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647.Paragraph 3 provides that the debtor and creditor are liable for their own expenses in relation to applications, objections, oppositions and hearings under this Part but paragraph 4 allows the sheriff to award expenses against one party in favour of the other if any of these actions are done on frivolous grounds.
648.Section 197 provides that, where any sums are recovered by the money attachment or paid by the debtor while the money attachment is in force, those sums will be ascribed to the following heads of claim in the following order—
the expenses of the money attachment which are chargeable against the debtor;
any interest on the sum due under the decree accrued up to the date of the money attachment;
the sum due under the decree (including interest on that sum which has accrued since the date the money attachment was executed).
649.Section 198 defines what is meant by the expressions used in this Part. Subsection (2) provides the Scottish Ministers with power (exercisable by order subject to negative resolution procedure) to modify the definitions of “decree” and “document of debt”. Subsection (3) makes provision for electronic signatures where any document that requires to be signed under this Part is submitted in electronic form. The signature has to be a certified electronic signature which complies with the requirements of the Electronic Communications Act 2000 (c.7).
650.This section amends section 58 of the 1987 Act so that, where a debtor is subject to both an earnings arrestment and a current maintenance arrestment, those arrestments will rank equally in the deductions from the debtor’s earnings if the debtor’s net earnings are not sufficient to allow deduction of the full amounts due under each. Under section 58(2) as it stood before the amendments made by this section, the earnings arrestment took priority over the current maintenance arrestment.
651.Subsection (1) inserts new subsections (2) to (4) into section 58 in place of subsection (2). These subsections set out formulae which the employer must use to calculate an equal proportion of the available net earnings to satisfy both creditors when both types of arrestment are operating at the same time.
652.Schedule 3 to the 1987 Act makes provision for the disbursement by the sheriff clerk of deductions made by a debtor’s employer under a conjoined arrestment order. Again, under the law before this Act (for which see paragraph 4 of schedule 3), where the sum available for disbursement was not sufficient to allow the full amounts due to each creditor to be paid, priority was given to ordinary debts (i.e. debts which are recoverable by earnings arrestment).
653.Subsection (3) amends paragraph 4 and inserts a new paragraph 4A so that, where the sum available for disbursement is not sufficient, it is divided proportionately among the various creditors rather than priority being given to ordinary debts. Subsection (2) makes a minor amendment of section 63(5)(b) (which deals with how the debtor’s employer calculates the sum to be deducted where a conjoined arrestment order is in effect) to clarify the language of that paragraph.
654.Section 200, among other things, inserts a new section 49A into the 1987 Act.
655.New section 49A provides that any holiday pay which is paid on the same day on which normal earnings are paid is to be treated separately from the normal earnings for the purpose of calculating any deductions to be made under an earnings arrestment. On such a pay-day, the amount to be deducted from the normal earnings is calculated in accordance with section 49 as if the holiday pay had not been paid. A separate calculation is then made to determine the deduction to be made from the holiday pay. The holiday pay is treated broadly as if it were normal earnings relating to the period during with the debtor is on holiday.
656.This makes a change to the previous system under which holiday pay was added to the normal earnings and the deduction was calculated on the basis of that aggregated payment.
657.This section amends sections 47 (earnings arrestments), 51 (current maintenance arrestments) and 60 (conjoined arrestment orders) of the 1987 Act to impose duties on creditors to provide debtors with debt advice and information packages no earlier than 12 weeks before executing diligence against the debtors’ earnings. Subsection (4) also amends section 73 (the interpretation provision for Part 3 of the 1987 Act) to add a definition of “debt advice and information package”.
658.This section amends section 70 of the 1987 Act. Subsection (2) amends section 70(1) to require the judicial officer, when serving an earnings arrestment schedule or a current maintenance arrestment schedule on the employer, to take all reasonably practicable steps to provide a copy of the schedule to the debtor.
659.Subsection (3) inserts new subsections (4A) and (4B) which place a duty on employers on whom an earnings arrestment schedule, a current maintenance arrestment schedule or a conjoined arrestment order is served, in the case of an earnings or current maintenance arrestment, to provide the debtor with a copy of the schedule and, in all cases, to notify the debtor of the date on which the first deduction from salary is to be made together with the amount to be deducted.
660.Section 203 inserts four new sections into the 1987 Act concerned with the provision of information.
