August 2012

What has the Scottish Parliament ever done for us?

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The day after Professor Bonnington claimed the Scottish Parliament was damaging Scots Law, I provide one example in relation to debt law, where this is not the case.

Scotlands Best Kept Secret: The Debt Arrangement Scheme

In 1985 when the Scottish Law Commission produced it’s report into diligence, the area of Scots Law that deals with the legal recovery of debts, it was proposing reform of an area which had not been kept up to date with changing values .

It was possible back then when you owed money for your creditors to instruct officers of the court to seize your possessions and have your neighbours funnel through your home with a view to buying them. You not only had to contend with the embarrassment of being publicly humiliated, but also the knowledge that the predatory behaviour of those attending would mean your property would in all likelihood be sold for peanuts.

Unfortunately, the Scottish Law Commission didn’t think this was too bad and just a few adjustments were required, so it didn’t recommend abolition. However, it did make a number of other recommendations, one of which was there should be a new scheme for people with multiple debts who needed time to pay them off.

When the Debtors (Scotland) Act 1987 was introduced, Poindings and Warrant Sales as they were known, were kept, but slightly reformed (your neighbours couldn’t come into your home anymore, but they could watch from their windows as the court officer carried away your goods). And the scheme to help people repay their debts? Well that was a nice idea, but really why bother?

By 1997, nearly and 18,980 poindings were being executed in Scotland. Good times.

Then in 1999, Tommy Sheridan with the assistance of Mike Dailly, the Principle Solicitor of Govan Law Centre brought forward one of the first member bills in the newly formed Scottish Parliament: The Abolition of Poinding and Warrant Sales Bill.

Despite Scottish Executive resistance there was a back bench revolt (interestingly, primarily by woman) and this archaic practice was abolished. The Scottish Executive then brought forward their own legislation, the Debt Arrangement and Attachment (Scotland) Act 2002 which confirmed the abolition of poinding and warrant sales, albeit replacing them with a new type of attachment that distinguished between good kept in the home and outside the home. They also dusted off the old Scottish Law Commission recommendation of a new repayment scheme and called it the Debt Arrangement Scheme.

It was introduced in 2004 and allowed people to enter into formal repayment schemes with their creditors, letting them pay their debts, but with the full protection of the law. Once in a scheme, creditors could not do earning arrestment, bank arrestments, attach people’s property or make them bankrupt. And if the creditors objected? Well the new government officer, the Debt Arrangement Scheme Administrator could say tough, you’re in, providing she thought it was reasonable.

As a result of a painfully slow start, however, in 2007 the Scottish Government then introduced reforms so that once a  programme was approved, all interest, charges, fees and penalties on debts were frozen and if the plan successfully completed, written off.

Then in 2011, to give it another kick it was reformed again, this time to widen the type of money advisers who could apply for a programme on behalf of their clients. They also introduced payment breaks, so if your income dropped more than 50%, you could qualify for six month’s grace to get back on your feet again. And if you had ten different creditors to pay each month, well that was okay as everyone in the scheme has to pay their debts through a payment distributor who collects the money then distributes it to the creditors. And the cost of that service? The creditors have to pay for it.

The Scheme is still the little brother of Scotland’s two other formal debt remedies: 9,194 people signed Protected Trust Deeds last year; 11,056 people were declared bankrupt; and only 3,319 had Debt Payment Programmes approved.

However, as the graph below shows, if the first 8 years of the Debt Arrangement Scheme is compared with the first 8 years of Protected Trust Deeds, its growth pattern matches that of Protected Trust Deeds and in the last year has begun to grow even more steadily. In all likelihood in a few years time it will become Scotland’s main debtor remedy.

And it’s good for creditors also. The average dividend paid to a creditor in a Protected Trust Deed is less than 16p in the £ and less for bankruptcy: in a Debt Payment Programme, as the longest they normally last is 10 years, creditors get at least 30p in the £ back over the same period, but also with the hope of more in future years as it is not a form of personal insolvency.

The Scottish Government is also now looking to extend the Scheme so it can be used more easily by sole traders and partnerships to let them repay debts and avoid bankruptcy: creating a culture of recovery rather than one of liquidation.

And as for the replacement of poindings and warrant sales: in 2011/12 there were only 2,758 attachments, which is for property outside the home, such as cars and commercial property, and only 51 exceptional attachments carried out in the home (compared with the 18,980 poindings in 1998).

Now that’s not bad and as for the rest of the UK: they are still waiting for their reforms.

The Scottish Parliament Has Not Damaged Scots Law (Revised)

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By Alan McIntosh

Professor Alistair Bonnington’s statement that the Scottish Parliament has damaged Scots Law does not come as a surprise: there is plenty who take the view that our MSP’s are not up for the job. They have been accused of not understanding the issues they legislate on,  populism and being vulnerable to the occasional knee jerk reaction.

