The Bankruptcy and Diligence (Scotland) Act 2007contains a wide range of provisions affecting personal insolvency and various forms of diligence for enforcing civil obligations. Many of the provisions that relate to Inhibitions – which apply to heritable property - will come into force on 22 April 2009. Generally these reforms are to be welcomed.

An inhibition enables a creditor to prevent a debtor from transferring ownership of any of the debtor’s heritable property located in Scotland, or granting a security over it while the debt remains outstanding.

On 22nd April 2009, some significant changes to debt recovery legislation are due to come into force, affecting the procedures relating to inhibitions in Scotland. The provisions are a further step in the implementation of changes which are designed to make the debt recovery process more 'user friendly'. Part 5 of the Bankruptcy and Diligence etc (Scotland) Act 2007 brings about the following changes/clarifications:

The 22nd of April 2009 brings in significant changes to rules relating to arrestment and actions of furthcoming. The Bankruptcy and Diligence etc (Scotland) Act 2007 (Commencement No. 4, Savings and Transitionals) Order 2009 brings into force Section 10 of the 2007 Act which inserts Part 3A into the Debtors (Scotland) Act 1987. The provisions coming into effect include:

Company Voluntary Arrangements or CVA’s

Mead sought to enforce an adjudicator's decision of £332k. Dartmoor resisted on the basis that, as Mead was subject to a CVA, a stay should be granted on any judgment otherwise awarded to Mead. Mr Justice Coulson refused. There was no previous authority dealing with the point, but the Judge decided the following principles were relevant:  

In the case of Andrew Fender v National Westminster Bank PLC Judge Purle QC set aside a deed of release that had been executed in the mistaken belief that the company was no longer indebted to the bank.

Facts

In Andrew Fender (Administrator of FG Collier & Sons Limited) - v - National Westminster Bank Plc, a company went into administration. The administrator applied to the court to establish whether he had to treat NatWest bank as a secured or unsecured creditor of the company.

In Bridge Trustees Limited v Noel Penny, Judge Purle QC, sitting as an additional Judge of the High Court, held that the Court could use its inherent jurisdiction to permit an independent trustee to distribute surplus in a scheme that was winding-up. Under the Pensions Act 1995, an independent trustee is appointed to exercise powers otherwise conferred on the employer where an insolvency practitioner begins to act in relation to a company.

In Masri v Consolidated Contractors International Company SAL and another – Butterworths Law Direct 4.4.08 the principal issues on the appeal were whether the Commercial Court had international jurisdiction to make an order for the appointment of a receiver by way of equitable execution, and a freezing order, and whether a receivership order could be made by way of equitable execution in relation to future debts.

This Act received Royal Assent in July 2007 but no date for implementation has been published yet.

In addition to the provisions contained in this Act aimed at improving the working of the tribunals system and increasing judicial diversity, are several sections that will be of interest to financiers and insolvency professionals: 

The claimant obtained a judgment against the defendant for breach of a guarantee. The defendant entered into an IVA with his creditors, which included his liability to the claimant. The defendant paid the judgment sum to the claimant, but not the interest awarded on it. The claimant contended that the award of interest was a post-IVA claim, and threatened to bankrupt the defendant which would lead to a termination of the IVA. The defendant applied for a stay of execution of the interest part of the judgment, on the ground that it was within the IVA.