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ENFORCEMENT OF CIVIL OBLIGATIONS IN SCOTLAND

4 (CONT.) DEBTOR PROTECTIONS

Policy Issues and Proposals for Reform

Financial Arrangements

4.73 The financial arrangements put in place by the 1987 Act to assist unrepresented parties do not appear to have given rise to any difficulty in their application.

4.74 It is considered that there is no reason in principle why a creditor should be entitled to recover expenses from a debtor in respect of a time to pay direction ¹⁷⁵ but not in respect of an application for a time to pay order or other proceedings under the Act. It is proposed that the no expenses rule be extended to applications for time to pay directions.

Information and Education Strategy

4.75 It would appear that the main difficulties experienced by parties attempting to use the provisions of the 1987 Act relate to ignorance or lack of understanding of the various options available and, separately, a lack of confidence in their own ability to present their case to the court.

4.76 In line with proposals already made elsewhere, it is again proposed that the measures to assist unrepresented parties form part of an information and education programme, coupled with a review of the documentation currently in use. The Commission recently reported "virtually unanimous approval" for its proposal to improve the application forms by redesigning them after consultation with debt advice workers and others involved in debt recovery.¹⁷⁶ As before, whilst these forms were also originally designed in consultation with the advice sector, it would be worth reviewing their clients’ experiences of using them and it is intended to conduct this exercise again. Also, as part of a drive to encourage greater uptake of the mechanisms provided by the 1987 Act, further training could be made available for sheriff clerks to emphasise the importance of their role in these matters.

Representation and Assistance

4.77 It is clear that parties to actions for payment believe that representation is essential if, their case is to be given the attention it deserves. Parties should be encouraged to represent themselves and advice agencies to do so on behalf of their clients. This could be included in the general information and education programme.

4.78 As a matter of principle, it is considered appropriate that, in respect of their obligations to assist debtors, sheriff clerks ought to be equally obliged to assist creditors to use the provisions of the 1987 Act.

4.79 It has also been noted that the Executive is separately considering the In-Court Advice Pilot Project ¹⁷⁷ and that the Department of Trade and Industry is to review the Consumer Credit Act 1974 which will include the question of lay representation at time order hearings.¹⁷⁸

Q. 4B. 1 Should the no expenses rule be extended to applications for time to pay orders or other proceedings under the Act in line with current application for time to pay directions?

Q. 4B. 2 Should measures to assist unrepresented parties and encouragement for party or lay representation form part of an information and education programme?

Q. 4B. 3 Should sheriff clerks be obliged to assist creditors to use the provisions of the 1987 Act in the same way as for debtors?

Q. 4B. 4 Should further training be made available for sheriff clerks to emphasise the importance of their role in assisting parties?

Q. 4B. 5 Should there be a review of the documentation currently in use?

(C) WRONGFUL DILIGENCE

4.80 The law of wrongful diligence governs situations where diligence has been carried out without proper authority to do so or where properly authorised diligence has been executed defectively. It can be regarded as a formal debtor protection, although it applies equally to anyone subjected to enforcement action, not just debtors.

4.81 Wrongful diligence is not a remedy which is often used. That may be because it is not required, not known about or not understood. Examination of discussion by writers on the subject may assist in considering why that might be and in assessing whether reform is necessary or desirable.

Summary of Current Law

4.82 The law relating to wrongful diligence is almost entirely common law, the majority of relevant cases having been decided in the 19^th and early 20^th centuries, since when there have been relatively few reported decisions on the subject. The law is fairly technical, with different rules applying to different types of diligence, but there are some general principles governing the law of wrongful diligence.

4.83 Two main types of act may be complained of as being wrongful (or wrongous ¹⁷⁹) diligence. First, where a creditor uses diligence without the proper authority to do so and second, where the diligence itself is authorised but is executed "irregularly".

Diligence used Without Proper Authority.