This image has not also been aided by scenes of ill-advised legislation that have being pushed through parliament during moments of panic. That happened in the immediate aftermath of Cadder v HMA and you got a feeling of how the Enabling Act of Germany could happen.

But in weighing up the comments of Alistair Bonnington it’s important to bear in mind we Scots can be a supercilious lot: that old “… I knew your father…” thing; and those in the professions do tend to get prone to viewing things through a prism of self-interest.  Although it has to be said politics is not much better: it can be a tawdry affair; elections have to be won, public opinion satisfied and those elected can sometimes lack even basic skills.

Also, it has to be conceded particularly in relation to criminal law, Professor Alistair Bonnington has a powerful case: there is a litany of ill-considered, poorly drafted laws or proposals from the Offensive Behaviour at Football (Scotland) Act 2010 to The Criminal Procedure (Legal Assistance, Detention and Appeals) (Scotland) Act 2010 to the current proposals to abolish the rules of corroboration in criminal trials.

But to suggest somehow that Scots Law thrived and flourished in the 300 years before the Scottish Parliament was created is less credible. If it did so, it was only despite the neglect of Westminster: who often couldn’t find the time to pass Scottish Acts of Parliament.

Also Professor Bonnington does seem to suggest that bad law making is a specialist skill the Scottish Parliament has developed all on their own, but the truth is it they don’t have exclusivity on it. Poorly drafted laws abound throughout the UK, and you can almost set your watch on new criminal justice bills being introduced by Westminster to deal with new outbreaks of youth crime.

Let’s, however, remember the Scottish Parliament has done a lot of good: it has reformed Scotland’s law of Diligence and Bankruptcy and created one of the most modern and progressive systems in Europe; it has introduced laws protecting the rights of women to breast feed their children in public; introduced protections for home owners and tenants to avoid unnecessary homelessness; reformed rape laws which  allowed rapists to walk free and continues to introduce land reform.

That’s not to say some of the Parliament’s laws would not be better off being repealed and some would have benefitted from a tad more consideration when they were drafted.  Also it probably would help if  parliamentarians did do their jobs  and  properly scrutinised Government legislation in the committees.

However, Scots law is not a museum piece to be preserved and not touched; it’s not precious. It’s a working system of rules and those rules have to be changed occasionally.  Sometimes those changes will be in response to events or public outcry; sometimes because of government policies;  and sometimes because there is a genuine need.However, as much as it’s true to say Parliamentarians would benefit from consulting more and thinking twice before enacting; it’s also true to say a lot of their laws have contributed to improving the standards of living of the Scottish people and the status and kudos of Scots Law. It’s also true to say many of us will just have to accept there is a Scottish Parliament and it is their job, after all, to legislate and make laws. 

New Protection for Tenants of Social Landlords

New Protection for Tenants of Social Landlords

New legislation introduced today by the Housing (Scotland) Act 2010 should help stamp out bad practice by many social landlords and bring to an end the draconian practice used by many of holding decrees like Swords of Damocles over the heads of tenants.

S153 and 155 of the 2010 Act, which amend the Housing (Scotland) Act 2001, should also make it more difficult for social landlords to evict tenants for rent arrears.

Section 153 introduces a new section 16(5A) and (5B) into the 2001 Act, which will mean that where court orders are now granted in relation to Scottish Secure Tenancies on grounds that include rent arrears, the date specified in the order for recovery will no longer be the date the tenancy ends. Instead tenancies will now cease on the date that recovery is made, ensuring technical evictions will no longer be required where agreements are reached and no new tenancy agreements will need to be signed.

The new amendments also require the courts to specify a maximum period within which the landlord must use the court order, which cannot exceed 6 month.

Section 155 does for Scottish Secure Tenants what the Home Owner and Debtor Protection (Scotland) Act 2010 done for home owners. It introduces new obligations in the form of Pre-Action Requirements (PARs) on Councils and Housing Associations which they must comply with before they can serve a notice of intention to raise proceedings. These PARs will only apply in rent arrear cases and landlords will be expected to comply with Scottish Government Guidance (http://www.scotland.gov.uk/Resource/0039/00395195.pdf).

The PARs are very similar to those for homeowners in that they place heavy emphasis on tenants being provided clear information, directed towards advice and where they are attempting to seek agreements for reasonable efforts to be made by landlords to enter agreements. Landlords are also encouraged not to initiate legal action where applications are being made for housing benefit and to provide tenants with assistance in making such applications.

