Bankruptcy and Diligence etc (Scotland) Bill: Stage 2
As we have a lot to get through, let us suspend the suspension and get on with business. This is day 6 of stage 2 consideration of the Bankruptcy and Diligence etc (Scotland) Bill. I welcome the minister and his team once again.
Section 134 agreed to.
After section 134
Amendment 317, in the name of the minister, is grouped with amendments 372, 373, 439, 441 and 442.
The amendments in this group relate to the Scottish Executive's debt advice and information package. If agreed, the amendments will extend the use of the debt advice and information package to inhibition in execution and diligence against earnings and improve the way in which the package is used.
The bill already extends the use of the package to land attachment, residual attachment and money attachment. It also changes the Debt Arrangement and Attachment (Scotland) Act 2002 so that the way in which the package is used for attachment is consistent with the changes brought in by the bill.
The bill provides for the package to be given to all debtors including companies and partnerships. It says that the creditor must provide the package on or before service of a charge for payment. However, the package is aimed at individuals and is of little use to companies and the like. A further issue is that a charge to pay lasts for two years and authorises any number of diligences in that period. The debtor therefore needs the information at a time when it is useful, which means that, where possible, the package should be provided no earlier than 12 weeks before enforcement.
Amendment 317 extends the use of the package to inhibition in execution where the decree is for payment of money, or for payment of money if the obligation is not met—for example, a decree for delivery of furniture within six months, failing which the debtor must pay £2,000. For inhibition, the package is served at the same time as the inhibition is effected and not up to 12 weeks earlier, in order to keep an element of surprise for the creditor. Inhibition is a freeze diligence and the creditor will not be able to force the sale of inhibited property other than by land attachment, so the debtor still has a chance to seek advice after an inhibition has been executed.
Amendments 272, 373, 441 and 442 provide that, for money attachment and other attachment, the package is to be provided to individuals no earlier than 12 weeks before those diligences are used. If those amendments are agreed to, I will lodge further amendments at stage 3 to make the same changes for land attachment and residual attachment.
Amendment 439 extends the use of the package to earnings arrestment, current maintenance arrestment and conjoined arrestment orders. The package is to be given to the debtor no earlier than 12 weeks before the diligence is used or, in the case of a conjoined arrestment order, an application for an order is made to the court.
I move amendment 317.
Amendment 317 agreed to.
Sections 135 to 143 agreed to.
Section 144—Inhibition terminated by payment of full amount owing
Amendment 318, in the name of the minister, is grouped with amendments 350 to 353, 355, 374, 376 to 404, 407, 409 to 418, 420, 424 to 426, and 428 to 437.
The amendments in this group continue the process of change in the name of the new court enforcement and citation officer profession from "messenger of court" to "judicial officer" in parts 5 to 8 of the bill.
I move amendment 318.
Amendment 318 agreed to.
Section 144, as amended, agreed to.
Sections 145 to 153 agreed to.
Section 154—Keeper's duty to enter inhibition on title sheet
Amendment 319, in the name of the minister, is grouped with amendment 320.
If land in the land register that is subject to an inhibition is sold or burdened, then the keeper will not guarantee a good title in the usual way. The keeper was good enough to comment on the changes to inhibition in the bill as introduced to make sure that they are fit for purpose. The amendments respond to his comments and, if agreed, will make the reform of inhibition more effective.
The bill provides for new subsection (1A) of section 6 of the Land Registration (Scotland) Act 1979. It clarifies that an inhibition need only be noted in the title sheet of land when a transfer is adverse to that interest.
Interests—for example, a new security—can be created as well as transferred. It should be made clear that the keeper need only note an inhibition when an interest is created adverse to the inhibition. Amendment 319 makes the necessary change.
An inhibition that is discharged no longer enables the creditor to strike down any deed in relation to the debtor's land. Similarly, if an inhibition is restricted to one piece of land owned by a debtor, other land that the debtor owns is not affected.
