Prior to Court Action
If a debt is due from a company and a creditor is owed more than £750, or an individual/partnership owes at least £1,500, a statutory demand can be served. This document must be in a prescribed form and once served by sheriff officers, the debtor has 21 days to answer the demand by either making payment or denying that the sums demanded are owing.
If payment is not made and the demand expires unanswered, then it can be relied on as a basis for evidencing to the court that the company is unable to pay its debts in accordance with Section 123 of the Insolvency Act 1986 and seeking the court’s permission to place the company into liquidation and to appoint a liquidator. If it is an individual that owes money, then the expiry constitutes the debtor’s “apparent insolvency” within the meaning of the Bankruptcy (Scotland) Act 2016, making it possible to place the debtor into bankruptcy (known as sequestration in Scotland) to secure the outstanding debt.
If the debt is disputed or the insolvency regime is not appropriate, then it is open for a creditor to issue a letter before claim, allowing the debtor a short period of time (usually 7 days) to make payment of the debt. This letter should set out the principal sum that is outstanding, along with any interest accruing, if applicable, and demand that the total sum be paid by the deadline, failing which court proceedings will be raised.
Court Procedure
In Scotland, there are two different types of court action depending on the debt value — Simple Procedure (debts up to £5,000) and Ordinary Actions (debts over £5,000).
Simple Procedure claim
A court action is commenced by the claimant (the person that is claiming they are owed money) completing a claim form (a pre-printed form), setting out the details of the debt and attaching any supporting documentation, for example an invoice or statement of account, that relates to the claim. This form is sent to the court to register the claim and issue a timetable. The claim form is served on the respondent (debtor) who is given a deadline to respond to the claim. The respondent can admit the claim and settle it, admit the claim and ask the court for time to pay or dispute the claim, and should notify the court accordingly. If the respondent fails to respond to the claim form, then the claimant can apply to the court for a decision.
If the respondent states an intention to dispute the claim, the sheriff will consider the claim and issue an order to do one of the following:
- Refer the parties to alternative dispute resolution
- Set a date for a hearing called a case management discussion
- If the sheriff considers that an order can be made by the court without a hearing, then it will do so
- Dismiss the claim
Ordinary actions
This procedure is more complex than the Simple Procedure. In this type of claim, court proceedings are commenced by the creditor (the pursuer) by drafting an initial writ and lodging this with the appropriate court. This document sets out details of the claim, including who owes the debt (the defender), what the pursuer is asking the court for and what facts are being relied upon. Any supporting evidence can be lodged with the court alongside the initial writ. The court will issue a warrant for service and the court papers will be served on the defender, who has 21 days after service to decide what action to take.
If the defender ignores the claim, then after 21 days, the pursuer can ask the court to grant a decree (the order set out in the initial writ). If the defender admits the claim and makes a payment offer, the pursuer will complete the appropriate form and send it to the court. If the offer is unacceptable, the court will decide what should happen next. If the claim is disputed, the defender will complete a form called a Notice of Intention to Defend and lodge this with the court and the court will fix a timetable for the defended court action procedure.
If you require advice regarding outstanding debts, Carolyn is able to advise you on your options and assist and/or represent you in your claim.
Carolyn is a Partner in the Litigation team and is based in the Glasgow office. She is qualified in Scots and English law thereby allowing her to advise you in UK-wide contentious matters.
