In this E-note:

Arrestment

Arrestment on the dependence

Arrestment in execution

Arrestment

Arrestment is the diligence by which moveables which are not in the possession of the debtor himself are attached, either in security of an alleged or constituted debt, or in execution of the decree judicially establishing the debt.^[1] The eminent author on the law of diligence, J. Graham Stewart (1898), writes of arrestment, as we now have it, having been borrowed from France. Scots law thereby adopted the principle of Roman law, that the vigilant creditor who arrests first, although his decree or judgment be not the first obtained, has the preference.^[2] The diligence is used against all categories of the debtor's moveable property - corporeal and incorporeal - in the hands of a third party, with the exception of earnings in the hands of the debtor's employer, for which the special processes of earnings arrestment and current maintenance arrestment apply.^[3]

Arrestment therefore could be included in our discussion (E-note 3) on the attachment of corporeal moveables. (It is the old Scottish custom, for example, to attach ships by arrestment in rem.) But by far the greatest practical use of arrestment for a creditor is against his debtor's incorporeal moveable property in the debts due to the debtor by third parties. Three distinct parties are required: the arrester (creditor), the arrestee (the third party, who is debtor to this creditor's debtor), and the common debtor (debtor). The subjects arrestable can be seen to be truly incorporeal in character, when it is realised that the test is, ultimately, about the arrestee's obligation to account to the debtor for some asset.

As a general rule it is necessary for the validity of an arrestment that the person in whose hands it is used should be actually possessed of funds or goods to which the common debtor is entitled. But the right which the common debtor has to call a party to account may be arrested in the hands of the party who is under the obligation to account, although the latter has not at the time of the arrestment any funds or goods in his possession.^[4]

Arrestment on the dependence

Used as a provisional and protective measure, the diligence is termed arrestment on the dependence of an action. Curiously, this was the earliest form of the diligence: it was originally used in every action, as the first step, to force the defender's appearance in court and secure, in time, his obedience to the judgment.^[5] As an aside, this quotation from Lord Kames's tract on the 'History of Process in Absence' (1758) shows how the legal attachment of moveables was, in the distant past, fundamental to all civil litigation:

In Scotland, we did not originally try even civil causes in absence [i.e. in default of appearance in court by the defender], more than the English do at present. The compulsion to force the defendant to appear, was attachment of his moveables, to the possession of which he was restored upon finding bail to sist himself in court. If he remained obstinate, and offered not bail, the goods attached were delivered to the claimant, who remained in possession, till the proprietor was willing to submit to a trial.^[6]

Returning to the present, warrant for arrestment on the dependence is competent where the action contains a conclusion for payment of a sum other than by way of expenses. It is available in the Court of Session (the supreme civil court) and in all the sheriff courts, in all values of claims.

A special application to the court for the warrant is required. This may be granted and executed, without prior intimation to the debtor, if (a) the creditor has a prima facie case; (b) there is a real and substantial risk enforcement of any decree in the action in favour of the creditor would be defeated or prejudiced by (i) the debtor being insolvent or verging on insolvency; or (ii) the likelihood of the debtor removing, disposing of, burdening, concealing or otherwise dealing with all or some of his assets. The onus is on the creditor to satisfy the court that the order granting warrant should be made. If the court does grant the warrant without there first being a hearing on the application, a hearing for recall or restriction of the arrestment on the dependence will be held thereafter, the creditor being ordered to intimate the date to the debtor and any other person appearing to the court to have an interest.^[7]

The schedule of arrestment on the dependence is in a prescribed form. It must be served by a judicial officer: either a messenger-at-arms, if the warrant proceeds from the Court of Session, or a sheriff officer, in a sheriff court action. Almost invariably^[8] the schedule of arrestment will be delivered by the officer, in the presence a witness, to the address of the third party, who acts as the arrestee.