661.New section 70A is inserted into the 1987 Act and places a duty on an employer, on whom an earnings arrestment schedule, a current maintenance arrestment schedule or a conjoined arrestment order is served, to provide the debtor, creditor and, in the case of a conjoined arrestment order, the sheriff clerk with certain specified information. It also specifies the dates on which the information is to be provided. The information to be provided is set out in subsection (3) and relates to details of the debtor’s pay and any deductions from it. A power is given to the Scottish Ministers to prescribe, by regulations, other types of information to be provided under this subsection. That power is exercisable by regulations subject to negative resolution procedure. Subsection (5) also imposes a duty on employers, where an arrestment against earnings is in effect to advise the creditor and, in the case of a conjoined arrestment order, the sheriff clerk if the debtor ceases to be employed by the employer and to provide details of any new employer of the debtor if known.
662.This section provides that where an employer fails to notify the creditor when a debtor’s employment is terminated and provide details of any new employment, the sheriff may, on the application by the creditor, make an order requiring the employer to provide whatever information is known by that employer to the creditor. The sheriff may also order the employer to pay the creditor an amount not exceeding twice the amount which that creditor would have received on the debtor’s next pay day had the debtor still been employed by the employer. Subsection (2) provides that payment of this amount will reduce the debt owed to the creditor by the same amount.
663.Under subsection (3) the employer may, within 14 days of the order being made, appeal, on point of law only, to the sheriff principal, whose decision will be final.
664.By virtue of an amendment of section 105 of the 1987 Act by paragraph 16(13)(c) of schedule 5 to this Act, section 70B does not apply to Her Majesty as an employer.
665.This section specifies the information to be provided by the creditor to the employer and, in the case of a conjoined arrestment order, to the sheriff clerk and the dates on which that information is to be supplied. The information to be provided relates to how much of the debt is still outstanding and how much the creditor has received under the arrestment towards paying off that debt.
666.This section provides that a debtor, who is subject to an arrestment against the debtor’s earnings, must notify the creditor and, in the case of a conjoined arrestment order, the sheriff clerk of any change of his or her employer.
667.This section amends section 73(1)(c) of the 1987 Act to make it clear that the references to the sheriff in particular sections of the 1987 Act are to the sheriff who has jurisdiction over (a) the principal place of employment of the debtor, (b) where that principal place of employment is outside Scotland, any other place of employment in Scotland or (c) where neither of the foregoing apply, the debtor’s domicile.
668.By virtue of section 73(3)(c) of the 1987 Act, wages of seamen (other than fishermen) were not treated as earnings for the purposes of earnings arrestments under the 1987 Act (although they could be subject to a current maintenance arrestment). This section repeals section 73(3)(c) of the 1987 Act. This has the effect of removing this exemption. This section also, as a consequence, repeals section 73(4), which contains definitions of “seaman” and “fishing boat” (expressions used in section 73(3)(c)) which are no longer required.
669.Section 206 inserts new Part 3A into the 1987 Act (after section 73). This new Part contains 18 new sections dealing with the diligence of arrestment in execution and the related action of furthcoming.
670.Arrestment is a diligence which allows a creditor to attach a debtor’s moveable property, such as goods or funds (for example, funds held in bank accounts). Arrestment can be used only where these assets are owned by the debtor but are in the possession of a third party. The third party is known as the “arrestee” and is often, in the case of funds, a bank or financial institution. If the assets are in the possession of the debtor rather than a third party then the diligence of attachment (or, in the case of money, money attachment) may be available.
671.Arrestment simply attaches the assets held by an arrestee; it does not transfer ownership of the assets to the creditor. To complete the diligence and have the assets handed over or sold, the creditor must raise an action of furthcoming. In many cases, the formal action of furthcoming is not necessary as the debtor completes a voluntary mandate permitting the arrestee to hand over the assets to the creditor in satisfaction of the debt.
672.The following sections make modifications to certain aspects of the law of arrestment. Those aspects of the law which are unchanged by this Act remain subject to the rules of common law.
673.Section 73A(1) provides that arrestment is permitted only to enforce a court decree (including a summary warrant) or a registered document of debt where the warrant or extract of the decree or document authorises arrestment. “Decree” and “document of debt” are defined in subsection (4). The Scottish Ministers have the power to add, remove or vary these definitions by order made by statutory instrument (subsection (5)). The exercise of this power is subject to negative resolution procedure.