The current practice of the keeper, when he is aware of the discharge or restriction of an inhibition, is not to enter details of the change on a title sheet but simply to remove the inhibition as needed from the title sheets of all land owned by the debtor. The keeper does not need to be asked to amend the title sheet. His general duty to maintain title sheets under the 1979 act will ensure that title sheets are changed and there is therefore no need for the express new right for people to apply for changes to be made. It follows that new subsection (1B) of section 6 of the 1979 act, as inserted by section 154 of the bill, is not needed. Amendment 320 removes it.
I move amendment 319.
Amendment 319 agreed to.
Amendment 320 moved—[Allan Wilson]—and agreed to.
Section 154, as amended, agreed to.
Section 155 agreed to.
Section 156—Diligence on the dependence
Amendment 321, in the name of the minister, is grouped with amendments 322 to 331 and 339 to 349.
The amendments in this group are all intended to clarify exactly how the provisions in relation to granting warrants for diligence on the dependence and interim attachment work together.
New sections 15D, 15E and 15F of the Debtors (Scotland) Act 1987, as introduced by section 156 of the bill, set out a new procedure for applications to the court for a warrant for diligence on the dependence. New, section 15D provides for an application to the court, new section 15E provides for the grant of a warrant without a hearing, and new section 15F provides for the grant of a warrant after a hearing. Amendments 321 to 330 insert cross-references into those sections to make it clear that they need to be read together. Amendment 331 provides for the creditor rather than the court to intimate the grant or refusal of a warrant for diligence on the dependence to the debtor and any other person appearing to the court to have an interest.
New sections 9C, 9D and 9E of the Debt Arrangement and Attachment (Scotland) Act 2002, as introduced by section 160 of the bill, set out the same procedure for applications to the court for a warrant for interim attachment as is provided for diligence on the dependence. Amendments 339 to 348 therefore insert new cross-references into those three sections to make it clear that they, too, need to be read together. Amendment 349 provides for the creditor rather than the court to intimate the grant or refusal of a warrant for interim attachment to the debtor and any other person appearing to the court to have an interest.
I move amendment 321.
Amendment 321 agreed to.
Amendments 322 to 331 moved—[Allan Wilson]—and agreed to.
Amendment 332, in the name of the minister, is grouped with amendments 333 to 338 and 362 to 368.
Part 6 of the bill reforms inhibition on the dependence and arrestment on the dependence, which are the existing diligences that creditors can use to get a security during a court action for payment of any money that is found due at the end of an action.
Part 7 introduces interim attachment, which is a new diligence on the dependence. It allows the creditor to secure a claim in a pending court action over moveable goods that are owned and held by the debtor.
The amendments in this group will improve the way in which the courts deal with applications for recall or restriction of warrants for diligence on the dependence; recall or restriction of an inhibition, arrestment or attachment that has followed from such a warrant; and removal or variation of any condition that the court has imposed on the debtor when refusing to grant, or recalling or restricting, such a warrant.
Amendment 332 will provide for the form of an application for the recall or restriction of a warrant for inhibition or arrestment on the dependence, or any inhibition or arrestment that is in effect, to be set out in court rules. It will also provide that the debtor must intimate the application to the creditor and any person with an interest, and that the court shall not make an order without giving all persons with an interest a chance to be heard.
Amendments 333 and 334 will provide that the court shall recall any incompetent inhibition or arrestment on the dependence.
Amendment 335 will clarify that, when an application is made for recall or restriction, the court must have regard to whether it is reasonable for a warrant for inhibition or arrestment on the dependence, or an inhibition or arrestment executed in pursuance of such a warrant, to remain in place.
Amendments 362 to 367 will make more or less identical changes to part 7, on interim attachment.
Amendments 336 and 368 will make provision in relation to diligences on the dependence and interim attachment. If the court makes an order recalling or restricting a warrant or a diligence under a warrant, the debtor shall intimate that order to the creditor and any other person with an interest.
I move amendment 332.
Amendment 332 agreed to.
Amendments 333 to 338 moved—[Allan Wilson]—and agreed to.
Section 156, as amended, agreed to.
Sections 157 to 159 agreed to.
Section 160—Interim attachment
Amendments 339 to 353 moved—[Allan Wilson]—and agreed to.
Amendment 354, in the name of the minister, is in a group on its own.