4.84 Diligence may be wrongful for want of proper authority in a number of situations. Firstly, diligence may be done where there is no warrant at all to justify it. This may be because a warrant has never been obtained ¹⁸⁰ or because the decree upon which the diligence proceeded has become inoperative, for example where payment of the sum due has been made.¹⁸¹ The latter example is given statutory foundation by the Debtors (Scotland) Act 1987 which provides that arrestments, earnings arrestments and poindings and sales will be terminated, "if the full amount recoverable thereby is paid to the creditor, an officer of court, or any other person who has authority to receive payment".¹⁸²

4.85 Secondly, a warrant to do a particular form of diligence may not be available as ‘of right’ and the court may have to be satisfied, on the basis of ex parte statements made by the pursuer, that the warrant should be granted. Use of the diligence will be wrongful if the statements made by the person seeking the warrant are inaccurate or incorrect, even where the inaccuracy is unintentional or made in good faith.

4.86 Thirdly, diligence may be wrongful where, although a valid warrant is available to the pursuer, diligence has been used "maliciously and without probable cause".¹⁸³ In this context, malice means spite or malevolence of such a degree required to rebut a defence of qualified privilege in an action for defamation. Absence of probable cause means "absence of any just cause".¹⁸⁴

Diligence Irregularly Executed

4.87 A person who has instructed diligence will not incur liability for wrongful diligence if he enforces a valid decree, provided that the diligence is executed properly. However, any material irregularity in execution of the diligence will give rise to an action without the need to establish want of probable cause and malice.¹⁸⁵ An example of such irregularity could be service of a charge, which incorrectly states the days of charge giving the debtor a shorter time to pay.¹⁸⁶

4.88 It is a matter of interpretation for the court whether, in all the circumstances, there has in fact been a material irregularity. There are areas of uncertainty. For example, it has been noted that there is authority for the view that a defect which is merely a clerical error is not actionable but it was held in a case concerning a charge for payment, where the date on which the charge was made was omitted, that both the charge and diligence following on from the charge were invalid.¹⁸⁷

Exercising the Remedy

4.89 Where a person has grounds to believe that diligence was wrongful, there are two types of action which he may raise. Firstly, and perhaps most immediately, he may attempt to prevent execution of the diligence commencing or continuing. Secondly, he may, in certain circumstances, be entitled to claim damages.

4.90 As noted above, diligence may be wrongful because there is no valid warrant for it. For example, because the decree upon which it proceeds is defective or because the diligence itself has been irregularly executed or is no longer appropriate. In the former case, action should be taken against the decree, for its suspension or recall. In the latter instance, an action for suspension, recall or interdict may be appropriate but directed against the diligence rather than the decree.

4.91 It has been commented that in the case of a summary warrant wrongfully obtained it is unclear how it should be challenged.¹⁸⁸ This suggests there may be difficulty in suspending or recalling a summary warrant itself but it has been held that diligence done on a summary warrant may be nullified where there is a defect on the face of the warrant.¹⁸⁹

4.92 Wrongful diligence may also constitute a delict and be used to found a claim for damages against the person who instructed it.¹⁹⁰ In most cases, before a court will be willing to award damages for wrongful diligence, it must be satisfied that there was ‘malice and want of probable cause’ on the part of those executing the diligence. This standard makes successful actions unusual ¹⁹¹ because negligence will not, normally, give rise to a claim for damages in cases of wrongful diligence. For example, if a bank obtains decree and is then paid but by administrative error diligence is instructed, it would seem that there is no liability in reparation because the wrongful diligence would have arisen through negligence not malice.¹⁹²

4.93 There are a few situations where there may be said to be strict liability for wrongful diligence. All that must be proved is the wrongful use of the diligence to establish liability for damages. This would be the case where there was no warrant at all to justify the use of diligence.

Liability for Wrongful Diligence

4.94 Different parties involved in the carrying out of wrongful diligence may be responsible, and therefore liable to the person prejudiced, to varying degrees depending on the circumstances. The pursuer upon whose instructions diligence proceeds will be liable not only for his own fault but also for that of his solicitor and/or enforcement officer because in every case where the diligence is wrongful, an action will lie against the creditor.¹⁹³

4.95 Similarly, where the enforcement officer involved in the diligence knew or ought to have known that it was unlawful, he may be jointly and severally liable with the creditor in damages. The same is true of an instructing solicitor.¹⁹⁴ Although not strictly speaking wrongful diligence, an officer of court may be liable in damages to his instructing agent if he fails to carry out diligence in accordance with the instructions, provided they are proper, or fails to do diligence with all due speed.¹⁹⁵ In certain limited circumstances members of the judiciary and court staff may be liable for wrongful diligence.¹⁹⁶

4.96 Actions for wrongful diligence appear to be extremely rare. Although such actions are not recorded as part of the Civil Judicial Statistics, only two cases specifically concerned with wrongful diligence have been reported in the last 60 years.¹⁹⁷ Many others have, however, been considered in related matters, such as suspension of diligence or of a decree.¹⁹⁸ Most of the cases cited by writers as authorities in this area were reported in the 19^th or even the 18^th Century.

