordingly approached the male. The Sheriff Officer stated that he asked the male if he was the petitioner and that he said yes. Mr.Alan Moulds ( and his witness) formed the impression that the male was about to either retreat back into the house or drive of in an adjacent car and so they then served the document on the male without further ado and left in their car. Mr.Moulds confirmed that he had not carried out any other checks, for example with Council Tax records, nor did he make enquiry of neighbours. So far as he was concerned the person upon whom he served the Statutory Demand had accepted that he was the petitioner and that was all he needed. I should record here that at the proof both Mr. Moulds and his witness identified the petitioner's son as the person they encountered that day. They did not serve on the petitioner. This was accepted by both agents.

vii)               The petitioner's evidence was that his son did not pass on to him the statutory demand. . He would have challenged it had he received it. The respondents agents cross examined the petitioner upon his apparent failure to have a system in place to forward important mail. The petitioner stated that he had told his son to tell anyone who enquired after him that he no longer lived in Dundee and to contact him if there were matters of concern. The petitioner's son told the court that he could not remember what he did with the papers handed to him by the Sheriff Officers. The issue of whether the petitioner received the statutory demand is not central to the outcome of this case and accordingly, I need not expand upon this element of the evidence

 

viii)              The respondents presented an initial writ petitioning for sequestration of the petitioners estates. The initial writ was accompanied by an Inventory of Productions. This contained the executed Statutory Demand and a Creditors Oath. The Oath provided more detail of the claim. The details of the debt are now disclosed as finance provided by Direct Auto on 21^st November 2003. The debt was assigned by Direct Auto to the respondents on 13^th July 2005. Default notices were issued and the sum due remained unpaid. The evidence of the debt is stated to be the statutory demand. No other productions were lodged. The respondents moved for the award of sequestration which was granted unopposed. The petitioner was still in Bahrain. A solicitor who knew the petitioner was in court when the award was made on 15^th December 2009. He contacted the petitioner directly and he instructed agents to lodge a petition for recall at once. The petition was lodged on 21^st December 2009 well within the ten week period referred to in section 16 (4) (a) of the 1985 Act.

 

4. Submissions

 

i)                    Mr. Lafferty, for the petitioner invited me to grant recall of the award of sequestration. The respondents should be found liable for both the trustees costs and of the petition process. He, firstly, submitted that service of a Statutory demand must be by officers of court and personal. This was clear from the terms of section 7(1)(d) of the 1985 Act ( see above). He referred me to Rae v Calor Gas 1995 SLT 244. In that case the First Division ( per Hope LP) opined that, whilst rules of court may authorise sheriff officers to serve summonses and the like by leaving at an address or in the hands of an inmate, the term "personal" required service on an individual by placing the document in the hands of a party themselves. Nothing short of this will constitute personal service. In this case the evidence showed and the respondents now accepted, that service was effected upon the petitioners son. This fundamentally undermined the statutory demand as the basis of a petition for sequestration. The respondents relied upon the statutory demand as the sole evidence of apparent insolvency and accordingly sequestration should not have been granted.

 

ii)                   Secondly, he pointed out that the statutory demand itself did not comply with the provisions of the 1985 Act. There was no evidence that the debt claimed by the respondents was liquid. The Act required evidence of liability for the debt to be produced to the court. This was decided by the Inner House in the case of Lord Advocate v Thomson 1995 SLT 56. He further submitted that as the statutory demand was inept then all that followed upon it must be equally tainted. The petitioner had a legitimate dispute with the respondents. He had surrendered the car which had been financed by the Conditional Sale Agreement. He believed that the proceeds of the sale of the car did not adequately reflect it's value. There were questions as to the premiums charged for the collateral insurances. The debt was disputed plain and simple.

 

 

iii)                 Finally he submitted that the respondent was not and never had been actually insolvent. He still owned heritable property in Scotland with equity in excess of the total sum claimed. He had held a well paid and responsible post with the University of Abertay Dundee and now with the Bahrain Institute of Banking and Finance. He was not a man of straw. He was a chartered accountant in good standing and sequestration was harmful to his reputation. The respondents would have their remedy of litigation in the ordinary courts to pursue their claim if they wished. In all the circumstances it was appropriate and reasonable to recall the award of sequestration. The respondents had elected to proceed by way of insolvency. The whole basis of their petition was undermined by the fatal flaws in the procedure and they should meet the trustees costs in terms of section 17(3) of the 1985 Act. So far as the expenses of the petition of recall were concerned expenses should follow success.