674.Where, however, the decree is a summary warrant, arrestment can be executed only if the debtor has been charged to pay the debt and the period of the charge (14 days, or 28 days if the debtor is outside the UK or the debtor’s whereabouts are unknown) expires without the debt being paid (subsection (2)). In any other case, no prior charge is required before arrestment may be executed. Any existing rule of law relating to the types of decrees or documents on which arrestment can proceed is abolished if the rule is inconsistent with these provisions (subsection (3)).
675.This section enables the Scottish Ministers to prescribe the form of schedule of arrestment to be used. This is only required in an arrestment which has not started out as an arrestment on the dependence of a court action. This power is exercisable by regulations subject to negative resolution procedure.
676.Where a creditor obtains a final decree in the creditor’s favour at the conclusion of a court case and the creditor had arrested property of the debtor on the dependence of the action then, under common law, the arrestment on the dependence automatically becomes an arrestment in execution of the final decree. In these circumstances, section 73C provides that the creditor will be required to serve a copy of the final decree, in the form prescribed in rules of court, on the arrestee. This gives the arrestee notice that the arrestment on the dependence has become an arrestment in execution and may be followed by an action of furthcoming, a voluntary mandate to release the assets held or by the automatic release of funds under new section 73J (see paragraphs 696 to 699 below).
677.Section 73D imposes a duty on a creditor to provide a debtor who is an individual with a copy of the debt advice and information package during a 48-hour period beginning with the service of either a copy of the final decree in favour of the creditor, following an action on the dependence of which the creditor has executed an arrestment, or a schedule of arrestment in a standard arrestment in execution. If the creditor fails to provide the debt advice and information package, the arrestment shall be invalid. The meaning of “debt advice and information package” in the 1987 Act is set out in section 47(4) (inserted by section 201(1) of this Act), as read with section 106 (as amended by paragraph 16(14) of schedule 5 of this Act).
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.
688.New section 73F protects debtors by providing that a minimum level of funds within bank and other accounts cannot be attached by an arrestment.
689.Section 73F applies to both arrestments in execution and arrestments on the dependence providing the arrestment attaches funds of a debtor held by a bank or similar financial institution. It applies only if the debtor is an individual (not a company, partnership or other body or organisation) and the account in question is not a trading account and is not in the name of a company, partnership or other association (subsections (1) and (2)).
690.Subsections (3) and (4) have the effect of preventing the attachment of an amount below the amount which, in an earnings arrestment, cannot be arrested when a person is paid monthly. At the time of the passing of this Act, this amount was set at £370 by the Diligence Against Earnings (Variation) (Scotland) Regulations 2006 (S.S.I. 2006/116). This amount can, however, be varied by the Scottish Ministers under the power conferred upon them in section 49(7)(a) of the 1987 Act (the functions of the Lord Advocate were transferred to the Secretary of State (by virtue of the Transfer of Functions (Lord Advocate and Secretary of State) Order 1999 (S.I. 1999/678) and to the Scottish Ministers by virtue of section 53 of the Scotland Act 1998). So, where the sum held by the arrestee is more than that amount, only the funds over that amount can be attached by an arrestment. If the sum in the debtor’s account is less than that amount, no funds are attached.
691.Subsection (5) defines what is meant by “bank or other financial institution”.
692.Under subsection (6), the Scottish Ministers may modify the types of account or vary any descriptions of the types of account that section 73F applies to. Also the definition of “bank or other financial institution” may be modified by the Scottish Ministers to add or remove types of financial institution or vary any of the descriptions of the types of institution. These powers are exercisable by regulations subject to the negative resolution procedure.
693.New section 73G places a duty on arrestees to disclose to an arresting creditor the existence of and the value of assets attached by an arrestment. Where nothing is arrested, there is no requirement for the arrestee to provide a “nil” return. The disclosure has to be submitted in the prescribed form within 3 weeks of the date on which the schedule of arrestment is served on the arrestee. A copy of the disclosure must be sent to the debtor and to any person known to the arrestee who owns or claims to own (in common or wholly) the attached property, or to whom attached funds are, or are claimed to be, due (in common or wholly).
694.Section 73H(1) provides that, where an arrestee fails to make a disclosure under section 73G, the sheriff may, on the application of the creditor, order the arrestee to pay the creditor the lesser of either the sum due by the debtor to the creditor or the amount which represents the minimum protected balance in bank accounts which are subject to an arrestment (at the time of the passing of this Act, £370).