Amendment 354 will give the court a new power to manage goods that are attached during an action as security for any payment that is found due by the court. Court actions can last for months, and goods that are subject to an interim attachment cannot be moved by the debtor. However, it might sometimes be sensible to move attached goods. For example, goods might be at risk of damage if the place where they were attached is no longer safe because of storm damage. Anyone with an interest should be able to ask the court to make an order for security of the attached goods. Such an order could allow the debtor to move the goods from a damaged building to one in good repair. The court should of course not make such an order without giving everyone with an interest a chance to have their say.
Amendment 354 will therefore enable the court, on the application of the debtor, the creditor or the judicial officer, to order the safekeeping of any attached article. The person who makes the application will have to intimate it to the other two interested parties, who will be given a chance to be heard before a decision is made.
I move amendment 354.
Amendment 354 agreed to.
Amendment 355 moved—[Allan Wilson]—and agreed to.
Amendment 356, in the name of the minister, is grouped with amendments 357 to 361.
Amendments 356 to 361 will clarify the circumstances in which and for how long an interim attachment is able to continue after the court disposes of the action in which the interim attachment was executed. That is necessary, because, as I said, interim attachment is a freeze diligence only, which provides a security over corporeal moveable property in the hands of the debtor, pending the outcome of a creditor's court action.
A creditor who has executed an interim attachment and to whom the court finds payment is due at the end of the action can use an attachment of the property to enforce the debt. The expenses of the interim attachment can be enforced only by attachment. The interim attachment should therefore continue to have effect after the end of the action in some circumstances, to retain the creditor's security over the goods and to give the creditor a chance to attach them.
The bill provides only for the attachment to stay in force when the court grants decree for payment of all or part of the sum sued for. However, there are two further situations in which a creditor might want to attach the goods that are subject to an interim attachment. One is when the decree is for a remedy as an alternative to payment of money. For example, a creditor could seek a court decree for delivery of goods, with an alternative remedy of payment of money if the goods are not delivered. In that situation, the creditor would wish to attach the goods subject to the interim attachment, where the debtor fails to deliver them.
The other situation is when the court orders the debtor to pay the expenses of executing the interim attachment, which it can do even if the creditor loses on the merits of the action. The Scottish Law Commission recommended that the court should have that power, because an interim attachment will be granted only where the creditor persuades the court that there is a good reason for doing that. Amendments 357 and 358 therefore ensure that the interim attachment can stay in effect for up to six months on all occasions when it is fair to give a creditor the chance to attach goods that are subject to an interim attachment.
Amendments 356 and 359 are minor technical amendments. Amendment 360 is a minor amendment consequential on amendment 357. Amendment 361 clarifies the procedure that is to be used when a creditor asks the court to extend the six-month life of an interim attachment after final disposal of the action. It includes a new duty on the creditor to intimate the application for extension to interested parties and for the application form to be prescribed in court rules.
I move amendment 356.
Amendment 356 agreed to.
Amendments 357 to 368 moved—[Allan Wilson]—and agreed to.
Amendment 369, in the name of the minister, is grouped with amendments 370 and 371.
The bill provides that the expenses of executing an interim attachment shall, if due to be paid by the debtor, be recovered only by an attachment in execution. This is one of a number of similar debtor protections in the bill. It is intended to draw a line under the cost of any one interim attachment, when it is completed by an attachment in execution. The aim is to discourage creditors from using "fishing" diligences in the hope of catching something, safe in the knowledge that the debtor will have to pay the costs regardless of whether any money is recovered.
The bill provides for a new section 9P of the Debt Arrangement and Attachment (Scotland) Act 2002. In the bill as introduced, subsection (1) of new section 9P of the 2002 act states that the expenses of an interim attachment are recoverable only by attachment in execution of a decree granted by virtue of the request for a court order in respect of which a warrant for interim action was granted. Subsection (1) is intended to cover two possible situations. Amendments 369 and 370 therefore provide that subsection (1) applies both to payment decrees and to other decrees, such as an order for delivery of goods, that are due to the creditor.
Amendment 371 is a minor consequential amendment that changes new section 9P(1)(b) of the 2002 act so that it, too, can be read as covering more than one type of decree.