Policy Issues and Consideration of Reform

4.97 There are aspects of the law relating to wrongful diligence which could be perceived to be unfair and outmoded. The existing system of regulating wrongful diligence is almost entirely based on common law, where the courts have established circumstances in which it will require proof of malice and want of probable cause before making a finding of wrongful diligence and how that test is to be fulfilled. The courts have also developed different rules to govern different types of diligence. Whilst it is often desirable that the rules are developed on a case by case basis by the courts, there have been few cases in modern times. It may be appropriate to adapt the existing test and standards to reflect changes in society.

4.98 For example, the standard to be met by a pursuer in an action for wrongful diligence, that he must prove malice and want of probable cause on the part of the person using diligence against him, may now be perceived as being unjustifiably high. It might also be fairer to innocent third parties affected by wrongful diligence if they could obtain damages where there is demonstrable negligence in the execution of the diligence. Similarly, it may be considered unnecessarily harsh that a creditor may be held liable for the irregular execution of diligence by enforcement officers (or his solicitor) which he has not condoned. It is also worth considering whether the uncertainty surrounding the means of challenging wrongfully obtained summary warrants should be addressed.

4.99 Although these issues have been raised by writers on the subject, they do not appear to have given rise to wide public concern. On the one hand, it is possible that there has simply been no need for recourse to the remedy. On the other hand, wrongful diligence may have been considered too difficult to establish. It is also possible that there is simply a lack of awareness, as noted for other aspects of this area of law. This issue is worthy of further exploration and the Executive would welcome consultees' views.

Q. 4C. 1 Why is the remedy of wrongful diligence little used?

Q. 4C. 2 Should an enforcement officer or instructing solicitor involved in diligence, which they knew or ought to have known was unlawful be:

(a) jointly and severally liable with the creditor in damages for wrongful diligence
(b) or wholly liable in place of the creditor?

Q. 4C. 3 Should the test to be met by a pursuer in an action for wrongful diligence, of malice and want of probable cause, be expanded to include negligence in the execution of the diligence?

Q. 4C. 4 Should the law be clarified to make it clear how a summary warrant wrongfully obtained should be challenged?

(D) DEBT ARRANGEMENT SCHEME

4.100 The historical recommendations for debt arrangement schemes, current need, benefits and difficulties of such an operation are examined and proposals for a current-day scheme are set out.

Nature and Purpose

4.101 The Scottish Law Commission first recommended debt arrangement schemes in its 1985 Report on Diligence and Debtor Protection.¹⁹⁹ The Commission intended that debt arrangement schemes would operate by debtors making regular single payments to a central place from where they would be distributed amongst multiple creditors as instalments towards payment of all their debts. It was to have assisted debtors who were not able to settle their debts as they fell due but had some surplus income, i.e. in excess of that required for minimum subsistence. Debtor applications, possibly prepared with the assistance of money advisers, would be submitted to the courts for judicial approval. All administration, including arrangements for payment and distribution, would be carried out by the clerk of court. The significant factor for the enforcement system was that, once schemes were approved and operating, enforcement action would not be competent. The purpose of the recommendation was intended to:

"fill a gap in the provision made by Scots law for helping ordinary consumer debtors and small traders to arrange for the orderly payment of debts".²⁰⁰

4.102 It was thought by the Commission to be similar in purpose, although not in make-up, to administration orders operating in England and Wales which were intended:

"for the introduction of a simple, accessible and inexpensive procedure for dealing with the ordinary consumer debtor ... who has no significant realisable assets, but who has a reasonable prospect of being able to discharge all or part of his liabilities out of the future earnings surplus to his essential requirements".²⁰¹

4.103 This remains a valid aim today. So why were the Scottish Law Commission's proposals for debt arrangement schemes made in 1985 not implemented with its other recommendations? The recommendation was not implemented for a number of reasons which the Commission summarised in its Report on Poinding and Warrant Sale.²⁰² These included the fact that existing arrangements for sequestration, voluntary trust deeds and voluntary repayment programmes were satisfactory. It was also felt that the proposals were too complicated, would not include pre-decree debts and might exclude subsequent creditors from the scheme whilst prohibiting them from enforcing. It had been noted that similar schemes abroad had experienced a high failure rate. Overall, the government of the time felt that the benefits would have been outweighed by the costs to the public purse. These concerns are addressed in following paragraphs.

