Scottish Sheriff Court Decisions

SHERIFFDOM OF GRAMPIAN, HIGHLAND AND ISLAND AT BANFF

Judgement

Of

Sheriff Philip Mann

In causa

Invocas as Agent for the Accountant in Bankruptcy as Trustee on the sequestrated estate of William Rose

 

Banff 4 June 2013

The Sheriff, having heard the applicant's agent refuses warrant to serve the application.

 

 

Sheriff Philip Mann

Note

1. Introduction

1.1 This is an application by the Trustee on the sequestrated estate of William Rose (William Rose being hereafter referred to as "the debtor"). The Trustee seeks a warrant to serve an application under section 39A(7) of the Bankruptcy (Scotland) Act 1985 on the debtor and his spouse.

1.2 The application seeks an order substituting a longer period for the period of 3 years mentioned in section 39A(2) of the Act. This is in relation to a property known as [address redacted] which is said to be the debtor's family home, the title to which is in the joint names of the debtor and his spouse.

2. The Statutory Provisions

2.1 The subsections of Section 39A of the Act which are relevant to this application are in the following terms:

"(1) This section applies where a debtor's sequestrated estate includes any right or interest in the debtor's family home.

(2) At the end of the period of 3 years beginning with the date of sequestration the right or interest mentioned in subsection (1) above shall-

(a) cease to form part of the debtor's sequestrated estate; and

(b) be reinvested in the debtor (without disposition, conveyance, assignation or other transfer).

(3) Subsection (2) above shall not apply if, during the period mentioned in that subsection-

(a) the trustee disposes of or otherwise realises the right or interest mentioned in subsection (1) above;

(b) the trustee concludes missives for sale of the right or interest;

(c) the trustee sends a memorandum to the keeper of the register of inhibitions under section 14(4) of this Act;

(d) the trustee registers in the Land Register of Scotland or, as the case may be, records in the Register of Sasines a notice of title in relation to the right or interest mentioned in subsection (1) above;

(e) the trustee commences proceedings-

(i) to obtain the authority of the sheriff under section 40(1)(b) of this Act to sell or

dispose of the right or interest;

(ii) in an action for division and sale of the family home; or

(iii) in an action for the purpose of obtaining vacant possession of the family home;

(f) the trustee and the debtor enter into an agreement such as is mentioned in subsection (5) below.

(g) the trustee has commenced an action under section 34 of this Act in respect of any right or interest mentioned in sub-section (1) above or the trustee has not known about the facts giving rise to a right of action under section 34 of this Act, provided the trustee commences such an action reasonably soon after the trustee becomes aware of such right.

......................................

(7) The sheriff may, on the application of the trustee, substitute for the period of 3 years mentioned in subsection (2) above a longer period-

(a) in prescribed circumstances; and

(b) in such other circumstances as the sheriff thinks appropriate.

3. The Facts

3.1 The application discloses that the debtor was sequestrated on 20 May 2008. Accordingly, in terms of section 39A(2) of the Act his family home had ceased to form part of the sequestrated estate and had been reinvested in the debtor unless any of the things mentioned in section 39A(3) had occurred within the 3 year period from the date of sequestration so as to disapply section 39A(2).

3.2 The application also discloses that none of the things mentioned in section 39A(3) has occurred but that the Trustee did attempt to register a memorandum in terms of section 39A(3)(c). However, the Keeper of the Registers refused to register the memorandum because it was outside the 3 year period specified in section 39A(3).

3.3 The application goes on to assert that there is substantial equity in the property and that the creditors in the sequestration will suffer substantial prejudice if the application is refused. In these circumstances the Trustee seeks to invoke section 39A(7).

4. Submissions

4.1 When the application was presented for warranting I arranged to be addressed on the competency of the remedy sought, given that it appeared that the property had already reverted to the ownership of the debtor by virtue of section 39A(2). I was addressed by Mrs MacAndrew as local agent for the Trustee's principal agents.

4.2 Mrs MacAndrew pointed out that section 39A(7) of the Act contains no time limit within which an application to extend the period must be presented to the court. This contrasted with other provisions in the Act where a time limit for an application to court was set. She cited section 54 of the Act as an example. As a matter of statutory interpretation it could be inferred that because section 39A(7) was silent on the matter parliament had intended that an application thereunder was not subject to any time limit.

4.3 Mrs MacAndrew advised me that, as yet, no circumstances had been prescribed in terms of section 39A(7)(a) of the Act. However, she pointed out that section 39A(7) gives the sheriff discretion to extend the time limit in such other circumstances as he or she thinks appropriate. One of those circumstances might be where the Trustee had failed to act in terms of section 39A(3) due to administrative error, as was claimed to be the case in this instance.

4.4 Mrs MacAndrew argued that I should warrant the application and that it would then be up to the debtor to respond or not. If he did respond and indicated that he had taken any action in relation to the family home in reliance upon section 39A(2) which might be prejudiced by an extension of the time limit then that would be one of the things that the sheriff could take into account in deciding whether or not to exercise the discretion. The inference was that if the debtor did not respond then the application could be granted without further enquiry.

4.5 Mrs MacAndrew pointed out that the creditors would be prejudiced if the Trustee could not now prevent the operation of section 39A(2) and cited this as a reason why warrant should be granted.

5. Discussion and Decision

5.1 I was unmoved by the submissions on behalf of the Trustee. I would have thought that the first rule of statutory interpretation is that the words of the statute are to be given their ordinary and natural meaning unless there is a clear indication to the contrary. The terms of section 39A(2) are quite clear and explicit. The meaning is clear. There is no ambiguity that requires to be resolved by resort to any other rule of statutory interpretation.

5.2 The terms of section 54 of the Act do not assist the Trustee. Just because that section prescribes a time limit it does not necessarily follow that an application under section 39A(7) is not subject to a time limit. In my view, if parliament had wished that to be the case it would, and should, have said so, given the clear and unambiguous terms of section 39A(2)

5.3 The Trustee's argument suggests that there is no time limit at all within which an application under section 39A(7) can be made. That simply cannot be the case, in my view. In combination, sections 39A(2) and (3) provide that reinvestment of the family home in the debtor happens automatically on the expiry of the 3 year period unless the Trustee has taken a relevant step in terms of section 39A(3). At that point the debtor may do as he pleases with the property since he is, once again, the owner of it. It seems to me that the possibility that ownership of the property could revert to the Trustee at any time in the future would act as an effective barrier to the debtor being able to do as he pleases with his property. For example, I could well imagine that a lender would be unwilling to lend on the security of the property in such circumstances. The prejudice to the debtor is obvious when one considers that if the Trustee's submissions are correct then the possibility of reversion of ownership might never be removed should the Trustee choose never to apply to the court under section 39A(7).

5.4 The plain fact of the matter is that, on the Trustee's averments, the property has already reverted to the ownership of the debtor and it is now too late to prevent that from happening. The Trustee is not trying to prevent that from happening. He is, in effect, trying to reverse that which has already happened in consequence of section 39A(2). Section 39A(7) says nothing about reversing the effect of section 39A(2).

5.5 For all of the foregoing reasons I was of the view that the Trustee's application was incompetent and accordingly I refused to grant the warrant sought.