I move amendment 369.
Amendment 369 agreed to.
Amendments 370 and 371 moved—[Allan Wilson]—and agreed to.
Section 160, as amended, agreed to.
Section 161—Money attachment
Amendments 372 and 373 moved—[Allan Wilson]—and agreed to.
Section 161, as amended, agreed to.
Section 162 agreed to.
Section 163—When money attachment not competent
Amendment 374 moved—[Allan Wilson]—and agreed to.
Amendment 375, in the name of the minister, is grouped with amendments 408 and 419.
It would not be right to give judicial officers an unrestricted right to keep going back to the same place to attach money for the same debt. Section 163 is therefore intended to prevent creditors from attaching more than once at the same place for the same debt unless there is a good reason for doing so.
The bill allows further attachments at the same place for the same debt if new money has been taken to that place—by that, I mean money that is taken there after the first money attachment. It also allows a further attachment of any money, including new money, when the court orders a money attachment to cease because the attachment is unduly harsh to a third party who owns the money in common with the debtor. However, the bill should take due account of other situations in which the court orders that a money attachment should cease and that attached money should be released to someone else who is its owner. In such circumstances, it would be fair to let judicial officers go back to the same place to attach further money that belongs to the debtor whether or not it is new money. In particular, judicial officers should be able to go back if the court orders the release of money when it is satisfied under sections 170 and 173 that it belongs to someone other than the debtor. Amendments 375, 408 and 419 will, if agreed to, have that effect.
I move amendment 375.
Amendment 375 agreed to.
Section 163, as amended, agreed to.
Section 164—Removal of money attached
Amendments 376 to 383 moved—[Allan Wilson]—and agreed to.
Section 164, as amended, agreed to.
Section 165—Presumption of ownership
Amendments 384 to 388 moved—[Allan Wilson]—and agreed to.
Section 165, as amended, agreed to.
Section 166—Schedule of money attachment
Amendments 389 to 392 moved—[Allan Wilson]—and agreed to.
Section 166, as amended, agreed to.
Section 167—Valuation of banking instruments
Amendments 393 and 394 moved—[Allan Wilson]—and agreed to.
Section 167, as amended, agreed to.
Section 168—Order for realisation of money likely to deteriorate in value
Amendments 395 to 397 moved—[Allan Wilson]—and agreed to.
Section 168, as amended, agreed to.
Section 169—Report of money attachment
Amendments 398 to 403 moved—[Allan Wilson]—and agreed to.
Section 169, as amended, agreed to.
Section 170—Creditor's application for payment order
Amendment 404 moved—[Allan Wilson]—and agreed to.
Amendment 405, in the name of the minister, is grouped with amendments 406, 421 to 423 and 427.
Section 174 provides that a sheriff must make an order that a money attachment ceases to have effect if the creditor does not apply for a payment order. Section 175 provides that a money attachment ceases to have effect if the debtor either pays the sum recoverable under the attachment or offers payment and the creditor unreasonably refuses the offer.
If they are agreed to, the amendments in the group will improve the way in which the bill provides for an attachment to cease to have effect in the circumstances that are covered by sections 174 and 175.
Amendment 422, which is the substantive amendment in the group, seeks to do two things. First, it seeks to provide that a money attachment automatically ceases to have effect if the creditor does not apply for a payment order. That will relieve the court of an unnecessary and unusual duty to make an order that an attachment ceases to have effect when no application for an order has been made. Secondly, it seeks to move the content of what is now section 175 into an expanded section 174 in order to put into one place provisions that have a common theme. In addition, the amendment makes it clear that, when an attachment is terminated as the result of a payment or an offer of a payment, the officer must return the attached money to the debtor.
Amendment 423 seeks to omit section 175, which is no longer needed. Amendments 405, 406 and 427 are minor consequential amendments that are needed as a result of the omission of section 175.
I move amendment 405.
Amendment 405 agreed to.
Amendments 406 to 408 moved—[Allan Wilson]—and agreed to.
Section 170, as amended, agreed to.