695.Subsection (2) provides that in the case of an arrestment on the dependence of an action, the sanction in subsection (1) cannot be applied until the creditor has served a copy of the final decree in the action (see section 73C). The failure to disclose information can be treated as a contempt of court in arrestment on the dependence cases. Contempt of court is punishable by any of, or a combination of, admonition, fine and (in extreme cases) imprisonment or detention.
696.Where the arrestee pays over a sum ordered under subsection (1) following a failure to disclose information, subsection (3) provides that the amount paid reduces the debt owed by the debtor to the creditor by that amount and the arrestee is not allowed to recover that amount from the debtor.
697.Subsection (4) gives an arrestee a right of appeal against an order to pay money to the creditor following a failure to disclose information. The appeal must be made to the sheriff principal within 2 weeks of the date of the order and can only be on a point of law. There is no further right of appeal.
698.New section 73J provides for a procedure by which a creditor can obtain arrested funds automatically after the expiry of defined period. Where funds are released under this procedure there is no need for an action of furthcoming or for the debtor to grant a mandate to release funds.
699.Subsection (1) states that the automatic release of funds can apply only when the arrestment is an arrestment in execution (even if it originally was an arrestment on the dependence) and it attaches funds held by the arrestee and owing to the debtor.
700.The automatic release of funds under this section is to take place at the end of the period of 14 weeks starting on the date of the service of the schedule of arrestment or (if the arrestment was originally executed on the dependence) the date of service of the copy of the final decree. The arrestee can release the funds before the automatic release period has expired if those with an interest in the attached funds authorise the arrestee to do so, by way of a mandate. Automatic release may be prevented by any of the events mentioned in new section 73L(1).
701.Subsection (4) makes it clear that any references in this section and in sections 73K to 73P (which make provision related to automatic release of funds) to funds or sums due do not include references to funds or sums due in respect of future or contingent debts. As mentioned above at paragraphs 681681 and 682682, future and contingent debts are arrestable. (Ascertainable future debts being arrestable according to the formula set out in section 73E and unascertainable future and contingent debts being arrestable at common law). Accordingly, any arrestment of funds or sums due in respect of future or contingent debts cannot be completed by automatic release. Instead an alternative means of realising the arrestment such as a voluntary mandate or action of furthcoming must be pursued.
702.New section 73K states how to calculate the amount which is to be released under the automatic release procedure. The sum to be released must be the lowest of—
the sum attached by the arrestment (which is calculated under section 73E and may be limited by the protected minimum balance provisions in section 73F);
the amount the arrestee holds on behalf of the debtor (excluding any funds or sums relating to future or contingent debts); or
the sum calculated under a formula similar to that set out in section 73E(2)(b) but without any amount representing the average costs of an action of furthcoming (which is not needed if the funds are released) and limiting the interest charged to interest up to the date of release (rather than 1 year’s interest as under section 73E(2)(b)).
703.Section 73L(1) sets out the circumstances which prevent an arrestee automatically releasing funds under section 73J. The circumstances are—
that the arrestee or debtor or any other person to whom funds are due solely or in common with the debtor applies, by notice of objection under section 73M, to the sheriff;
the debtor makes a hardship application for release of funds or property under section 73Q(2);
an action of multiplepoinding is raised (which is an action where there are competing claims as to ownership of attached property held by an arrestee, for example more than one creditor of the debtor attempts to arrest the funds); or
the arrestment is recalled or restricted or otherwise ceases to have effect. An arrestment may be recalled where, for example, the debt in relation to which it has been effected is paid. Recall or restriction can also occur by order of the sheriff where a time to pay order is applied for under Part I of the 1987 Act.
704.This section provides for the way in which notices of objection to automatic release are dealt with. Debtors, arrestees and third parties may apply to the sheriff by notice of objection for an order recalling or restricting the arrestment of funds.
705.Any objection to automatic release must be on the grounds that the warrant in execution of which the arrestment was executed is invalid, or that the arrestment has been executed improperly or irregularly, or that the funds are due to a third party wholly or in common with the debtor (subsection (4)). Any objection must be made in the form to be prescribed in court rules and must be made within 4 weeks of the schedule of arrestment (or, in the case of an arrestment which was originally on the dependence, the copy of the final decree) being served. The notice must also be given to the creditor, the debtor, the arrestee and any other third party with an interest, known to the person objecting.