 

iv)                 The respondents submissions were presented by both Ms.Gallacher and Mrs McWilliams. Ms. Gallacher dealt with the evidence led and Mrs McWilliams with the applicable law. Ms. Gallacher was short and to the point. The respondents accepted Rae v Calor Gas Ltd and the definition of "personal service" set out therein. She accepted that, on the evidence of the officers, service had been effected upon the petitioner's son. There was no personal service. She, however, urged me to look behind that fact and consider the reckless conduct of the petitioner. She submitted that the Sheriff Officers were quite clear that the petitioner's son agreed that he was the petitioner. He had misled the officers. It was not good enough for the petitioner, knowing that important documents might be delivered to the house he still owned in Dundee, to have no system in place to forward mail or other deliveries. The petitioner had brought this all on his own head and if the court were minded to recall the sequestration then he should bear the costs.

 

v)                  Mrs McWilliams then addressed the legal issues. She accepted that personal service, as a matter of fact, had not been effected. She accepted that the court had a broad discretion in the matter of recall and that the absence of personal service, alone, might be adequate grounds to do so. She, however, urged me to weigh the respondents failure to look to his own affairs and the neglect of his son in passing on important documents when considering the costs of both the trustee and the cause. The respondent was clearly aware of the claim and had failed to take basic steps to protect his own interests. He should bear the trustees costs and those of the petition.

 

 

vi)                 She then addressed me on the statutory demand. She accepted the authority of Lord Advocate v Thomson ( above) and that, in her words, the demand "could have had more detail". She conceded that the demand had not been accompanied by any evidence of the constitution of the debt ( or in this case it's subsequent assignation) but submitted, however, that statutory demands were issued in the format used in this case all the time. She said "this is how they are done ". She urged me to accept that the demand had been issued in a standard format and in good faith. The respondent would have had ample opportunity to respond if his son had taken basic steps to inform him that important documents had been delivered for his attention. Indeed it was not clear that the respondent did not receive a copy of the statutory demand from his son. He could have received it and just ignored it. He equally should have responded to the service of the Initial Writ seeking sequestration. She re-iterated Ms Gallacher's submission that it was reckless for a person to go abroad leaving an apparent domicile where important documents may be delivered and have no proper system to reasonably ensure that they would be forwarded on or otherwise dealt with in an appropriate fashion. In the event that the court was minded to grant recall the petitioner was primarily at fault through his reckless neglect of this own affairs and should bear the cost.

 

 

5. Discussion and Opinion

 

i) In the course of evidence it became clear and it was ultimately accepted by the solicitor for the respondent, that the officers had served the statutory demand upon the petitioners son. The evidence also established that the only document attached to the statutory demand was the A4 sheet setting out the statement to which I have already referred. In addition the respondents conceded that nothing was attached to the statutory demand beyond the statement of account. There was no copy of the original conditional sale or credit agreement. There was no express reference to the document of assignation nor was a copy of it produced. The 1985 Act stipulates that a statutory demand can only create apparent insolvency where it seeks to recover a liquid debt. In this case the sums sought by the respondents are in the character of damages for breach of contract albeit that, in terms of the agreement produced to me, they are described as "agreed compensation". I have grave reservations that such a debt is truly liquid no matter how it is described by the parties to a contract. I, however, do not have to formally decide this matter as, in my opinion, the demand has another fundamental and fatal flaw.

 

ii) A demand for a liquid debt must also be accompanied by "clear evidence of the existence of the debt." This was decided by the Inner House in the case of Lord Advocate v Thomson ( above) . In that case The Lord Advocate, on behalf of HM Commissioners of Customs and Excise, sought to sequestrate an individual said to owe arrears of VAT. They had served upon the defender a statutory demand to which was attached only a statement of the alleged arrears of VAT. No official certificate of liability or indeed any vouching of the existence of the debt accompanied the demand. In the sequestration petition the pursuer averred that he was a creditor of the defender to the extent of £3,053.86 conform to oath produced, which oath proceeded upon a statutory demand for payment. The pursuer further averred that the statutory demand had been served on the defender and that he had not made payment or denied the debt and accordingly he was apparently insolvent in terms of s 7 (1) (d) of the 1985 Act. The sheriff refused to grant warrant to cite the debtor on the view that while an unsatisfied statutory demand for payment was evidence of apparent insolvency in terms of section 7 (1) (d), section 11 (5) required that an account or voucher be produced in addition and no such evidence had been produced. The pursuer appealed to the Sheriff Principal who said, refusing the appeal:

 

"For present purposes it is sufficient to note that the debt in question must be liquid. Since I am of opinion that the pursuer in this case has failed to vouch the existence of any debt, liquid or otherwise, I do not require to analyse the various references which I was given concerning the meaning of the term "liquid", from which I gathered that the matter remained unclear. I do however agree with the sheriff's comment that the court must be provided with a voucher which will enable it to consider whether or not there is a liquid debt for, if the debt is not liquid, the petition will be incompetent."

