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| This survey examined a sample of payment actions raised in 5 sheriff courts in a one month period (March 1992). In all, 4246 actions were included in the survey. For each action, information on the following was collected: litigant type, principal sum, duration, representation, initial response to the summons and outcome. The survey formed part of a programme of work designed to evaluate the Debtors (Scotland) Act 1987. |
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| Main Findings |
- The vast majority of payment actions (90%) were raised by businesses. Individual pursuers were most common in ordinary cause actions (16%), and least common in small claims actions (5%). Financial institutions were the most common type of business pursuer. The majority of defenders in payment actions were private individuals (62%).
- Actions ranged from £3 to £1.5m. However, 25% of actions were below £250, and almost half (46%) were below £750 (the upper limit for small claims procedure). Only 7% of actions were for more than £10,000.
- The majority of small claims and summary cause actions (84%) concluded without a hearing of any type, and only 4% of such actions involved a proof or full hearing.
- Pursuers had legal representation at 94% of hearings across all procedures. In contrast, defenders were legally represented at just 56% of hearings (and just 23% of small claims hearings). Defenders represented themselves at 10% of hearings and were absent from 33% of hearings. Defenders were absent from 69% of time to pay direction hearings.
- In the majority of cases (two-thirds) the defender made no response to the summons. In the remaining cases, defenders indicated that they would defend the action in 17% of cases and admitted the claim and applied for time to pay the debt in 15% of cases.
- Compared to the previously available summary cause instalment decree, the new time to pay direction had only slightly increased the proportion of eligible defenders applying for time to pay their debts.
- Three-quarters of applications for time to pay directions were accepted by the pursuer. The majority of rejected time to pay directions (67%) resulted in the awarding of an open decree. Sheriffs were particularly unlikely to allow time to pay directions which would involve payments over more than one year.
- The majority of actions (72%) resulted in a decree in favour of the pursuer. Business pursuers were, however, more likely than private individuals to be successful, with 74% compared to 48% obtaining a decree in their favour. Those defenders represented by a solicitor at a hearing in a defended action fared better than those who represented themselves, or who did not appear at all.
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| Introduction |
| This survey forms part of a programme of work designed to evaluate the Debtors (Scotland) Act 1987 (the Act). This Act, implemented in 1988, introduced major changes to the procedures for enforcing debts in Scotland. The evaluation was commissioned by Scottish Courts Administration and conducted by the Legal Studies Research Branch of The Scottish Office Central Research Unit. |
| Court action is an important stage in the debt recovery process, and crucially can represent the first step towards formal enforcement of a debt through diligence 1. A court decree is a warrant for diligence, and so opens up the possibility of the post-decree provisions of the Act being invoked (ie, the reformed procedures for poindings and warrant sales, the newly introduced diligences against earnings, and time to pay orders). Further, following the initiation of court action and before a decree is granted, a defender has the opportunity to apply for a time to pay direction, another measure introduced by the Act. |
| The aim of the survey of payment actions was to provide information about the pursuit of debts through the courts, which is an important stage in the debt recovery process. Specifically, the survey sought to provide information on: |
- the types of action which enter the formal stages of debt recovery;
- the nature of pursuers and defenders in such actions;
- the pathway of actions though the system;
- the use of time to pay directions;
- the outcome of actions.
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| With the exception of time to pay directions, where an application must be made before a decree is granted, the survey of payment actions did not deal directly with the provisions of the Act. Rather, the survey sought to gather information about the court stages of the debt recovery process to act as a background to the overall evaluation. |
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| Characteristics of actions |
| The typical payment action raised in the sheriff court would appear to involve a business 2 pursuing a private individual for a relatively small sum of money. |
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| Pursuers |
| Ninety per cent of pursuers in the survey were businesses. Financial institutions (banks, building societies, credit card companies, etc.) accounted for the largest proportion of actions (20% of all actions raised by businesses), and a small number of large organisations (financial institutions, the 'utilities', and public sector bodies) accounted for a significant proportion (42%) of all actions pursued by businesses. |
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| Defenders |
| In contrast to pursuers, the majority of defenders (62%) were private individuals. The most common category of business defender was that of 'construction and trade', appearing in 9% of actions studied. |
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| Pursuers and defenders |
| Over half of all actions studied (58%) involved a business pursuer acting against a private individual, and businesses in general were more likely to pursue private individuals than other businesses. Private individuals, on the other hand, were as likely to pursue another individual as a business. |
| There was variation in the extent to which different pursuer types were involved in actions against individuals or businesses. For example mail order firms, financial organisations, the utilities, professional services and public bodies raised the bulk of their actions (80% or more) against private individuals, while manufacturers and commercial suppliers, transport suppliers and a range of miscellaneous organisations raised the majority of their actions against commercial defenders. |
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| Value of claims |
