Re-opening sequestration for whose benefit?
In a recent note, issued by Glasgow Sheriff Court, Sheriff Deutsch, has refused an application to re-open a sequestration, which he found failed to provide sufficient evidence that re-opening the sequestration would benefit anyone, but the professionals involved.
The application to re-open the sequestration, after the trustee and the debtor were discharged, was to allow the trustee to be re-appointed in order that he could take possession of funds that had become available from a mis-sold payment protection insurance claim.
As these funds related to a claim that would have vested with the trustee during the sequestration, if it had been known about, s63 (1) (b) of the Bankruptcy (Scotland) Act 1985, allow a trustee to apply to the court to re-open a sequestration in order that the funds be ingathered and distributed to the creditors of the sequestration.
In this case, the problem was there were none, or at least any who had submitted a claim.
Exercising his discretion, the sheriff could see insufficient benefits that would arise from the re-opening of the case, other than for the professionals involved, and declined to do so.
Of the £2,817.91 available to the trustee, it was shown approximately only 16% of this would be available to be distributed to the creditors, none of whom had made a claim in the previous sequestration, and £2,344.38 would be consumed by the fees and outlays of the trustee and his legal advisers.
Consignation of Funds
Interestingly, the solictors acting for the trustee, suggested to the sheriff that if the sequestration was not re-opened, the funds would have to be consigned to the Accountant in Bankruptcy (AiB). This is a process that allows for funds to be deposited with the AiB at the end of a sequestration, where funds have been allocated to a creditor, but not uplifted or cashed, or which have been allocated to a claim by a creditor that has been set aside.
In the sequestration in this case, however, no claims were received by creditors, so it is not simply a case they had not been uplifted of cashed. The only apparent grounds for consigning the funds, therefore, would be the creditor had failed to make a claim and provided reasonable reasons for failing to submit one, under section 52 (8) of the 1985 Act. However, it would appear no reasonable reasons were provided by those creditors that failed to submit claims.
As the Trustee is no longer in office, and the court clearly decided to not allow the case to be re-opened, it must be wondered what capacity they would have to take any funds, even to just consign them to the AiB. Equally, it must also be wondered what would be the statutory basis for the AiB accepting the funds. No claims were made in the sequestration and apparently creditors did not provide reasons for failing to submit claims.
Sheriff Deutsch, however, suggested there may be other routes, even informal ones available for dealing with the funds. One option he suggested, was an action of multiple-poinding. Multiple poinding is an action that can be raised when there are multiple competing claims that need to be dealt with. However, in this case, there are no claims, presuming the trustee himself has no fees and outlays outstanding from the original sequestration.
Offer of Composition
Another informal route that could be used is to make an offer of composition to the creditors in full and final settlement of the debts. There are, however, also problems with this. First, the trustee has no official capacity to do this and until the funds are released to the debtor, they lack any means of implementing it. It would also require creditors to submit claims and, there may still be problems agreeing the claims submitted.
Possibly a better way of dealing with a case like this, is where no claims have been received, or reasons for failing to submit a claim have been made prior to the trustee being discharged, is to take a view that the creditors have personally barred themselves from making a claim in the future. This would allow the funds to be reverted back to the debtor. It cannot be argued they didn't have sufficient time to make a claim or at least submit a reason for why they had not.
This would appear more sensible. Its one thing re-opening sequestrations where creditors have made claims which are unsatisfied, or have submitted reasons why no claim has been submitted prior to a trustee receiving their discharge; its another thing to re-open a case where no claims are known about and no fees are owed to the trustee in the original seqeustration.
It also has to be questioned on what basis someone else's property is being consigned to a government agency to be held in trust for creditors, who have made no claim or failed to provide any reason for failing to make a claim. It would appear fairer to assume all debts have been paid and the funds should be reverted back to the debtor.