 

The pursuer appealed to the Inner House. The appellant submitted that the courts below had wrongly interpreted the statutory provisions. The Second Division rejected those submissions and endorsed the opinions of the Sheriff and the Sheriff Principal

( per Ross LJC at page 61 ) :

 

"The obligation upon the creditor is to refer in para 3 [of the statutory demand] to whatever constituted clear evidence of the existence of the debt. As the footnote goes on to explain, that may be a court decree or a contract. In the present case clear evidence of the existence of the debt could no doubt be found in the assessment with, or possibly without, the warning letter. However para 3 contains no reference to the assessment with or without the warning letter, and the result is that in the present case there has been failure on the part of the pursuer as creditor to comply with the requirement contained in the third sentence of (f) and to refer in para 3 to the clear evidence of the existence of the debt..............As there has been a failure to comply with this requirement, the consequence is that there is no valid statutory demand within the terms of s 7 (1) (d). Counsel conceded that if there was no valid statutory demand, his appeal must fail and that there was no need to proceed to consider the further question .......as to whether the pursuer had complied with the requirements of s 11 (5) of the Act of 1985.......We would merely observe that the language of s 11 (5) appears to be fully consistent with the construction which we have placed upon marginal note (f) in providing that in addition to evidence of apparent insolvency, there must be produced evidence of the debt."

 

I respectfully agree with their Lordships.

 

iii) In the present case no evidence or vouching of the conditional sale agreement for the purchase of the car, the credit agreement for the collateral insurance premiums or the assignation from Direct Auto to the respondents was produced along with either the Statutory Demand or the subsequent petition for sequestration. I concede that the respondents made a better fist of the sequestration petition than they did of the statutory demand. The petition incorporates, by reference, the terms of the Creditors Oath which narrates that finance was provided to the debtor by Direct Auto on 21/11.03 and this was assigned to Go Debt on 13^th July 2005. Reference is also made to default and termination notices. It is unnecessary for me to decide upon this point, standing my judgement on the fundamental flaw in the statutory demand, but I observe that the Oath does not even narrate the nature of the finance (which as set out above was in two discrete tranches albeit combined into a single form of agreement) which it makes it all the harder to see how a court is to establish the existence of the debt without production of copy agreements etc.

 

iv) Mrs McWilliams for the respondents conceded that the statutory demand was lacking in detail and did not demur that the document when weighed in the balance against the dicta set out in Lord Advocate v Thomson was wanting yet she invited me to accept that , "this is how it's done". I regret that I cannot accept that submission as factually accurate but, in any event, practices within the debt recovery industry cannot cure defects in statutory procedures as properly interpreted by the Inner House. I am bound by Lord Advocate v Thomson even if I did not consider it to be good and sound law; which I do.

 

v) The petitioner has accordingly satisfied me, on the evidence that :

 

• Personal service of the Statutory Demand was not effected upon him as required by the 1985 Act;

 

• The statutory demand that was served did not comply with the dicta set out in Lord Advocate v Thomson and is accordingly inept and all that follows from it is of no effect.

 

• There being no other evidence of the existence of a debt to constitute apparent insolvency , the petition for sequestration ought not to have been granted and falls to be recalled.

 

• In any event in all the circumstances narrated above there is sufficient cause to recall the sequestration even if it were properly constituted.

 

6. Costs and Expenses

 

i) Mrs McWilliams for the Respondents submitted that it was not good enough for the Petitioner to expect his son to recognise important documents and pass those on to him: it was the Petitioner's responsibility to look after his mail and he had been reckless or at the very least quite negligent. She did not refer me to any authority for the proposition that a person who had decided to live somewhere beyond the borders of the legal jurisdiction where they had previously stayed but remained the owner of heritable property where they could, conceivably, be sent mail including citations to court had a duty to put in place an effective system for forwarding mail.