4.104 The Commission’s proposals for debt arrangement schemes had been made in conjunction with other recommendations aimed at debtor protection and orderly payment, including time to pay directions and orders and conjoined arrestments. These recommendations were implemented and are currently in operation. Thus, for single debts for which an action has been raised, the court may grant the debtor time to pay, either by deferred lump sum or by instalments.

4.105 However, where individuals have multiple debts, they can find it difficult to organise and manage several separate time to pay arrangements. It may also be difficult for the court to set appropriate levels of payment in individual cases when they may not be informed of all relevant circumstances. Thus, individual time to pay arrangements ordered by the court, or made by informal agreement, can fail when repayments are not based on the complete debt picture and set at a level beyond surplus income available for all debts. Creditors may then have little option but to consider taking enforcement action to recover the debt. Time to pay arrangements granted in one case do not prevent enforcement action by another creditor under a different decree which can render the time to pay arrangement difficult to maintain.

4.106 The current time to pay arrangements depend on the debtor taking the initiative of making an application in cases which are before the courts. However, it is thought that many debtors are not taking up this opportunity, the reason for this appearing primarily to be due to lack of awareness.²⁰³ There may also be a reluctance because the time to pay arrangements also require the debtor to co-ordinate the payment arrangements awarded along with other subsisting debts and payments. It is understood that a large proportion of all small claims and summary cause actions for payment of money are undefended.²⁰⁴

4.107 Similarly, conjoined earnings arrestments were devised by the Scottish Law Commission to deal with multiple debts but, again, do not prevent other enforcement action by the same or other creditors being taken at the same time.

4.108 The Commission, when recommending time to pay and conjoined arrestment arrangements, had envisaged that they would mesh with debt arrangement schemes, thus avoiding these difficulties. It was not the intention that the time to pay arrangements should be a solution for multiple cases of debt and so it is perhaps not surprising that they have not been regarded as sufficient.

Support for National Statutory Provision for Debt Arrangement

4.109 Support for debt arrangement schemes has been renewed in recent times from many quarters.

4.110 The Scottish Law Commission, on consulting before issuing its 1985 Report, had then found that creditor interests supported debt arrangement schemes. At that time, the Scottish Association of Citizens Advice Bureaux, whilst accepting the principle expressed, serious doubts about their value.²⁰⁵ The Scottish Law Commission renewed its recommendation for debt arrangement schemes in its 2000 Report.²⁰⁶ The Commission re-opened the issue in its preceding discussion paper in which it sought views on whether such schemes should be introduced.²⁰⁷ The Commission reported that the overwhelming majority of consultees supported the introduction of debt arrangement schemes.²⁰⁸

4.111 Current general perception is that the multiple debt problem has continued to increase over recent years. Reports from advice agencies and support groups about the effects of social changes appear to support this perception, particularly in relation to easier access to credit and other factors such as an increase in home ownership and wider availability of mortgage lending.

4.112 Citizens Advice Scotland now strongly supports introduction of a debt arrangement scheme. In evidence to the Scottish Parliament, it advised that: "Most clients have a strong desire to repay their debts, despite the almost impossible hurdles that can be faced doing so. Most clients, particularly young clients, do not want to face bankruptcy, with all of the financial and social consequences following them for the rest of their lives."²⁰⁹ A subsequent paper, offering views on the possible workings of such a scheme stated that: "Debt continues to be the largest, fastest growing and increasingly complex single problem that Bureaux dealt with in 1999/00…Most CABx debt clients are in multiple debt situations. For these clients, the lack of a formal debt arrangement scheme can create further problems."²¹⁰