| Forty-six per cent of the actions studied were small claims actions (below £750), 19% were summary cause actions (between £750 and £1500), and the remaining 35% were ordinary cause actions for £1500 or over. The value of actions, however, ranged from £3 to £1.5 million. The high proportion of small claims actions shows the extent to which actions were concentrated at the lower end of the scale. This trend is most obvious at the extremes with 25% of all actions being for £250 or less and only 7% of actions being for more than £10,000. Individual defenders tended to be involved in low value actions while business defenders were relatively more common in higher value actions. |
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| Progress of actions |
| The duration of actions |
| The duration of actions ranged from 5 days to 20 months. However, there were significant differences between procedures. Two-thirds of small claims and summary cause actions concluded within 2 months, and more than nine-tenths concluded within 4 months. In contrast, only one-fifth of ordinary cause actions concluded within 2 months and almost 40% were still ongoing at the time of the survey, some 16 months after the actions had been raised. |
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| The pathway of actions |
| The majority (84%) of all small claims and summary cause actions were concluded without a hearing of any type, and only 4% involved a full hearing or proof. Although information on the pathway of ordinary cause actions was not gathered in this survey, similar results have been reported for that procedure in other recent research (Morris and Headrick, 1995) 3. |
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| Representation |
| Ninety-four per cent of pursuers used legal representation at hearings, compared to 56% of defenders. Ten per cent of defenders appeared without representation, while 33% were absent. For both pursuers and defenders the likelihood of legal representation increased with the complexity of the procedure (ie, more litigants had legal representation in summary cause actions than small claims, while more still had legal representation in ordinary cause actions). Lay representation was rare. Defenders were also much more likely to be represented at hearings in defended actions than in hearings relating to time to pay directions. Almost three-quarters of defenders were legally represented in defended actions, compared to just 2% at time to pay direction hearings. At the latter type of hearing the majority of defenders (69%) failed to appear at all, and the remainder represented themselves. |
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| Response to the summons |
| Two-thirds of defenders made no formal response to the summons, leaving the pursuer free to seek a decree in their favour. However, the high rate of dismissals in cases where the defender made no formal response to the summons suggests that an out of court settlement was reached following the initiation of court action in about one-third of such cases. Of those defenders who did respond to the summons, 15% applied for time to pay their debts and 17% noted their intention to defend the action. However, defended actions were most common in ordinary cause actions and least common in small claims actions, while the opposite was true of applications for time to pay. There were also differences amongst litigant type, with business defenders twice as likely as individual defenders to defend an action, probably indicating the fact that most actions against private individuals are straightforward debts where no defence is possible. |
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| Time to pay directions |
| Time to pay directions were applied for in 15% of all actions studied, almost identical to the 16% who applied for instalment decrees in 1978, previously available under summary cause procedure. However, comparing the proportion of eligible defenders who applied for the 2 measures shows that there has been a slight increase in those applying for time to pay their debts. Twenty-four per cent of eligible defenders applied for time to pay in the current research compared to 19% under the old summary cause instalment decree arrangements. Nevertheless, the majority of defenders still do not take advantage of the opportunity available to them. |
| Defenders can apply to pay their debt in instalments or by way of a deferred lump sum. The majority of offers were for instalment arrangements (94%) and amongst such arrangements, monthly instalments were most common. Examining the principal sum in relation to the offer made, it was found that the time to repay the debt ranged from less than one month to more than 30 years. However, almost half of the offers made (48%) would have resulted in payment within one year, while almost three-quarters (73%) would have resulted in payment within 2 years. |
| Overall, almost three-quarters (74%) of applications for time to pay were accepted by the pursuer in the action, although acceptance was highest in small claims actions (78%) and lowest in ordinary cause action (58%). Not surprisingly, pursuers were more likely to accept offers involving shorter repayment periods, and were more likely to accept offers in relation to lower debts. Some pursuer types were also more likely than others to accept offers, with private individuals generally accepting fewer offers than businesses. Amongst businesses, there was, however, further variation. For example, the utilities accepted 98% of all offers made, while manufacturers and commercial suppliers accepted just 40% of offers made. |
| Those time to pay directions rejected by pursuers are adjudicated on by a sheriff. Both parties have an opportunity to put their case to the sheriff before a final decision is made. The survey found that the majority of applications heard by the sheriff (67%) resulted in an open decree, and more than half of the directions granted involved higher payments or more frequent payments than those proposed by the debtor in their application. The data suggested that the period over which payments would be made was a significant factor in whether or not the sheriff allowed an application, with the majority of applications which would have involved repayment periods of more than one year being rejected. |
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| Outcome of actions |
| The majority of actions resulted in a decree for the pursuer (72%). Businesses were more likely than private individuals to achieve a successful outcome, probably reflecting the fact that the majority of actions raised by businesses were straightforward debt actions and higher rates of pursuer success were apparent in higher value claims. In defended actions, defenders fared best when represented by a solicitor. |
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| Conclusion |