 

ii) I know of no such authority although there is a reference in criminal jurisprudence which may assist to put the proposition in context. In Anderson v Douglas 1998 SLT 379 An accused person was fined, failed to pay the fine in the 14 days given, appeared before a means inquiry court and was subsequently cited to a further means court. The accused failed to appear and was arrested on a warrant. The justice was told that the accused had failed to appear because he had never received his citation as his mother, whose address was on the complaint but with whom he only occasionally resided, had failed to pass on the citation to him. The justice found him in contempt of court. In passing a Bill of Suspension quashing the finding the High Court said ( per Lord Sutherland) :

 

"it is perfectly plain that while there may be what was gross neglect or carelessness or even recklessness on the part of the complainer in making his arrangements about receiving mail, it has not been established and could not have been established that the complainer had deliberately defied the order of the court because there was no proof before the justice that he had in fact received the citation."

 

Lord Sutherland's opinion fortifies my view that the court is concerned with the effectiveness of the form of service: plain and simple; not whether there is moral blame to be attributed to the defaulter. I cannot, for these reasons, accept the respondents submissions on this point.

 

iii) In my judgement the respondents must accept responsibility for the expenses in this matter both of the trustee and of process. They knew the petitioner disputed the debt. They were aware that the petitioner was no longer working for the University of Abertay Dundee. They knew he was working and at least temporarily, resident in Bahrain. The email exchanges referred to above, which threaten to invoke the justice system of Bahrain, vouch this. They, instead, passed the claim to their Scottish solicitors. I was not informed of the nature and substance of the instructions and papers the solicitors received but suffice it to say they elected to proceed by way of statutory demand rather than initiating court proceedings by seeking warrant for service upon an Initial Writ. The Sheriff Officers evidence was that they merely served the statutory demand as framed by their instructing solicitors. They carried out no background investigations to amplify their basic instructions which, so far as I can see, did not extend beyond the alleged debtors name and address. I was far from impressed by the officers reference to being on the lookout for a "person of colour" not because I believe that the comment was in any way intended to be racist but rather because it is an extremely imprecise tool for identification. The officer, in cross examination, fairly conceded that the person upon whom they served the statutory demand was a young man with dreadlocks and on reflection, was clearly too young to have entered into a car credit agreement some six years earlier. They did not have, however, any details of the alleged debt beyond the reference to "finance in or around November 2003". They could not even deduce that the alleged debt was for car finance as the demand ran in the name of Go-Debt rather than Direct Auto Finance.

 

iv) Scottish Courts have observed time and time again that insolvency proceedings, whether by way of personal bankruptcy or the winding up of a company, if used to by-pass the ordinary litigation process, are undertaken at the creditors risk. In this case the statutory demand was, frankly, incomprehensible without production of a copy of the agreement and the assignation. What was any recipient to make of the phrase "finance provided to the Defender around November 2003 for which satisfactory payment has not been received and is now due to be paid to the creditor." The obvious questions are: what is the nature of the finance, bearing in mind that in this case there were two discrete contracts contained in one documentary agreement? ; why is the actual date of any agreement not stated? ; what is "satisfactory" payment, bearing in mind that in this case ( as set out above) Go Debt had offered no less than two compromise figures?; is the sum demanded "now due to be paid" because it is merely outstanding or is the final phrase an obscure reference to the assignation. I might also observe that it is confusing to refer to someone as "the debtor" throughout the pre-printed form but as the "the defender" in clause 2 of the operative section of the demand.

 

v) The 1985 Act for the very good reasons outlined above requires that only a liquid debt may be pursued by way of statutory demand and that such a document must be accompanied by clear evidence of the constitution of the debt. . I understood from the submissions of Mrs McWilliams that there seemed to be some doubt in the minds of practitioners on this point. Let there be none. In this case the demand should have been accompanied by a copy of the original credit sale and credit agreement and some evidence of the assignation as a link in title. This is not only to comply with the statute and the dicta in Lord Advocate v Thomson but so that it made sense.

vi) Equally, practitioners should be clear that the 1985 Act also requires evidence of the debt ( and any link in title) to be lodged with a petition for sequestration. I accept, as stated in Lord Advocate v Thomson that the same evidence may suffice for both demand and petition but clearly, if the statutory demand is not accompanied by appropriate evidence of the constitution of the debt then merely lodging this as a production will be of no avail.

 

I will accordingly recall the award of sequestration and find the respondents liable to the Accountant in Bankruptcy for the proper costs and expenses of the sequestration and to the petitioner in the expenses of the cause as taxed.

 

Sheriff of Tayside Central and Fife