Diligence on the Dependence

Question 1

What is diligence on the dependence?

Answer 1

The point of going to court is to get an order of the court called a decree which allows you to get, do or stop doing something.
Usually you want decree for the payment of money.
Diligence is the stage beyond getting the decree, about the enforcement of decree.

Question 2

How do you get diligence on the dependence?

Answer 2

There are various ways to do this:

1. Arrestment — freeze wages or money in a bank account of any other debt due to the defender
2. Inhibition - stops person selling their heritable property and anyone buying will not get good title
3. Attachment — to moveable property stops someone alienating any moveable valuable property.

This is sought in advance of the decree being granted.
If action is defended then it will take even longer to get the decree.
The aim of diligence on the dependence is to stop a party alienating their assets while litigation is taking place
It is available to both parties - e.g. Where there is a counter-claim
It is a protection measure to maintain status quo until litigation is disposed of.

Question 3

What is Arrestment and Inhibition on the dependence?

Answer 3

Law put into place on 1 April 2008 although it is not modern
The law developed according to judicial decisions
Current legislation - in Debtors (S) Act 1987 s15A to 15N as inserted by BAD(S) Act 2007
In sheriff court the rules dealing with this are found in chapter 6 of ordinary cause rules (interim diligence)

Question 4

What is the required procedure?

Answer 4

If seeking before service means - going to court to make an application before you have served action on the defender
Alternatively seek it after service - after defender has notice of the initial writ.
In order to make an application should include it in the crave section of the writ with supporting averments even if you are not seeking diligence on the dependence initially.
Prescribed form must accompany application for diligence in OCR 6.A2 which is Form G4A.

Question 5

When can the Court make an order granting diligence on dependence without a hearing?

Answer 5

Court may make an order granting diligence on dependence without a hearing
The basis of this is found in section 15E of the 1987 Act.
The onus is on the creditor which is normally the pursuer.
The creditor has to show 3 things —
1. firstly, a prima facie case on the merits: pleadings make sense, in a position to justify what you are seeking by way of materials or documents
2. Creditor must show that there is a real and substantial risk that the claim will be defeated by insolvency, or verging on insolvency or likely debtor will remove or dispose of assets
3. If it is reasonable to grant application
The granting of diligence on dependence is important to both parties as debtor can affect cash flow of business and for creditor may make it worthwhile to sue debtor.

Question 6

Martin Bain v Rangers FC 2011

Answer 6

is a good example of how statutory test works in practice. In this case the former chief exec of rangers applied for warrant for arrestment on dependence under s15F on 1987 Act in course of action of damages for rangers in respect of alleged breaches of contract.
Rangers accepted that Mr Bain had a prima facie case but argued that the risk of insolvency was reasonably proximate. They argued that the court should not assume an adverse outcome in an ongoing tax case.
The application was granted subject to limitation - the evidence was not persuasive of rangers being insolvent on either practical or absolute insolvency.
Lord Hodge held there was a real and substantial risk of insolvency if the appeal in relation to the tax liability was decided against rangers.
So Mr B had satisfied the tests under s15F but warrant was granted limited to refelct existence of counter claim against him for damages of fiduciary duty so it was appropriate to limit the warrant for arrestment to half the total for his claim for accrued rights.

Question 7

What is a hearing on application?

Answer 7

Before diligence is granted, there is opportunity for defender or anyone else claiming an interest to be heard. The same 3 part test occurs and the court will grant application if:

1. Prima facie case on merits
2. Real and substantial risk claim assets will be disposed of
3. Reasonable in the circumstances

Question 8

What happens after diligence is granted?

Answer 8

It can be recalled e.g. The party was unable to oppose beforehand or the circumstances have changed
Expenses in relation to diligence on depenndence are recoverable if pursuer succeeds at the end of the litigation