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Scottish Court of Session Decisions |
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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Aitken v. McAdam Or Aitken [2005] ScotCS CSOH_105 (04 August 2005) URL: http://www.bailii.org/scot/cases/ScotCS/2005/CSOH_105.html Cite as: [2005] CSOH 105, [2005] ScotCS CSOH_105 |
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Aitken v. McAdam Or Aitken [2005] ScotCS CSOH_105 (04 August 2005)
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OUTER HOUSE, COURT OF SESSION [2005] CSOH 105 |
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A494/05
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OPINION OF LORD HODGE in the cause JOHN GRAHAM AITKEN Pursuer; against ISABELLA McADAM or AITKEN Defender:
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Pursuer: Moir; Balfour & Manson
4 August 2005
[1] This is a motion for interim suspension of a charge and interim interdict against the defender from applying to obtain an award of sequestration. The pursuer makes the motion in an action for production and reduction of a decree of divorce which was granted on 16 May 2005 and extracted on 31 May 2005. [2] The grounds on which the pursuer seeks reduction of the divorce decree are that the service of the amended Writ, which introduced financial claims, was defective and that the factual information put before the sheriff in support of the claims for a capital sum and periodical allowance was incomplete and inaccurate. [3] The pursuer raised the action only on 1 August 2005. By that time the days of the charge for payment, which had been served on the pursuer on 31 May 2005, had long since expired. An application for sequestration of the pursuer's estates had been presented by the defender and the pursuer had been cited to appear at Linlithgow Sheriff Court on 3 August 2005 to show cause why sequestration should not be awarded. The pursuer has therefore left it very late to seek to halt the sequestration process. [4] Mr Moir for the pursuer recognised that this was the case and that in the light of the authorities the hurdle which he had to surmount was high. He referred me to Wilson v Bank of Scotland 1987 SLT 117 in which Lord Stewart recalled an interim interdict against the Bank proceeding to sequestration, which had been granted after the commencement of the sequestration process, and Mackay v Bank of Scotland 1992 SLT 158 in which Lord Sutherland refused to grant interim interdict to prevent the Bank from founding on a guarantee five days before the sequestration was due to be awarded. He recognised that the expiry of the days of the charge without payment had made the pursuer apparently insolvent (Bankruptcy (Scotland) Act 1985 ("the 1985 Act") section 7(1)(c)) and that suspension of the charge would not affect the apparent insolvency. He submitted however that, notwithstanding the delay, it was equitable to grant interim interdict. The Court had a wide discretion to recall a sequestration under section 17 of the 1985 Act and that remedy was available even where, as here, the debtor had failed to take action to prevent his apparent insolvency from being constituted (see Wright v Tennent Caledonian Breweries Limited 1991 SLT 823, Lord President Hope at page 826D-E). However, it was not necessary to incur the cost of sequestration and recall in this case as the pursuer was willing to consign in the Court £36,000 which would provide security for the capital sum awarded and the expenses of the divorce action. The charge for payment was for a sum of £35,868.07. He explained that the defender had arrested approximately £24,000 in a bank account which sum could be consigned if the arrestment were recalled and that the pursuer would provide the balance to make up the sum of £36,000. In the circumstances he invited me to grant interim interdict. [5] In my opinion it is appropriate in this case to grant interim interdict. Interim suspension of the charge will not assist the pursuer at this stage in relation to this sequestration because apparent insolvency has been constituted and the charge has therefore served its purpose (see Sutherland v Sutherland (1843) 5D 544, Wilson v Bank of Scotland 1987 SLT 117 and Goudy on Bankruptcy (4th Edition) page 74). The apparent insolvency continues until the pursuer is able to pay his debts and pays them as they become due - see the 1985 Act, section 7(2). The pursuer however also seeks interim interdict to prevent the sequestration of his estates. As Lord Sutherland pointed out in Mackay v Bank of Scotland (1992 SLT 158 at page 160) interim interdict is an equitable remedy and it is normally far too late for a debtor to seek such a remedy when he has allowed his apparent insolvency to be constituted and a petition for sequestration to be served. If a debtor is seeking to challenge the debt on which a charge proceeds and suspend the charge, he should do so before the expiry of the days of the charge. Other challenges should be mounted before the petition for sequestration is initiated, as in James Finlay Corporation v McCormack 1986 SLT 106. Nonetheless the authorities do not absolutely exclude the possibility of a debtor preventing a sequestration after the expiry of the days of the charge. There may be exceptional circumstances where it is equitable for the Court at this late stage to prevent sequestration taking place to allow a challenge to be made to the debt which is the ground of the apparent insolvency and the application for sequestration. On the basis of the pursuer's averments and submissions I consider that such circumstances exist in this case. [6] Sequestration is a summary process and the policy of the law is both to limit the grounds for opposition to an award once the debtor is apparently insolvent and not to permit dilatory proceedings. (See for example Scottish Milk Marketing Board v A & J Wood 1936 SC 604). The Court will rarely allow challenges to the validity of a debt which founded the charge after the expiry of the days of the charge. Otherwise a debtor would be able to raise a last minute challenge and delay his sequestration, thereby enabling him to keep control of his assets and to dissipate them to the prejudice of the petitioning creditor and his other creditors. [7] In the present case however this mischief does not arise because the pursuer has undertaken to consign the sum of £36,000 to cover the defender's claim for a capital sum and expenses. Under section 12(3A)(b) of the 1985 Act a Court is prevented from awarding sequestration where a debtor pays or satisfies, or gives sufficient security for the payment of the debt in respect of which he became apparently insolvent and any other debt due by him to the petitioning creditor. By undertaking to consign the sum of £36,000, the pursuer is providing the Court with security for the defender's known claims. [8] It appears to me that the pursuer has averred a prima facie case that the grant of the decree of divorce with the orders for financial provision was defective. In relation to the balance of convenience, while the pursuer's delay in advancing the challenge cannot be justified, the interests of the defender can be secured by consignation and the cost of a sequestration and an application for the recall of that sequestration can be avoided. I therefore consider that the balance of convenience favours the grant of interim interdict. [9] I grant the interim interdict on the undertaking by Mr Moir on the pursuer's behalf to consign in the Court of Session the sum of £36,000 within 7 days. As approximately £24,000 of the sum which he undertakes to consign is held in a bank account which the defender has arrested, the undertaking to consign the full £36,000 is conditional upon the defender releasing the arrestment to enable the arrested sums to be consigned. In the event that the defender does not consent to release the arrestment to enable the consignation, the pursuer is to consign in the Court of Session such sum which, taken with the arrested sum, amounts in aggregate to £36,000.
