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Bankruptcy and Diligence etc. (Scotland) Act 2007

New section 73E – Funds attached

678.New section 73E provides rules to limit the sums that may be attached by an arrestment in execution which secures sums held by the arrestee (for example, a credit balance in a bank account in the debtor’s name).

679.This section changes the common law for most arrestments under which the words “more or less” in the arrestment schedule of a validly executed arrestment in execution attach the whole of the debtor’s moveable property in the possession of the arrestee rather than merely enough property to cover the value of the debt due by the debtor to the arresting creditor. That rule operates regardless of the size of the actual debt due.

680.Subsection (1) sets out the circumstances in which the rules in this section apply. For this section to apply to arrestment in execution of a decree there must not have been an arrestment on the dependence of the action in which the decree is granted. The sum attached in those cases is determined at the point at which the arrestment on the dependence is granted (see section 15H of the 1987 Act inserted by section 169 of this Act). Paragraph (b) clarifies that this section applies to an arrestment only to the extent that the arrestee holds funds due to the debtor which are of an ascertainable amount at the time the arrestment is executed. Also, it applies where the arrestee holds the debtor’s funds, even where the arrestee also holds other moveable property belonging to the debtor.

681.Debts can be classified as “pure”, “future” or “contingent”. A pure debt is one which is currently due and can be demanded immediately. For example, the obligation of a bank to an account holder in respect of sums due on a current account. Future debts are an obligation to pay a debt on a certain future date or on the occurrence of an event which must occur. For instance, an obligation to pay a building contractor on completion of a 12 month contract. A contingent debt is a debt which depends on the occurrence of an uncertain future event. For example, the right of an insured car owner to be indemnified by an insurer against a third party claim for damage to a vehicle in a car accident, caused by the insured where the third party has not yet raised a court action for damages, is a contingent debt.

682.Under common law, all of these types of debt are arrestable. However, contingent debts are arrestable only where the right to the debt has vested in the common debtor. It is arrestable for what it may ultimately prove to be worth. Accordingly, pure debts are of an ascertainable amount, future debts may be of an ascertainable amount (although some may not be if they increase, say, in accordance with rising interest rates). Contingent debts, on the other hand, are unascertainable as there is no guarantee that the contingency will be purified.

683.This section, in dealing only with debts to the extent that they are ascertainable, deals only with pure debts and any future debts of an ascertainable amount. For future debts which are not of an ascertainable amount and all contingent debts, the common law applies. That means, rather than the formula set out in subsection (2) applying, because the debt is unascertainable, a sum will be arrested under common law “more or less” for the amount of the debt owed, plus any expenses.

684.For ascertainable debts, subsection (2) provides that the funds attached by the arrestment will be the lesser of—

  • the sum held by the arrestee on the debtor’s behalf (referred to as the debt due to the debtor by the arrestee because a sum of money held, for example, by a bank in a person’s account is in fact a debt owed by the bank to the person for the balance in the account); or

  • the sum arrived at by the formula set out in paragraph (b). The formula requires adding up the amount of the principal sum claimed in the decree or document, any expenses chargeable against the debtor under the decree or document, the expenses of carrying out the arrestment, interest on the principal sum up to and including the date of the arrestment plus interest that may accrue in the year following that and interest on the expenses of the arrestment itself plus an amount to be specified by the Scottish Ministers in regulations which approximates to the average expenses chargeable against a debtor in an action of furthcoming.

685.If the amount held by the arrestee is not enough to cover the sum arrived at under the subsection (2)(b) formula and the arrestee also holds other moveable property belonging to the debtor, subsection (4) provides that the arrestment will attach all the moveable property of the debtor held by the arrestee in addition to any funds due to the debtor and held by the arrestee. Subsection (5) provides that in any other case (in other words, where the amount of money held by the arrestee is enough to cover the amount arrived at in the subsection (2)(b) formula) the arrestment will not attach any other moveable property and attaches only the amount of money arrived at under subsection (2).

686.Subsection (6) ensures that the sum attached under section 73E(2) will only include ascertainable debts and that, in this situation, the creditor cannot unnecessarily attach additional funds relating to unascertainable debts under common law. Where the sum attached in the hands of the arrestee is the amount due in respect of the debt, there is no need to allow attachment of additional funds, otherwise the creditor would attach funds unnecessarily to the detriment of the debtor. There may, however, be circumstances where the arrestee owes unascertainable debts to the common debtor which the creditor ought to have the right to arrest in addition to ascertainable debts to make up the amount of the debt, interest and expenses owed to the creditor. Subsection (6) does not prevent an additional amount of unascertainable debts being attached under common law in those circumstances.

687.Note that any amount of money attached by this section may be reduced by the provisions of new section 73F.

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