706.Subsection (5) prevents any debtor, arrestee or third party, who has raised a notice of objection to the automatic release of attached funds, from raising an action of multiplepoinding or other court action in respect of those funds (for example, an action of furthcoming). There are three exceptions to this which are detailed in subsections (6) and (7). A party who has objected to the automatic release may raise a multiplepoinding or other proceedings where the sheriff makes an order under section 73N(5) sisting the proceedings on the objection. The sheriff might do this where there are complex competing claims to the ownership of the property which would be more appropriately resolved in a multiplepoinding. An objecting party can also enter into an action of multiplepoinding or other proceedings raised by another party.
707.A debtor who has objected to automatic release may, under subsection (7), also apply to the sheriff for release of funds or property because of undue hardship. Where this happens, the sheriff can hear both cases at the same time to ensure the effective use of court time.
708.Section 73N(1) provides that the sheriff shall, subject to the circumstances set out in subsection (5), hold a hearing where the automatic release of attached funds is objected to by the debtor, the arrestee or a third party claiming to be due the attached funds (whether solely or in common with the debtor). The hearing must be held within 8 weeks of the day the notice of objection was given to the interested parties. Subsection (2) provides that, before the sheriff can make an order, the creditor, the arrestee, the debtor and any interested third party have the right to be heard at the hearing.
709.Under subsection (3), the sheriff can make an order recalling or restricting the arrestment where the sheriff is satisfied that the objection is upheld.
710.The sheriff can reject the application and order the release of funds to the creditor on the expiry of the 14 week period or, where it has already expired, the release as soon as is reasonably practicable after the date on which the order is made (subsection (4)). Even although the court requires to hold a hearing within 8 weeks of the day on which an objection is made, it is possible that the hearing may not conclude prior to the 14 week time limit for automatic release expiring. The court can still deal with the merits of the case if for any reason it is not possible to determine an application within the 14-week period.
711.Subsection (5) provides that where the sheriff is satisfied that it is more appropriate for the matters raised at the objection hearing to be dealt with by an action of multiplepoinding or other proceedings, the sheriff may make an order sisting the proceedings on the objection. That means effectively putting the objection hearing proceedings “on hold” pending the outcome of the multiplepoinding or other proceedings. The sheriff must also sist the objection proceedings if any multiplepoinding or other proceedings are raised, provided they are raised before a decision is made in respect of the objection application.
712.In addition to making an order recalling or restricting the arrestment, an order for release of funds or an order to sist the proceedings, the sheriff is able to make any other order which the sheriff considers appropriate under subsection (6).
713.Subsection (7) provides that the objector (on order of the sheriff) must inform the creditor, arrestee, debtor and any interested third party of the sheriff’s decision on the application. Subsection (8) provides that any party who objects to the decision of the sheriff is able to appeal to the sheriff principal within 14 days of the decision. The appeal may be on a point of law only and the decision of the sheriff principal is final.
714.Further procedure on hearing objections will be set out in rules of court.
715.Section 73P makes it clear that arrestees are not liable to the debtor or any other interested party where they release funds in good faith to a creditor because the arrestee was unaware that the warrant in execution of which the arrestment was executed was invalid or the arrestment was incompetently or irregularly carried out.
716.Section 73Q gives a debtor upon whom an arrestment in execution has been effected (including an arrestment in execution which has started life as an arrestment on the dependence of an action in which the creditor has been successful) and has attached moveable property or funds, the right to apply to the sheriff for an order to be made on the grounds of hardship. This right can be exercised at any time during which the arrestment has effect. For an arrestment of funds to which the automatic release process applies, such an application would require to be made prior to the expiry of the 14 week period for automatic release set out at section 73J(3) or the funds would be automatically released to the creditor.
717.The debtor is able to apply for an order which stops the effect of the arrestment in relation to some or all of the funds and/or property attached and requiring the arrestee to release some or all of the funds and/or property.
718.The application must be in the form prescribed by rules of court and must be copied to persons with an interest, in particular, the creditor and the arrestee.
719.Following an application by a debtor under section 73Q, the sheriff may, if satisfied that the arrestment is unduly harsh to the debtor or any other person listed in this section (certain family members), and taking into account the circumstances of the case, make an order for the release of some or all of the arrested funds or moveable property. A sheriff could, for example, take into account whether the arrested funds or some of them were needed by the debtor for what might be termed “essential services” such as to pay a carer or to pay rent.