Section 171—Effect of payment order
Amendments 409 to 413 moved—[Allan Wilson]—and agreed to.
Section 171, as amended, agreed to.
Section 172—Release of money where attachment unduly harsh
Amendments 414 to 417 moved—[Allan Wilson]—and agreed to.
Section 172, as amended, agreed to.
Section 173—Invalidity and cessation of money attachment
Amendments 418 to 420 moved—[Allan Wilson]—and agreed to.
Section 173, as amended, agreed to.
Section 174—Effect of creditor's failure to apply for payment order
Amendments 421 and 422 moved—[Allan Wilson]—and agreed to.
Section 174, as amended, agreed to.
Section 175—Money attachment terminated by payment, etc
Amendment 423 moved—[Allan Wilson]—and agreed to.
Section 176—Redemption of banking instrument
Amendment 424 moved—[Allan Wilson]—and agreed to.
Section 176, as amended, agreed to.
Section 177—Final statement of money attachment
Amendments 425 to 433 moved—[Allan Wilson]—and agreed to.
Section 177, as amended, agreed to.
Section 178 agreed to.
Section 179—Money in common ownership
Amendments 434 to 436 moved—[Allan Wilson]—and agreed to.
Section 179, as amended, agreed to.
Sections 180 to 184 agreed to.
Schedule 3
Expenses of money attachment
Amendment 437 moved—[Allan Wilson]—and agreed to.
Schedule 3, as amended, agreed to.
Section 185 agreed to.
Section 186—Interpretation
Amendment 219 moved—[Allan Wilson]—and agreed to.
Section 186, as amended, agreed to.
Section 187 agreed to.
After section 187
Amendment 438, in the name of the minister, is in a group on its own.
The Debtors (Scotland) Act 1987 created the current regime of diligence of earnings arrestment. It provides tables that set out exactly how much can be deducted from daily, weekly or monthly earnings of various amounts. The tables are intended to strike a fair balance between creditors and debtors. They are updated as needed, which happened most recently on 5 April 2006. The tables are fair to debtors by ensuring that those who are subject to an arrestment are left with some money to live on and are fair to creditors by ensuring that people with high earnings must pay a larger share of what they earn to their creditors than people with low earnings would pay.
The 1987 act takes no specific account of holiday pay. For most people, that does not matter because they are paid as normal during holidays. However, it matters for people who are not paid as normal during holidays but are instead paid extra, together with their normal pay, before or after their break. In such a case, the employer has to add the holiday pay to the normal pay, which puts the debtor into a higher earnings bracket for the purposes of the arrestment. As a result, the debtor is treated for that payday as if he or she regularly earns the increased amount. For example, a debtor who is paid weekly might be paid in advance for two weeks' holiday, with the result that he or she receives a one-off payment of three weeks' pay followed by two weeks of no pay. The 1987 act ignores the fact that three weeks' pay is being paid at one time. In this example, the employer would therefore have to treat all three weeks' pay as if it were the regular payment
The effect of all that is that the debtor who receives holiday pay in advance has to pay the creditor a larger share of what he or she has earned than would a debtor who is on the same earnings and who is paid regularly during his or her holiday. That is not fair, so amendment 438 provides that holiday pay that is paid on the same day as normal pay must be treated as a separate payment or payments made for the pay period or periods during which the debtor is on holiday and not as if it were an increase added to the normal pay.
I move amendment 438 and urge members to support it to defend the holiday pay of the people concerned.
A very sensible measure.
I welcome the amendment, which will protect some of the most vulnerable members of society, who are paid weekly. Holiday pay enables them to take a family holiday perhaps once a year; I welcome the proposed change, which will allow them to continue to do that.
I think that we all welcome the proposed change. The amendment is very sensible. You do not need to wind up, do you, minister?
No. I agree with Karen Gillon.
Amendment 438 agreed to.
Amendment 439 moved—[Allan Wilson]—and agreed to.
Sections 188 to 191 agreed to.
That concludes consideration of amendments for today. I thank the minister and his officials.
All those amendments just to change the name of the job.
Next time, do it before we have to amend the bill.
The next time that you introduce a bankruptcy bill, you will have learned a lesson.