Attachment

Question 1

What is attachment?

Answer 1

This is the diligence formerly known as poinding[ Thought to be a particularly unfair diligence. It was a particular mechanism used by local authorities to enforce payment. ]. It was introduced by the Debt Arrangement and Attachment (Scotland) Act 2002. This is diligence against corporeal moveables.

Attachment is virtually identical to the rules on poinding (except one exception in relation to dwelling house property).

Question 2

What does attachment require to be executed?

Answer 2

Attachment requires to be in execution of a decree of document of debt or is a protective action taken by the creditor while the case is taking place in court[ I.e. if you raise an action against an unscrupulous debtor they may try to get rid of their assets so you can apply for an interim procedure. This is called diligence on the dependence. This is a process which is initiated during the court action.

Up until the 2007 Act this was not possible (attachment could not be carried out by interim process).] - if the latter (interim diligence / diligence on the dependence), if the creditor then wins the court case they have the assets and can sell them, but if the creditor loses the court case the attachment will be released.

Question 3

What is the first question we should ask in relation to attachment?

Answer 3

Must ask: is it on execution or dependence?

• Diligence in execution arises when the creditor has obtained decree from the court to say that the debt is due.
• Diligence on the dependence is a process which can be initiated prior to the ending of the court decision. It is used as a mechanism by the creditor to protect their position. It allows the creditor to attach the assets during the court action but they cannot sell them until the court action is finished.

Question 4

What is the attachment procedure?

Answer 4

1) Requires a formal document called a charge for payment[ Formal demand which the creditor makes on the debtor. ]
⁃ With attachment you initially must serve a charge for payment. A charge for payment is a statutory form specifying the debt which is due and that a court order has been awarded confirming that the debt is due. This gives the debtor 14 days to pay[ Don’t know why it is 14 days.]. The charge for payment is important because once it has expired, as well as entitling the creditor to do diligence it also entitles the creditor to make the debtor formally insolvent (see ‘apparent authority’).
⁃ When you send the charge for payment you must also send the debtor a “debt information and advice package”[ This is a set of information provided to the debtor to tell them to pay or there will be consequences. if you do not pay you may be sequestrated or end up having your assets seized. it is to encourage the debtor to take advice at an early stage. ].
- Once you serve this you can carry out attachment (2002 Act, Part 2). This Act however differentiates between two broad situations. [See below on dwelling houses v commercial assets].
- Any time that an attachment takes place there must be a charge for it which has taken place before this.

Question 5

If the debtor doesn’t pay, what can you do?

Answer 5

The creditor can attach under the process set out in s 10 of the 2002 Act. They can instruct a sheriff officer to go in and seize the assets of the debtor.
⁃ In seizing the assets of the debtor the sheriff officer will detail individual assets of the debtor and give them a value, and then report this back to the court. This process creates a security over the debtors assets.

Question 6

When can attachments not be made?

Answer 6

Attachment cannot be made on Sundays or public holidays or before 8 am or after 8 pm (s 12)

Question 7

What can be attached in relation to moveables outwith a dwelling house?

Answer 7

In relation to moveables outwith a dwelling house - the creditors have extensive powers (ss 15-19). Under s 19A the sheriff officer can remove certain assets from the property where it is urgent.

Question 8

What articles are exempt from attachment?

Answer 8

Under s 11 there are certain “articles exempt from attachment”. These are exempt from attachment in all circumstances [Both commercial and domestic.]:
⁃ Implements, tools of the trade, books etc required for the use of the debtor in the practice of the debtor’s profession, trade or business up to a value of £1,000 (s 11(1)(a))
⁃ Vehicles up to a value of £1,000 (s 11(1)(b))
⁃ Mobile home which is the debtor’s only or principal residence (s 11(1)(c))
⁃ Tools of other equipment..for keeping the garden in order (s 11(1)(d))
⁃ Money (s 11(1)(e))

Question 9

When will assets located in the dwelling house attach?

Answer 9

In general, assets located in the dwelling house cannot be attached unless an exceptional attachment order (Part 3 of the Act) is used. Thus these things are generally exempt, unless an exceptional attachment order is used:
⁃ The rules are found in ss 46, 47 and 48. And must comply with these to carry out the order.

Question 10

When will an exceptional attachment order be granted?

Answer 10

An exceptional attachment order will only be granted under s 47(1) where the sheriff is satisfied that there are exceptional circumstances which justify the use of an exceptional attachment order. If there are exceptional circumstances then you can attach non-essential assets of the debtor’s kept in any dwelling house.

Question 11

How is a dwelling house defined?

Answer 11

• Dwelling house is defined in Part 2 of the Act, s45, which states it is a definition which applies to Part 1 and Part 3 [NB it does not include a garage - Part 2 procedure applies here].
• However see B&B (commercial premises but with a resident owner) - this is a dwelling house but it is not excluded. It is protected by the exceptional attachment regime. [Must look at whether there is a dwelling house element].

Question 12

What are the exceptional circumstances?