The form describes the warrant and gives precise instructions to the arrestee. It states the total amount arrestable, in excess of the Protected Minimum Balance. This protected amount is currently set at £415; it applies where the arrestment attaches funds in a debtor's account with "a bank or other financial institution", if the debtor is an individual - but it does not apply if the account is operated by the debtor as a trading account. Everything above £415 is arrested according to the formula: "arrest in your hands (i) the sum of (amount), in excess of the Protected Minimum Balance, where applicable, more or less, due by you to (debtor's name) or to any other person on his [or her or its or their] behalf; and (ii) all moveable things in your hands belonging or pertaining to the said (debtor), to remain in your hands under arrestment until they are made forthcoming to (creditor) or until further order of the court."

The following note gives effect to an important recent reform in the procedure, putting greater responsibility upon the arrestee: "you must also, within the period of 3 weeks beginning on the day on which the arrestment is executed, disclose to the creditor the nature and value of the funds and/or moveable property which have been attached. This disclosure must be in the form set out .... Failure to comply may lead to a financial penalty under section 73G of the Debtors (Scotland) Act 1987 and may also be dealt with as a contempt of court."

A creditor would be entitled to such expenses as he incurs in obtaining the warrant and having the arrestment executed, unless the court were satisfied that the creditor acted unreasonably in applying for the warrant.

If the arresting creditor then succeeds in obtaining a final decree in his favour, the creditor must, as soon as reasonably practicable, serve a copy of that final decree on the arrestee. This form (which is signed by the creditor or the solicitor for the creditor, rather than the officer) gives an important instruction to the arrestee - being part of the reforms of arrestment which came into force in 2009: "You are now required to release to the creditor, on the expiry of the period of 14 weeks beginning with this date (or earlier where a mandate [granted by the debtor] authorises you to do so) the lowest of - (a) the sum attached by the arrestment; (b) the sum due by you to the debtor; or (c) the sum ... calculated in accordance with section 73K(c) of the Debtors (Scotland) Act 1987." This sum, (b), is the aggregate of (i) the principal sum; (ii) any judicial expenses chargeable against the debtor; (iii) the expenses of executing the arrestment; and (iv) interest on the principal sum. It may also be competent in some circumstances to recover interest on the expenses of executing the arrestment. This automatic release of money by the arrestee to the creditor must take place, unless the debtor or the arrestee and a qualified third party sends a notice of objection to the sheriff court - or the arrestment otherwise ceases to have effect. Following such a notice of objection the court will make a decision following a hearing.

Arrestment in execution

Most arrestments, however, are not executed on the dependence of actions, but are served in execution of either court decrees or documents of debt, being deeds registered for execution in the Books of Council and Session or the sheriff court books. Except in that category of decrees which includes the summary warrants granted to H.M. Revenue and Customs and Scottish local government authorities, a creditor who has obtained an extract of his decree or document of debt can immediately instruct a judicial officer to execute an arrestment, without any preliminaries.

The schedule of arrestment served on the bank has the effect of giving, in the one form, all the instructions to the arrestee that have been described above, in connection with arrestment on the dependence, up to the stage of serving the final decree. Therefore, the arrestee is told of the sum in excess of the Protected Minimum Balance (but without the words "more or less") having been arrested - covering debts due by the arrestee to the debtor and goods and other moveables held by the arrestee for the debtor. The notes then explain that on the expiry of 14 weeks, beginning with the date of service of the schedule of arrestment, the arrestee must release to the creditor the statutory amount, unless a notice of objection is received or the arrestment otherwise ceases to have effect. Furthermore, in the three week period following the service of the arrestment, the arrestee must disclose to the creditor the nature and value, in so far as it is known, of any funds and/or moveable property which have been attached.

Residual attachment

Part 4, Chapter 3 of the Bankruptcy and Diligence etc. (Scotland) Act 2007 enacts a new form of diligence over property of a debtor, heritable or moveable, to be known as residual attachment. Its essential character is that this is to be a diligence which might be used against assets which are neither attachable by any other diligence, nor exempt from other diligence.^[9] The law has not yet been brought into force. However, it especially deserves to be noted in this discussion of Scotland's system for the attachment of incorporeal moveable property; for the law, once commenced, would provide a process for attaching and realising the value in, for example, the intellectual property of copyrights and patents.