In this bulletin we will examine how the new diligences of money attachment and residual attachment are enforced once the assets have been attached.

Money Attachment

Once the attachment has been executed and money removed, the messenger of court must report to the court and the creditor then has a period of 14 days within which to apply to the sheriff for an order authorising payment to the creditor. Where there is no opposition to the application, the sheriff must make a payment order.  However, where the payment order application is opposed the sheriff must hold a hearing and give any party opposing the application an opportunity to make representations.

If a creditor fails to apply for a payment order within 14 days of the report being made, the Bill requires the sheriff to order that the money attachment ceases to have effect, and the messenger must return the money to the debtor.

At any hearing, the onus will lie on the debtor/third party to establish that any money attached is not owned by the debtor or that there are other grounds for refusing the payment order; if this is established then the sheriff must order that the attachment ceases to have effect in relation to that money.  The debtor is entitled to seek an order from the sheriff that either all the money attached or a portion of it should be returned to the debtor on the grounds of undue harshness.

If the court is satisfied that the attachment has been carried out correctly and that the debtor/third party has no basis to challenge the money attachment, the court will grant a payment order. This order authorises the messenger of court to release the money attached (under deduction of fees and outlays). If surplus funds are attached any surplus is repaid to the debtor.

Residual Attachment

A residual attachment order is commenced by an application to the court, which must be intimated on the debtor.  The application should specify the property to be attached and also specify how the value of the property would be realised should a satisfaction order be made. A satisfaction order is roughly equivalent to the sale stage in land attachment.

Given the range of property subject to the diligence, there will be occasions where the court is considering applications to attach property in specialist areas of law; requiring creditors to specify how the property should be realised will assist the courts in determining applications and it may be necessary for creditors to seek specialist input on valuation and sale in support of their application. It should also be noted that there are certain types of property that cannot be transferred and therefore cannot be attached through the new residual diligence.

The immediate effect of intimating an application on a debtor is that the debtor is restrained from disposing of the property, granting a licence, and transferring or burdening the property; if the debtor takes any of these steps this can be treated as a contempt of court.

If an application is granted the court will issue an order specifying the property affected and order intimation on the creditor and, where appropriate, third parties.

In addition to the formal residual attachment order, the court is given a wide discretion to make "any other order which the court thinks fit in consequence of the residual attachment order".  The reason that two orders may be required is due to the wide variety of property potentially subject to residual attachment, and the necessity for the court to have the discretion to tailor the effect of any order to the type of asset(s) to be attached. As such, the diligence will not have a single effect.

One example from the Bill of a consequential order that can be made that will be of interest to the insolvency profession is the appointment of a judicial factor to manage the property. It remains to be seen when the court will consider it appropriate to make this type of consequential order.

The residual attachment order takes effect from the beginning of the day the schedule of attachment is served on the debtor.  Once created, the attachment gives the creditor a right in security over the attached property for the amount of the charge for payment together with expenses.

As with the sale provisions for land attachment, the debtor (or other person with an interest) is entitled to apply for a recall or restriction of the residual attachment order.  The same provisions apply; if the court is satisfied that the order is invalid, executed incompetently or has ceased to have effect then the court must recall the attachment.  If the order is valid but the court finds that more property is attached than need be, and if it is reasonable to do so, it may order a restriction of the attachment.

Residual attachment orders cease to have effect at the end of 5 years although the Bill enables the creditor to apply to court to extend the order; and this must be done in the 2 month period before the order expires.

The satisfaction order is the last stage of the diligence.  Unlike the sale stage of land attachment however there are no time scales for when a satisfaction order can be sought; it is possible (and will in some cases be necessary) to seek a satisfaction as soon as the residual attachment order is in effect.  The reason for this flexibility results from the wide range of property subject to the diligence.  For example, a fixed term licence to use copyright material will have a limited lifespan; in these circumstances an application to realise or sell the material should be competent any time after the attachment comes into effect if the residual diligence is to be of value and use.  However, authority to realise, sell or otherwise satisfy the debt will not be automatic.

The court needs to be satisfied that the attached asset is capable of being realised before a satisfaction order is granted.  The court is given a wide power to make an order "authorising the satisfaction" of the debt; this can mean a sale of the property, but could also involve the transfer of ownership or income derived from the property, or, giving the creditor, for example, the authority to lease or licence the property.  Where the court orders a sale, it must appoint a person to make arrangements to carry out the sale, and may appoint someone to value the property.

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