Answer 12

⁃ Under s 47 and 48 certain factors must be taken into account:

1) Under s 47(4) factors which must be considered are:
⁃ The nature of the debt[ If a consumer debt this will make it less likely that it is exceptional circumstances. If it is a business debt then more likely.]
⁃ Does the debtor reside in the dwelling house
⁃ Does the debtor carry on trade or business in the dwelling house[ If so then more likely that you will be able to attach.].
⁃ Has money advice been given to the debtor.
⁃ Have any time to pay orders been granted by the court
⁃ Have the debtor and creditor agreed anything in relation to payment of the debt.
⁃ Have any documents been lodged by the debtor as to assets that they have

2) Under s 48(1) the factor that must be considered are:
⁃ Has the creditor taken reasonable steps to negotiate a settlement of the debt
⁃ Has the creditor already tried an arrestment[ If the creditor has not tried an arrestment than an exceptional attachment order will probably not be granted - but perhaps the creditor has not tried an arrestment because there are no assets to arrest.]
⁃ Is there a prospect that the sum recovered from an auction of the assets will at least equal the expenses plus £100[ So potentially a creditor can use an exceptional attachment order to get the cost of carrying out the attachment plus ONLY £100.]

Question 13

Once the creditor is granted an exceptional attachment order, what assets can they get?

Answer 13

⁃ You are entitled as the creditor to attach assets within the dwelling house.
- But under schedule 2 para 3 there is a list of essential assets (which are absolutely excluded from attachment):
⁃ Clothes
⁃ Implements, tools of trade, books etc for debtors profession, trade or business under £1,000
⁃ Medical aids or medical equipment
⁃ Books or other articles reasonably required for the education or training etc up to £1,000.
⁃ Articles reasonable required for the care or upbringing of a child
⁃ Childrens toys

Question 14

What assets can be excluded from attachment where they are ‘reasonably required’?

Answer 14

Under schedule 2 para 4 there is a list of assets that can be excluded from attachment as long as they are reasonably required by the debtor/household, including:
⁃	Beds, bedding
⁃	Househould linen
⁃	Chairs or settees
⁃	Tables
⁃	Food
⁃	Lights or light fittings
-	Televisions (e.g. If you have more than one then the reasonably required test applies and you may only keep one). 
⁃	Etc.

Question 15

What happens if the moveables are outside the dwelling house?

Answer 15

If the moveables are outside the dwelling house then the creditor has more power, they have a general power to enter lockouts places. The power of auction then arises.

However note there are certain attachments which are exempt no matter what the dwelling house: s11.

Question 16

What is a power of auction and when does it arise?

Answer 16

Once a sheriff officer has attached the assets and notified back to the court. A power of auction arises. If the debtor still doesn’t pay then the creditor can sell the assets pay the expenses (including instructing the sheriff officers) plus anything that is left goes to payment of the debt. If there is any balance after the assets are sold this goes back to the debtor (but this is unlikely in relation to attachments).

• They identify the various assets and then value them.
• When they go through the value of the assets they are looking to get a value which equates the debt.
• The schedule of attachment is then noted back to the court and if the debtor does not then pay, the assets identified are given a power of sale to the creditor.

Question 17

How does attachment operate in the context of insolvency?

Answer 17

⁃ There is no case law on this - there are only cases from the old law of poindings and the legislation.
⁃ It seems to be the case that attachment creates a real right in the debtor’s property at the point at which attachment arises, which gives the creditor priority in the insolvency of the debtor. This judicial right in security will give priority in cases of sequestration or insolvency.
⁃ But this is only a general rule and the attachment will not take priority if carried out in a period immediately before liquidation or sequestration. In these cases there are equalisation rules which apply and the diligence might be (1) struck down [these rules apply to various types of diligence.] or (2) equalised because of the rule in Schedule 7 para 4.

Question 18

How does attachment interact with floating charges?

Answer 18

• NB the floating charge ranks after effectively executed diligences
  ⁃ In the case of Lord Advocate v RBS it was held that poindings were not effectually executed diligence which gave a priority over the floating charge[ Remember - floating charges attach subject to effectually executed diligence.].
  ⁃ A poinding only became EED when the court granted authority to sell the assets. But this point is only a few days before the assets will be sold - so it is a very minimal period that the creditor has priority.

⁃ Under the new rules of attachment we do not know what the law is - we don’t know if attachment takes priority over a floating charge or the Lord Advocate v RBS test of requiring the authority of the court for the assets to be sold to take place before attachment takes priority.
⁃ NB the MP who introduced the bill said that poindings and attachment should prevail over a floating charge - so on a Pepper v Hart interpretation of the legislation then they would take priority, but this goes against Lord Advocate v RBS.

Question 19

What are interim attachments and how are they carried out?

Answer 19

⁃ This can be carried out prior to the conclusion of the action.
⁃ Interim attachment is governed by s 9A onwards of the 2002 Act.
⁃ THIS WILL BE DEALT WITH ALONG WITH ARRESTMENT ON THE DEPENDENCE AND INHIBITION ON THE DEPENDENCE LATER ON BECAUSE EXACTLY THE SAME TEST APPLIES TO EACH.
- Section 9A of the 2002 Act introduced interim attachments (a form of diligence on the dependence in relation to corporeal moveables). This is introduced by s 173 of the BAD Act and ss 9D and 9E of the 2002 Act mirror ss 15D and 15E of the 1987 Act (on diligence on the dependence which is discussed below)