Scottish Sheriff Court Decisions

SHERIFFDOM OF GLASGOW AND STRATHKELVIN AT GLASGOW

[2015] SC GLA 73

SQ266/15

NOTE BY SHERIFF AF DEUTSCH

to his interlocutor dated 25 September 2015

in the Petition of

JENNIFER MARIA MONAGHAN OR MACKIN

Petitioner;

for sequestration of the estate of

ALLAN JAMES MACKIN

Act:   Penman

Alt:   Fairbridge

Glasgow,    December 2015

[1]        On 25 September 2015 after a contested hearing I granted a first order in this sequestration. In doing so I gave brief reasons but indicated to parties that I would issue a note explaining my decision more fully.

[2]        The petition called before me because a caveat had been lodged on behalf of the respondent. In terms of rule 2 (1) (e) of the Act of Sederunt (Sheriff Court Caveat Rules) 2006 a caveat may be lodged against an order for intimation, service and advertisement of a petition for a person’s sequestration. There must therefore be exceptional circumstances in which it would be appropriate for the court to refuse a first order; for example the debtor may be able to show conclusively that all debts due by him to the creditor have been satisfied or perhaps there might be an issue going to the competency of the petition.

[3] On this occasion the grounds advanced for refusal arise out of the terms of regulation 30 of the Debt Arrangement Scheme (Scotland) Regulations 2011/141. That provision is in the following terms:

“30.— Diligence or sequestration in the period before a debt payment programme is approved

(1) It is not competent to serve a charge for payment in respect of, or to commence or execute any diligence to enforce payment of, any debt, or for a creditor to petition for sequestration—

[...] ¹

[

(ba) during the period immediately following an application by the debtor being entered in the DAS Register under regulation 19(2)(b) and ending on the earliest of the dates mentioned in paragraph (2A); or

] ²

(c) during the period of 6 weeks immediately following revocation of a joint debt payment programme on the ground that conditions in regulation 22(1)(b) or (2) no longer apply.

[...] ¹

[

(2A) The dates mentioned in paragraph (1)(ba) are—

(a) that on which a notice that the debt payment programme is approved is entered in the DAS Register;

(b) that occurring 14 days after the date on which notice of rejection of the debt payment programme, sent under regulation 29(1), is so entered;

(c) that occurring 28 days after the date on which an application for review under regulation 47(1) is so entered; and

(d) that on which the intimation of withdrawal of the application in respect of the debt payment programme, given under regulation 20(4), is so entered.

(2B) Insofar as it relates to a period mentioned in paragraph (1)(ba) and (2A), this regulation does not apply while any period of protection applies under section 4D(1) ⁴ of the 1985 Act to which subsections (7) and (8) of that section apply (moratorium on diligence under the 1985 Act extended on application for approval of debt payment programme).

] ³

(3) During any period mentioned in paragraph (1), it is not competent in respect of the debt—

(a) to make, under section 97(2) of the Bankruptcy and Diligence etc. (Scotland) Act 2007, an order granting warrant for sale of attached land; or

(b) to make, under section 136(2) of that Act, a satisfaction order.

(4) If an arrestment mentioned in section 73J(1) of the Debtors (Scotland) Act 1987 ⁵ (automatic release of arrested funds) has been granted in respect of funds due to the debtor, it is not competent, during any such period as is so mentioned, to release funds under subsection (2) of that section; but the period in question is to be disregarded for the purposes of determining whether the period mentioned in subsection (3) of that section has expired.”

[4]        It was not in dispute that prior to presentation of the petition an entry had been made in the DAS register in respect of a programme which included the debt which forms the basis of the petition. The application for a program has been made by the debtor under regulation 20 and been entered in the DAS Register under regulation 19(2) (b). The programme had not yet been approved. It was submitted that regulation 30 made it incompetent for the petitioner to present the sequestration petition because it followed upon an application for a program having been entered in the register.

[5]        Taking the regulations in isolation, upon a strict literal interpretation of them, the respondent’s submission might have the appearance of being correct. Mr Penman conceded that to be the case, however, he pointed to a significant and substantial conflict between what the regulations appeared to provide and the terms of the Bankruptcy (Scotland) Act 1985 (“the 1985 Act”). It was significant that the 1985 Act was a piece of primary legislation. He referred in particular to section 12 (2) which is in the following terms:

“(2) Where a petition for sequestration of a debtor's estate is presented by a creditor or a trustee acting under a trust deed, the [sheriff to whom] ⁹ the petition is presented shall grant warrant to cite the debtor to appear before [him] ¹⁰ on such date as shall be specified in the warrant, being a date not less than 6 nor more than 14 days after the date of citation, to show cause why sequestration should not be awarded.”

[6]        Mr Penman submitted that the phrase “shall grant warrant” was peremptory; allowing the Sheriff no discretion to refuse. I agree with that submission; the language is pellucidly clear. Having identified the seeming conflict between the two separate pieces of legislation the solicitor for the petitioning creditor argued that the court required to follow section 12 (2) of the 1985 Act and to grant a warrant. It could not be correct that no sequestration petition could be presented while a DAS application was pending. The summary character of sequestration would be lost because the inevitable consequence would be debtors making endless DAS applications; the process would grind to a halt. That, Mr Penman submitted, could not have been the intention of the legislature. The legislative intention that sequestration should not be awarded where a debt payment programme had been applied for was fulfilled by the terms of section 12 (3C), which gave the Sheriff discretion to continue consideration of the petition.

