Sheriff Court case concerning a petition for sequestration of a debtor by Glasgow City Council.

In terms of the Bankruptcy (Scotland) Act 1985[1], sequestration will not be awarded in favour of a creditor where the debtor “forthwith pays or satisfies, or produces written evidence of the payment or satisfaction of, or gives or shows that there is sufficient security for [the debt]”.

In this case the sheriff accepted an argument by the debtor that, because the Council held a standard security over subjects owned by the debtor’s brother in law, the debtor had shown that there was “sufficient security for payment of” the debt in question and refused the petition for sequestration.

That decision was appealed by the Council which argued that, in terms of the relevant provision of the 1985 Act, the debtor had to show not only that a security covering the debt existed but also that the security was capable of immediate realisation so as to lead to payment of the debt without undue delay. In that regard, Council pointed to the fact that the standard security in this case had been granted by a party other than the debtor and that the subjects secured were residential (meaning various statutory pre-actions requirements would have to be carried out before the security could be realised) thus leading to a delay in payment of the debt.

The Sheriff Principal found that the authorities supported the Council’s argument, allowed an appeal of the sheriff’s decision and awarded the sequestration.

 “Sufficient security for the payment of the debt, in my opinion, means a form of security which, by its nature, brings about immediate payment or guarantees such payment…”

 The full judgement is available from Scottish Courts here.

All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.

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[1] Section 12(3A)(b).