One of the most interesting topics in the Guidance relates to sequestrations, where landlords are encouraged to consider where it is appropriate for them to raise actions for eviction where tenants have become bankrupt. Although sequestration in itself does not stop eviction, the point is made that raising actions for eviction may be construed as an attempt to obtain unfair preference and arguably should be avoided.

The Scottish Federation of Housing Associations have claimed the new laws are unnecessary and will not result in less evictions, but this ignores the point that when the credit crunch began the political focus was on preventing home owners losing their homes, despite the fact a tenant was twice as likely to have a decree made against him/her. Traditionally, the plight of tenants has been neglected and the fact these provisions took over 18 months to be introduced when the equivalent for home owners came into force in 2010 emphasises that point. There may not be fewer evictions, but the purpose of the provisions is also to improve practices in dealing with rent arrears.

Where the practices of social landlord are as unimpeachable as they claim, they will have nothing to worry about, but where they are not the Sword of Damocles that some of them held over the heads of their tenants for years, may now drop on them.

Poll Tax 20 Years On: Still Not Paying

Poll Tax 20 Years On: Still Not Paying

As we approach the twenty year anniversary of the Poll Tax being abolished, Alan McIntosh looks at what happened to the debt.

The Community Charge, or the Poll Tax as it was known, was introduced into Scotland one year ahead of the rest of the UK. It was to be the final nail in Margaret Thatcher’s coffin and arguably also the Scottish Conservative Party’s. The tax caused huge resentment and many saw it as evidence that Scotland was to be nothing more than a testing ground for the Tories.

Where it destroyed some careers, it made others, throwing the limelight onto Tommy Sheridan, Jim Sillars and Kenny MacAskill, who became the SNP’s Anti Poll Tax spokesman.

It was eventually abolished in 1993 after a massive campaign, which saw at its height one million non payers in Scotland and culminated in some of the worst riots in UK history, mostly notably with what became known as the Battle of Trafalgar Square.

However, despite abolition nearly 20 year ago, information obtained by freedom of information request shows Scotland’s councils are still pursuing over £322 million in community charge arrears, with some taking the view that all debts owed to them can still actively be recovered.

In England most of the debts were legally written off more than 7 years ago, but in Scots law it takes longer to extinguish debts that are legally constituted. Many will only be due to lapse now, although some accounts will still be recoverable for many years to come. Section 7 of the Prescription and Limitation (Scotland) Act 1973 means debts that have been legally constituted only extinguish after 20 years, providing they have not been relevantly acknowledged in that time; or the creditor has not made a Relevant Claim. Relevantly acknowledged means either a payment or a written acknowledgement of the obligation has been made by the debtor. Where a debt has been relevantly acknowledged, the prescription period runs again. A Relevant Claim could be raising a petition for bankruptcy against the debtor or executing diligence (wage arrestment, bank arrestment, attachment etc).

Despite this many local authorities have already taken the view to write off poll tax debts, with Inverclyde Council taking such a decision for its 2011/12 accounts. Other councils, such as Falkirk, have gradually reduced the amount owed by annually reviewing and writing off accounts as uncollectable. Glasgow City Council, however, is still owed approximately 27 pence in every pound that was ever billed (approximately £125 million) and has now taken the view it will still pursue those debts which have not been prescribed under the 1973 Act. Other local authorities such as Edinburgh are owed over £70 million, but cannot say how much is still recoverable, demonstrating the difficulty of doing due diligence on the collectability of such old debts, with many debtors now being deceased or gone away. It also highlights another problem in that in some cases, with old paper filing systems and the fact few debtors still have receipts 20 years on, where there are legitimate disputes, trying to resolve them fairly is impossible.

Debtors, however, are still being pursued and it is not uncommon for debt advisers to encounter clients still facing diligence or sequestration for debts which include amounts for community charge. The recent Scottish Diligence report by the Accountant in Bankruptcy illustrated this point by evidencing the fact that of the 84% of diligences executed in 2011/12 by local authorities, the debts being collected were not just council tax arrears but also community charge debts.

The poll tax was Thatcher’s legacy to Scotland and was widely seen at the time as hugely unpopular and unjust, evidenced by the fact its lifespan was so short and contributed to her downfall. Many of those ministers and councillors now in power will have marched and protested against the tax and been non payers themselves. It’s now therefore, not unreasonable to ask they urge all local authorities to clear old poll tax debts from their books. It’s ironic that where Scots were first punished with the poll tax, we will also be the last.

There is also the other issue of why debtors can still be pursued twenty years on and have diligence executed against them and be threatened with sequestration for debts which they were unable to defend in court in the first place.

John Wilson, the MSP for Central Scotland in the last parliament proposed a new bill to align the powers of councils to pursue tax debts with those of other creditors. Maybe now is the time to dust off that proposal.