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Show me the money
A new debt-collection tool for creditors will be introduced at the end of this year, and is expected to be widely used in pubs, clubs and restaurants where money in the form of cash and cheques is frequently kept in large amounts. David Whyte outlines the latest legal development in debt recovery…
Known as 'money attachment', the new provision could affect anyone in the retail, hospitality and leisure industries, and those who own or run such businesses need to be aware of the imminent changes.
Scotland had been lagging behind England, Wales, Northern Ireland and many other countries, where money attachment is already permitted. Under the new law, creditors will be able to instruct sheriff officers to search debtors' business premises, and any coins, banknotes, cheques and banking instruments - in sterling or any other currency - may be seized in satisfaction of any debts owed. However, creditors may only take this action once they have obtained a court decree, or 'document of debt' (but most formal leases of premises will constitute the latter).
Searches of a debtor's premises can be quite intrusive, and creditors may conduct them late in the evening or on a Sunday or public holiday (only with permissions from the courts) in order to secure the maximum available funds.
However, residential property is excluded, and money attachment will not normally be permitted on Sundays or local public holidays, nor outside the hours of 8am to 8pm without the prior approval of the court. Ultimately, it will be down to individual sheriffs to decide whether or not attachment during excepted periods will be permitted, and that will depend on the circumstances of each case.
Once the sheriff officers have entered a business premises which is owned, occupied or controlled by a debtor, any monies found will be presumed to be owned by that debtor. As part of the money attachment process:
- Any foreign currency must be changed to sterling
- Sheriff officers may remove and bank cash, acting as an agent for the creditor
- Banking instruments, such as cheques, may be removed and retained in a safe place
- Attached money can be released when the creditor makes an application to the court within a period of fourteen days, but the court may not authorise release of more than £1,000
- Anyone wishing to oppose the creditor's application must also do so within a period of fourteen days, and the courts will determine the opposition. Debtors, meanwhile, may apply for whole or partial release of money attached, on the grounds that the seizing of such a large amount was 'unduly harsh'
On the basis of its popularity in the rest of the UK, it would appear that money attachment will become a useful collection tool for creditors involved in retail and entertainment businesses throughout Scotland. Landlords, wholesale suppliers and HMRC in particular will be keen to use the new law to search premises where large caches of money are often stored on site.
While ownership of funds may be difficult to prove, the initiative could nevertheless become commonplace in Scottish bars and restaurants, and owners of such businesses who have experienced financial difficulties would be wise to prepare themselves accordingly. www.brodies.com
This article has been edited from its original version. For the complete feature, please see Catering in Scotland magazine November/December 2009.
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