Recall of Sequestration

Background

Since the introduction of the Bankruptcy and Diligence etc (Scotland) Act 2007, Recall of Sequestration has been moved from the Court of Session to the Sheriff Court. There has since then been a lack of decided authority on the approach Sheriffs should take to deciding recall. Gordon Milne, Petitioner is a recently decided recall case. The debtor represented himself and the decision does not therefore have the benefit of full submissions for the debtor in the way one would expect had he been represented. However, the case was decided by Sheriff Gregor Murray, a former accredited insolvency specialist, and now Sheriff at Peterhead. Therefore, while his judgement does not provide substantive guidance on approach, his brief observations are worth noting.

The Case

In Milne the debtor had been sequestrated following expiry of charges for payment, based on personal guarantees he had granted in favour of his company’s bankers. The party litigant debtor focused his submissions for recall on the charges, and the actions of the bank prior to appointment. The factual submissions can be found in the report of the case. They do not provide real assistance on the approach to be taken to Recall.

However, what is most interesting are the Sheriff’s general comments when finding the debtors’ arguments irrelevant and refusing to grant the petition. Firstly, the Sheriff decided that in exercising his discretion as to whether recall should be granted, he would have regard to the fact that some of the arguments could have been advanced during the sequestration procedure; and the petitioner had chosen not to make the arguments at that point. Secondly, the debtor submitted that he ought not to have been sequestrated because of his application to have been admitted to a DAS scheme (thus rendering, he said, sequestration incompetent). The Sheriff rejected the submission; it was clear that while a DAS application was a factor to be considered when weighing whether to allow recall, sequestration was not incompetent. Rather, it had been for the Sheriff to consider whether to allow a continuation in order to establish whether a DAS was entered into. Indeed, in this case the debtor’s reapplication to the DAS was not followed up by him. Recall was refused.

Advice

The Sheriff’s decision reemphasises to debtors that it may count against them (in the exercise of the court’s discretion) if they apply for recall seeking to challenge acts and omissions in the pre appointment process, and they have not challenged those acts or omissions at that time. For example, if there had been an argument about the charge the remedy for the debtor would have been to seek suspension of the charge pre appointment. There also seems to be tacit approval In the Sheriff’s decision that it is appropriate for a Trustee to enter process in a recall petition in order to ensure (even if he otherwise does not oppose the petition) that his fees and outlays are paid as a precondition of the recall. We wait with interest to see further recall decisions from the Sheriff Courts.

BBM Solicitors specialise in advising IP’s in both contentious and non-contentious matters (including transactional work). Contact: Eric Baijal (emb@bbmsolicitors.co.uk) or Alasdair Baijal (agb@bbmsolicitors.co.uk). This briefing note is current 27 May 2012 and is our understanding of the position described at that date. Legal advice ought to be taken before relying on its terms (particularly to ensure the law has not changed).