The Sheriff Court will now have jurisdiction to grant inhibitions on the dependence (i.e. inhibitions granted pre-decree).  A crave for arrestment/inhibition on the dependence will be required in the Initial Writ.  The jurisdictional rules on Arrestment on the dependence remain largely unchanged.

Procedure

A statutory test is introduced whereby the creditor will have to satisfy the court:

• that the creditor has a prima facie case on the merits of the action
• that there is a real and substantial risk that enforcement of any decree in the action in favour of the creditor would be defeated or prejudiced by reason of:
  
  
  - the debtor being insolvent or verging on insolvency;
  
  

  - the likelihood of the debtor removing, disposing of, burdening, concealing or otherwise dealing with all or some of the debtor's assets, were warrant for diligence on the dependence not granted in advance of such a hearing;
  
  - that it is reasonable in all the circumstances, including the effect granting warrant may have on any person having an interest, to do so.

The Court may consider that a hearing is required at the outset, but has the power to grant the order without a hearing.  If the Inhibition / Arrestment is granted without an initial hearing then the Court must fix a subsequent hearing.  The creditor must intimate the date of that hearing on the debtor and any other person having an interest.

Whether the Order is granted at the hearing or not, the creditor is required to intimate the outcome of the hearing on the debtor and any other party having an interest.

Where pre-decree inhibition/arrestment is executed before the writ is served, the writ must be served within 21 days or diligence will cease to have effect.  There is provision to apply to Court for an extension in the event that it is not possible to effect service within 21 days.

Powers of Court to Limit effect of diligence

The Courts will have the power to limit property covered by an inhibition on the dependence and can limit the sums to be attached under an arrestment on the dependence. 

For inhibitions this means that specific properties can be inhibited, leaving a debtor free to deal with other properties.  This would be of most relevance where, for example, inhibition is sought against a property developer.

In the case of arrestments, the court must specify a sum arrested and the maximum amount the court can specify is the principal sum sued for plus a sum equal to 20% of that sum plus a sum equal to 1 year's interest on the principal sum at the judicial rate.

Arrestments: Protected Sums

The rules on the minimum protected sum are not expected to come into force on 1st April. The rules are that where the arrestee is a bank and the customer is an individual (not a company, partnership, or trading account), the bank will be required to deduct minimum payment level, currently £370 from sums arrested in order to prevent undue hardship to the debtor.

It is understood that the protected sum will come into effect around October this year.

PART 7 - INTERIM ATTACHMENT

The Act introduces a new diligence specifically for payment actions to be known as interim attachment.  This diligence is intended to preserve moveable property in the hands of the debtor from being disposed of.

The diligence covers the same types of property as an Attachment Order, but specifically excludes any articles within a dwellinghouse (i.e. those goods which would currently require an Exceptional Attachment Order).  It can be applied to motor vehicles free of hire purchase, which have a value in excess of £1,000.  It is expected to be of limited application.

FURTHER INFORMATION 

For further information on this ezine or any other banking litigation related issue, please contact Ruari MacNeill 0131 625 7279, Claire Martin 0131 625 7285 or Andrew Foyle 0131 625 7247 in the Dispute Resolution Banking Team.