Two recent Sheriff Court decisions have explored what is a "qualified creditor" for the purposes of petitioning for a debtor's sequestration (bankruptcy).

The law of personal insolvency in Scotland is contained in the Bankruptcy (Scotland) Act 2016. The Act sets out various requirements a creditor must satisfy before a court will award sequestration. Amongst these is that the debtor is "apparently insolvent" and the creditor is a "qualified creditor". A person can be apparently insolvent in several ways. One of these is for sheriff officers to serve a Charge for Payment which expires without payment being made. And a qualified creditor is one who, at the date the sequestration petition is presented to court, is owed at least £3,000.

Angus Council, Petitioner

In November 2018, Sheriff Murray in Forfar refused to grant warrant to cite three debtors. All three cases were petitions for sequestration by a local authority for alleged arrears of council tax. In each one the Charges for Payment were based on summary warrants and were for less than £3,000. The Council claimed that further sums due pushed the debts over that amount and the warrants should be granted.

Sheriff Murray disagreed. He accepted that the debtors were apparently insolvent as the Charges had expired without payment. However he did not accept that the Council was a qualified creditor for three reasons. The first of these related to the summary warrants and was specific to that type of court order. Secondly, the sheriff did not accept that a creditor could combine its own debts to reach the £3,000 threshold. Finally, Sheriff Murray also thought that the Council's submission that a sequestration petition could be based on a Charge for less than £3,000 was novel.

Scottish Water Business Stream Limited v McMath

Although parts of Sheriff Murray's decision related to the specific cases before him, it was obvious that the decision could have wider implications. The case of Scottish Water Business Stream Limited v McMath came before Sheriff Jamieson in Dumfries. The sum due under the Charge was less than £3,000 but the total debt due to the petitioner was more than that amount. Before he would grant a warrant, Sheriff Jamieson asked to be addressed by the petitioner in light of Angus Council.

At a hearing in chambers, it was submitted that the warrant should be granted. The requirements for the debtor to be "apparently insolvent" and for the creditor to be a "qualified creditor" were separate. Apparent insolvency didn't need to be constituted by a debt of more than £3,000. The creditor just needed to show that (1) the debtor was apparently insolvent and, (2) it was owed more than £3,000. Further, a single creditor combining its debts was not novel. As far back as 1993, in Arthur v HMA, a court had held there was no reason why a petition debt should be restricted to a sum contained in a decree.

Additionally, the petitioner explained that the court is obliged to grant a warrant if, on an initial look, the requirements of the Act were met. Evidence had been produced that the debtor had failed to pay the sums due under a Charge and the creditor was owed more than £3,000. The petitioner also explained that, if it wasn't eligible to petition for the debtor's sequestration, the Act required it to withdraw.


Sheriff Jamieson accepted the petitioner's arguments. He noted that the petition before him appeared to have been presented in accordance with the 2016 Act. He therefore granted the warrant to cite. In doing so he emphasised that he was not making a decision after a debate. No arguments had been presented by the debtor. However, by refusing to grant a warrant he would be denying the petitioner its right of access to the courts under Article 6 of the European Convention on Human Rights. And if he did refuse to grant a warrant, the petitioner would not have any right of appeal as a refusal to grant a warrant would not amount to a refusal of a petition to the court.

What next?

The decisions in Scottish Water Business Stream and Angus Council show the benefit of having a decree for £3,000 or more. A debtor can't challenge the amount of the debt and a creditor will have more certainty that its petition will be granted. If a "top up" debt has been used to reach £3,000, that debt may be disputed by the debtor and the creditor's petition will need to be withdrawn.

Sheriff Jamieson makes the observation that there is no binding authority from the Sheriff Appeal Court or the Court of Session on this issue. It should also be noted that Sheriff Murray doesn't appear to have been referred to earlier case law, including the decision in Arthur v HMA.The decisions in Scottish Water Business Stream and Angus Council were made without an opposing party to contradict the arguments being presented to the court. Perhaps in the future a judgment will be issued by the SAC or Inner House which will provide some finality to creditors.