720.Where funds are attached, the sheriff must, in particular, consider the source of the funds (for example, whether any funds to the credit of a debtor in a bank account derive from state benefits or tax credits) and whether there is already a diligence in effect in relation to those funds, such as an earnings arrestment.
721.Where the sheriff refuses to make a hardship order the sheriff may, where funds are attached, order the automatic release of funds on the expiry of the 14 week period set out in section 73J(3) or, where that period has already passed, as soon as reasonably practicable after the date on which the order to release is made.
722.Where someone wishes to appeal against the decision of the sheriff (for example an aggrieved debtor or creditor), they have 14 days to do so after the decision is made. An appeal may be made to the sheriff principal on a point of law only and the decision of the sheriff principal is final.
723.Section 73S formalises the voluntary mandate which will enable the arrestee to release arrested funds or other property to creditors without having to proceed to an action of furthcoming. The mandate must now be in a form prescribed by the Scottish Ministers by regulations. If a mandate is not in the prescribed form it is invalid. Subsection (3) provides that where a mandate is invalid but the arrestee pays over funds or hands over property, the arrestee is not liable to the debtor or any other interested party for financial loss caused by releasing the funds or property provided the arrestee acted in good faith (for example, the arrestee did not know and could not reasonably have known that the mandate was not in the proper form).
724.This section makes clear that the provisions of this Part of the Act do not apply to the arrestment of ships, cargo or other maritime property which are subject to special rules (see, in particular, Part V of the Administration of Justice Act 1956 which is amended by Part 14 of and schedule 4 to this Act).
725.Section 207(1) abolishes the diligence of maills and duties which enabled creditors who had a security over heritable property to recover rents due from tenants of that property. For instance, where a creditor had a security over a debtor’s land and the debtor had let the land to a tenant, the creditor could raise an action of maills and duties to attach the rent due from the debtor’s tenant. An action for maills and duties was not available to creditors holding standard securities and was therefore not widely used.
726.Subsection (1) also ensures that any legislative provision or rule of law relating to maills and duties no longer has effect.
727.Subsection (2) limits the effect of the abolition by providing that it does not affect any action of maills and duties which has been commenced prior to this section coming into force.
728.Consequential repeals (of obsolete provisions containing references to maills and duties) are included in schedule 6.
729.Under the common law a landlord has a right in security over certain moveable property situated in land or buildings which the landlord has let. The security is known as the landlord’s hypothec and it secures 1 year’s rent due from a tenant. Before the coming into force of this section it would last for 3 months after the last due date for payment of that rent. The security could be enforced by an action of sequestration for rent provided it were raised before the end of that 3 months. The action attached the goods secured by the hypothec and permitted the landlord to obtain warrant to sell the goods in satisfaction of the rent. This action was available to a landlord in addition to any other diligence such as attachment or arrestment which would also be available to the landlord as a creditor of a tenant.
730.Section 208(1) abolishes the diligence of sequestration for rent and subsections (2) to (9) and (11) make various changes to the law relating to the landlord’s hypothec as a consequence.
731.The abolition of sequestration for rent does not affect any action for sequestration for rent brought before this section comes into force but the provisions in subsections (4) to (7) limiting the property which is subject to the landlord’s hypothec and therefore attachable by sequestration for rent will apply to existing actions (subsection (10)).
732.Subsection (2) preserves the landlord’s hypothec and makes clear the nature of the security it confers. It continues as a real right in security over corporeal moveable property and as a result it gives the landlord an appropriate ranking relating to property over which it confers a security. “Insolvency proceedings” for the purposes of subsection (2) are defined in subsection (12).
733.Subsection (3) clarifies the limitations on the landlord’s hypothec and abolishes it as a security over property kept in a dwellinghouse, on agricultural land or on a croft. A “dwellinghouse” for this purpose includes a mobile home, caravan or houseboat used as a dwelling.
734.Under subsection (4), the hypothec will no longer arise in relation to property owned by a person other than the tenant.
735.Subsection (5) provides that the hypothec does not affect any property which is acquired by a third party from the tenant in good faith or, where a landlord has interdicted a tenant from disposing of property subject to the hypothec, any property bought in good faith and for value by a third party from a tenant. But if property is sold by a tenant in breach of an interdict, the tenant remains liable for the breach despite the property no longer being subject to the hypothec due to subsection (5)(b).
Bankruptcy and Diligence etc (Scotland) Act 2007