[7]        Replying to Mr Penman’s point that the 1985 Act is a piece of primary legislation Mr Fairbridge observed that everything contained within that Act relating to the DAS scheme had been amended in by subordinate legislation produced by the Scottish Parliament. As I understood his point, it was that the 1985 Act as amended and the regulations together represented the intention of the legislature.

[8]        The first issue to be considered is whether the literal meanings of the two provisions do actually conflict with each other. I am not persuaded that they do. To petition for sequestration is not quite the same thing as presenting a sequestration petition to the court. The creditor cannot move the court to award sequestration and nor could the court make such an award until the debtor has been validly cited. Therefore, in a real sense the petition for sequestration is not made to the court until the creditor’s solicitor appears upon the date fixed by the warrant to cite and moves the court to award sequestration. I have concluded that the legal meaning of regulation 30 is that the creditor may not move the court to award sequestration during the period following an application by the debtor having been entered in the DAS Register. In other words that is the meaning which corresponds with the legislative intention, which I take to be the prevention of an award of sequestration in the period before a debt payment programme is approved. Properly understood regulation 30 does not prevent the creditor from seeking a warrant to cite.

[9]        There are a number of reasons to doubt that it was intended that creditors should be prevented from even presenting a sequestration petition while a DAS application is pending. In the case of a petition by a creditor the “date of sequestration, is the date of the warrant to cite the debtor and not the later date of the award of sequestration (section 12 (4) of the 1985 Act). The “date of sequestration” is the time at which effect is given to a number of protections which operate not merely for the benefit of the petitioning creditor but for the general body of creditors: the recording of the warrant to cite in the register of inhibitions and adjudications (section 14 (1) (a)); the vesting of the estate in the permanent trustee (sections 31 and 32); the operation of the rules on gratuitous alienations (section 34); the operation of the rules on unfair preferences (section 36); and the effect of sequestration on prior diligence (section 37). It is difficult to think that, while there exists the possibility that a debt payment programme will not be approved, it was intended that these important protections, which predate the 1985 Act, were to be removed.

[10]      If regulation 30 is truly intended to operate as a bar to the very presentation of a sequestration petition then that sits ill with the terms of section 12 (3C) of the 1985 Act, as inserted by the Bankruptcy and Diligence etc. (Scotland) Act 2007. The latter provision deals with the situation where at the first calling of a sequestration petition the Sheriff is satisfied that a debt payment programme has been applied for and not determined. In those circumstances the Sheriff is given a discretion to continue the petition for such period as he thinks fit. It would be open to the Sheriff to award sequestration at that point in time. To give the Sheriff no discretion at the stage of presentation of the petition while at the same time giving him such a wide discretion at the later stage is hardly consistent. Why should a DAS application made immediately prior to presentation of a sequestration petition be favoured in comparison to one made immediately after presentation?

[11]      In fact the different treatment afforded to DAS applications made at the later stage has not had any real consequence. Since section 12 (3C) became effective on 1 April 2008 the practice has been for sheriffs to allow lengthy continuations to enable DAS applications to be determined. Again that begs the question: why place a bar on the presentation of petitions when there is no real risk of sequestration being awarded while a DAS application is pending?

[12]      If I be mistaken in holding that, what I have identified as the legal meaning of regulation 30, corresponds to its linguistic meaning and that instead to equiparate “petition for sequestration” with “moving for sequestration at the first calling” represents a strained construction, nonetheless the circumstance of apparent conflict with section 12 (2) of the 1985 Act justifies favouring that construction. It is settled law that, unless the enabling Act provides for it, delegated legislation cannot override any Act (see Re Davis, ex p Davis (1871-72) L.R. 7 Ch. App. 526 per James LJ at 529 – “The Act of Parliament is plain, and the rule must be interpreted so as to be reconciled with it, or if it cannot be reconciled the rule must give way to the plain terms of the Act.” See also Bennion on Statutory Interpretation (fifth edition) at page 244 and also at page 458 where the learned author opines: “There are broadly four reasons which may justify (and in some cases positively require) the strained construction of an enactment: (a) a repugnance between the words of the enactment and those of some other enactment; [ ].”

[13]      In the circumstances I considered that I was bound by the terms of section 12 (2 of the 1985 Act to grant a warrant to cite. In doing so I took the unusual step of allowing citation by any legal mode. Ordinarily I would not do that without evidence of sheriff officers’ failed attempts to effect personal service. It was accepted by Mr Fairbridge that although domiciled in Scotland his client was currently in Spain. He could not give the court information as to the date of his client’s return. Given that personal service was likely to prove impossible and given also that the respondent’s solicitor would be bound to report the date of the sequestration hearing to his client I considered it appropriate to not require personal service. As a further precaution I ordained that intimation of the petition also been made to the respondent’s solicitor.