The author questions the sheriff's reasoning, if not the result, in the recent decision to refuse to warrant petitions for sequestration based on council tax arrears

The recent decision in the cases of Angus Council seeking warrants to cite JO, SP and JS [2018] SC FOR 65 (25 October 2018) has raised some eyebrows among sheriff officers, creditors and other courts. A closer look suggests the sheriff may have got the decision right but strays from the law in his reasoning.

Why was warrant refused?

The council sought warrants in relation to three debtors. In each case, a charge for payment in relation to a year's council tax had been served for a sum of less than £3,000. However, other council tax was also unpaid. The total debt due to the council was more than £3,000.

The sheriff refused to warrant the petitions on the following grounds:

Lack of prima facie evidence of debt. The council had produced a copy of the summary warrant and certificate to which the charge for payment related. It produced the summary warrants in relation to other council tax liabilities, but not the individual page identifying the relevant taxpayer. While the council also produced a statement of debt, it could not be reconciled with the summary warrants. The sheriff decided the council had not demonstrated it was a qualified creditor.

Charge for payment less than £3,000. The sheriff considered the legislative changes that required the council to serve a charge for payment prior to carrying out diligence in relation to council tax debt, in particular the Bankruptcy and Diligence (Scotland) Act 2007. He considered the purpose to be to promote settlement and prevent further diligence. The charge stated: “If you have total debts amounting to £3,000 or more, you are also liable to be sequestrated.” He considered that a debtor who received a charge for less than £3,000 might not appreciate sequestration was a possibility, and decided that the petitions did not provide evidence that the council had attempted to promote settlement or prevent further diligence.

The sheriff did not appear to accept that a single creditor could amalgamate a number of debts, but accepted that two or more creditors could combine debts to petition for sequestration. The sheriff queried why, if a petitioner was due more than £3,000, it did not serve a composite charge.

Was the sheriff right?

In terms of prima facie evidence of debt, if the council did not meet the threshold then the sheriff was right to refuse. However, it should be very straightforward for a council to overcome this by completing a certificate certifying the debt due by taxpayers. After all, the court grants summary warrants based on a certificate of debt from the council. In my opinion, a schedule of debt certified as part of the records of the council is prima facie evidence of debt and meets the threshold test.

A charge for payment for less than £3,000 appears to be no bar to raising a petition for sequestration, provided there are total debts of at least £3,000. The purpose of the charge for payment in the context of the Bankruptcy (Scotland) Act 2016 is principally to demonstrate apparent insolvency. That is a quite separate matter from demonstrating prima facie evidence of debt.

One cannot quarrel with the sheriff's interpretation of the purpose of the legislative change. I don't agree however that a debtor may not be “on notice” of sequestration if the charge is for less than £3,000. The wording “if you have total debts of more than £3,000” suggests there may be other debts that will tip the balance. The sheriff also appears to admit that debts can be combined to sequestrate.

The sheriff queried why a single creditor would not serve a composite charge. In relation to council tax, in my experience sheriff officers are instructed to serve a charge for payment based on the current tax year liability. Sometimes a charge results in part payment, sometimes not. Ultimately, there may be a number of charges served with varying payments made, but with the overall debt exceeding £3,000. If the local authority has one expired charge for the current year, why should it go to the expense of getting another amalgamated charge, causing further delay and potential confusion for the debtor?

There is also some useful case law in this area. In Comhairle Nan Eilean Siar v DC, Stornoway Sheriff Court, SQ4/12, Sheriff Principal Pyle accepted that it was competent for a local authority to petition for sequestration for multiple years' council tax arrears, notwithstanding the charge for payment for the present year's arrears was less than the threshold. I consider the sheriff principal to be correct in his interpretation of the law.


The Author
Alan Munro is a partner at TLT LLP
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