PETITIONS FOR SEQUESTRATION (Hansard, 26 October 1992)

§ Lord James Douglas-Hamilton
I beg to move amendment No. 10, in page 6, line 8, leave out '£750' and insert '£1,500'.
The amendment is a concession to a point raised in Committee by the hon. Member for Glasgow, Gascadden (Mr. Dewar). Members of the Standing Committee that debated the Bill will recall that the Committee accepted an amendment proposed by the hon. Member for Garscadden to increase the minimum debt level before a creditor could petition for the sequestration of a debtor from £750 to £1,500. During the debate on that amendment, there emerged a general feeling in the Committee that the equivalent minimum debt level before a debtor could petition for sequestration should also be raised to £1,500. I promised to consider the matter further, and this amendment is a direct response to the views expressed by the Committee.
Committee members recognised that there was a need to strike a balance between the interests of debtors and creditors in all aspects of these procedures. Sequestration is a serious process which not only results in penalties on the debtor but can also result in financial loss to the creditors who will have provided money, goods or services in good faith and will now no longer be paid. It is therefore right that there should be some constraint on the levels of 824 debt involved before sequestration is contemplated, and £1,500 appears to strike the right balance at the present time.
However, as I said to the Committee, it remains the Government's intention to monitor the effect of this provision and to consult more widely on the debt levels once the Bill is enacted. The Bill allows for that figure to be adjusted by regulation in the light of experience, should that prove necessary or desirable.

§ Mr. Stewart
I beg to move amendment No. 12, in page 6, leave out lines 13 and 14 and insert— '(i) is apparently insolvent; or'.

Mr. Deputy Speaker
With this, it will be convenient to take Government amendment No. 13.

§ Mr. Stewart
Members of the Standing Committee will recall that the Government amended the Bill in Committee to allow a debtor to petition for sequestration where he or she was apparently insolvent in terms of section 7 of the 1985 Act. That was felt on both sides of the Committee to be a simpler and more objective test than the original provision. Most debtors seeking access to sequestration would have no difficulty establishing grounds for apparent insolvency.
In the interests of maintaining a balance between the interests of debtor and creditor, it was felt necessary for this purpose to exclude the ground that a debtor had granted a trust deed. Not to have done so would simply have maintained the problem that has given rise to the present situation.
Over the summer, concern has been expressed by the Law Society of Scotland that some debtors might seek to make use of the provision in the 1985 Act which allows apparent insolvency to be constituted by a debtor giving a written notice to his creditors that he has ceased to pay his debts in the ordinary course of business to prevent creditors from undertaking diligence. Such an action would be a form of self-certifying sequestration aimed at avoiding the payment of debts that were legitimately due.
We have therefore concluded that that ground for apparent insolvency should also be excluded as a basis for a debtor presenting their own petition for sequestration. In practice, that is likely to affect only a small number of debtors with trading concerns. The typical consumer debtor—the main worry of hon. Members—would not fall within the terms of section 7(1) (b) of the 1985 Act. Therefore, his or her position will not be affected by the change.
I assure the House that the other grounds on which apparent insolvency can be established will still apply—allowing debtors who genuinely cannot pay creditors to have access to sequestration. That is largely a technical and legal matter, and I commend the amendment to the House.

§ Lord James Douglas-Hamilton
I beg to move amendment No. 14, in page 6, line 36, leave out from 'whereby' to the end of line 39 and insert— 'his estate (other than such of his estate as would not, under section 33(1) of this Act, vest in the permanent trustee if his estate were sequestrated) is conveyed to the trustee for the benefit of his creditors generally.'. Amendment No. 14 adjusts in a minor fashion the definition of "trust deed" in new section 5(4A). Its purpose is simply to clarify the definition. References to sections 31 and 32 of the 1985 Act are removed as those provisions do not actually set out limitations on the property which vests in the permanent trustee, and are not therefore relevant to the definition.
The object of the definition is to ensure that, for a trust deed to be recognised for the purposes of the 1985 Act, it should not convey property of the debtor which is exempt from poinding, or which is held on trust by the debtor for another person. Section 33(1) provides that exemption in the case of sequestrations and the definition, as amended, ensures that the exemption also applies in the case of trust deeds. That was a point mentioned in Committee by the hon. Member for Falkirk, East (Mr. Connarty). It means that the debtor's clothes, tools of trade and certain other belongings will be exempt, which was what the hon. Gentleman wanted.
Amendment agreed to.