| The survey revealed a situation where the majority of payment actions were raised by businesses against private individuals for a relatively small sum of money. Litigation was often non-contentious, and largely an administrative process, with the pursuer obtaining a decree without the defender responding in any way and without a hearing taking place. With few exceptions, pursuers employ solicitors to act on their behalf at hearings, while a smaller proportion of defenders do the same, and very rarely do they do so at a time to pay direction hearing. Absenteeism was common amongst defenders called to a hearing. Time to pay directions appear to be under-used, with a significant proportion of individual defenders making no response to a summons when it is possible that a time to pay direction would have been appropriate. However, where defenders do apply for a time to pay direction, they are successful in the majority of cases, particularly where the offer would result in payment within 2 years. Sheriffs, however, only allow a minority of applications initially rejected by pursuers, and are particularly unlikely to allow applications which involve payments over a period of more than a year. The apparent use of this time-based criterion in considering applications for time to pay is an important factor in how this procedure, introduced by the Act, is working in practice. |
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| General implications for the evaluation of the Act |
| Although the only provision of the Act directly examined in this survey was the time to pay direction, the survey provided other information relevant to the operation of the Act. For example, the fact that the majority of defenders make no formal response to the summons indicates that debtors as a group are unresponsive to official documentation, for whatever reason; the low rate of solicitor representation suggests that this is a group operating largely without professional help; the high rate of absenteeism at hearings reinforces the idea of unresponsiveness but also suggests a lack of understanding about the procedures. In contrast, pursuers appear to operate successfully within the court system, are generally represented at hearings and in the vast majority of cases instruct solicitors. The behaviour of these very different groups is likely to have an impact on the operation of the Act. |
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| About the study |
| The Debtors (Scotland) Act 1987 aimed to strike an equitable balance between the interests of creditors and debtors by providing effective machinery for the recovery of debts, while at the same time ensuring that debtors were protected from undue economic hardship and personal distress. The Act dealt with 3 main areas: firstly, it introduced 2 new procedures - time to pay directions and time to pay orders - to give debtors time to pay their debts free from the threat of diligence; secondly, it introduced reforms to the procedures for poindings and warrant sales; and thirdly, it introduced 3 new diligences against earnings - the earnings arrestment, the conjoined arrestment order and the current maintenance arrestment - replacing the previous system of arrestment of earnings and action of furthcoming. |
| Scottish Courts Administration commissioned a programme of research to evaluate how the Act was working in practice and the extent to which it was meeting its main objectives. The research consisted of 7 separate studies. Four qualitative studies sought information on the views and experiences of commercial creditors, individual creditors, debtors and facilitators (solicitors, advisers, sheriffs, sheriff officers) and 3 quantitative studies examined the characteristics of payment actions, the characteristics of poindings and warrant sales, and trends in the use of the measures introduced by the Act. Findings from each of the studies, as well as an Overview, have been published by The Scottish Office Central Research Unit (SOCRU) as follows: |
- Headrick, D. and Platts, A. (1999) Evaluation of the Debtors (Scotland) Act: Study of Individual Creditors. (Report and Research Findings No.10)
- Platts, A. (1999) Evaluation of the Debtors (Scotland) Act: Study of Commercial Creditors. (Report and Research Findings No.11)
- Whyte, D. (1999) Evaluation of the Debtors (Scotland) Act: Study of Debtors. (Report and Research Findings No.12)
- Fleming, A. (1999) Evaluation of the Debtors (Scotland) Act: Study of Facilitators. (Report and Research Findings No.13)
- Fleming, A. (1999) Evaluation of the Debtors (Scotland) Act: Survey of Poindings and Warrant Sales. (Report and Research Findings No.14)
- Fleming, A. and Platts, A. (1999) Evaluation of the Debtors (Scotland) Act: Survey of Payment Actions in the Sheriff Courts. (Report and Research Findings No.15)
- Fleming, A. and Platts, A. (1999) Evaluation of the Debtors (Scotland) Act: Analysis of Diligence Statistics. (Report and Research Findings No.16)
- Platts, A. (1999) Evaluation of the Debtors (Scotland) Act: Overview. (Report only)
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| 'Evaluation of the Debtors (Scotland) Act 1987: Survey of Payment Actions in the Sheriff Courts', the research report summarised in this Research Findings, is available priced £5. Cheques should be made payable to the Stationery Office and addressed to: |
The Stationery Office Bookshop, 71 Lothian Road, Edinburgh, EH3 9AZ.
Telephone: 0131-228 4181
or Fax: 0131-622 7017
http://www.thestationeryoffice.co.uk |
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| This Research Findings may be photocopied or further copies may be obtained from: |
The Scottish Office Home Department
Central Research Unit
Room J1-0
Saughton House
Broomhouse Drive
EDINBURGH
EH11 3XA |
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| This document and other Research Findings and Reports may be viewed on the internet at http://www.scotland.gov.uk/cru/ |
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| 1 As well as court action, there are various other routes into diligence and the procedures of the 1987 Act, through, for example, an extract of a document registered in the Books of Council and Session, an award made by a tribunal or a summary warrant. All of these represent warrants for diligence in the same way as a court decree and could lead to the 'post decree' measures of the Act being invoked. However, only the last is thought to account for a significant amount of debt enforcement activity. |
| 2 The term 'business' relates to all litigants who are not individuals. This includes commercial organisations, public bodies and utilities. |
| 3 Morris, S. & Headrick, D. (1995) Pilgrim's Process, Edinburgh: SOCRU. |