4.113 A Report of a discussion group during the Money Advice Scotland Annual conference recorded that: "A principal concern was about the pressing need for a statutory debt arrangement scheme. It was a common problem that voluntary repayment schemes which advisers devised for clients could be made unworkable by a single uncooperative creditor. A statutory scheme could prevent this and could also overcome the difficulty faced by courts when assessing ‘time to pay’ arrangements in individual cases by enabling a client's whole situation to be considered. Delegates put forward suggestions about how such a scheme might work in practice."²¹¹

4.114 A paper contributed to a Report of the Improving Debt Recovery Working Group supported a debt arrangement scheme at an early stage.²¹² It was felt that time to pay arrangements often put in place instalments which had been offered before court action had been raised and a debt arrangement scheme would, therefore, save time and costs for debtors, creditors and the courts.

4.115 The independent Working Group set up to consider a replacement for poinding and warrant sale recommended a national statutory debt arrangement scheme in its 2001 Report Striking The Balance- a new approach to debt management.²¹³ The majority of respondents who addressed the issue, 90%, supported this recommendation. Excerpts are reproduced at Annex A. Many made comments about how they considered that such a scheme should work which proved very helpful to the Executive in its review and formulation of the proposals which follow.

4.116 Comments from respondents to Striking the Balance touched on a wide range of relevant issues. Many respondents felt that establishing a statutory debt arrangement scheme was vital to dealing with multiple debt, particularly those in the advice sector including local authority advice services. Some thought that it would be of benefit in offering an alternative solution for resolving multiple indebtedness to that of bankruptcy and trust deeds which remove the debtor’s property from his control for realisation and distribution to creditors in satisfaction of their claims. One respondent felt that the absence of a debt arrangement scheme was a major contributing factor in the pre 1993 rise in sequestration and increasing post 1993 rise in use of protected trust deeds. Creditor interests mostly supported a debt arrangement scheme but some considered that it would only serve the same purpose as existing protected trust deeds. Local and central government creditors were concerned about how payments would be prioritised and apportioned between creditors.

4.117 Some respondents thought that there should be a maximum period over which the scheme should run whereas others thought that there should be no maximum period if that would mean that the full amount of the debt would be recovered. Respondents gave differing views about the stage at which the scheme could be entered, with some believing that greater benefits would be achieved if access could be as early as possible and others advising that this would inhibit or duplicate their own processes.

4.118 Concerns were raised by respondents about the scope of the scheme which it was felt should not extend to commercial debts, should not conflict with existing legislation for combating late payment in commercial debts and should not affect existing arrangements for deductions from benefits. Further concerns were expressed about the need for advisers to be accredited; including fee charging advisers; how the scheme would be funded; the need to ensure that debtors disclosed all sources of income and capital; the need for debtors to be aware that failure would result in further action; how disputes between debtor and creditor would be handled and whether lay representation would be permitted; how participants of the scheme would be listed; what would happen about omitted or subsequent creditors; and how debtors would be prevented from taking on further credit or debt.

4.119 The research into the operation of the Debtors (Scotland) Act 1987 suggests that many of the problems identified by different groups of respondents could be addressed by the introduction of debt arrangement schemes.²¹⁴ There was a general willingness by both debtors and creditors to agree settlement terms. However, in the absence of knowledge of the debtors' circumstances, creditors were suspicious of delaying tactics and debtors felt if only they could show creditors what their situation was they would agree to reasonable instalments. The intervention of advice seemed to produce positive results. Those who were supported by advisers succeeded in achieving settlement terms more readily. Where time to pay arrangements in court proceedings were used, they succeeded in about half of the study sample, with those who had received help (from a money adviser, trading standards officer or solicitor) being more likely to maintain the arrangement.

Voluntary Repayment Programmes

4.120 Voluntary repayment programmes have been operating for many years and continue to do so. A debt management plan is currently set up on a voluntary basis for instalment payment of multiple debts by mutual agreement between a debtor and his creditors. These arrangements are often brokered by money advice workers and debt counsellors. A gradual increase of these services and, most significantly, technical advancements have enabled them to become more automated and less cumbersome to administer as well as more discreet and user friendly for debtors.

4.121 Typically, a voluntary repayment programme will be arranged, at no cost to the debtor, in the following manner. A debtor seeks advice about a particular debt or his overall indebtedness. He may have done so of his own volition but, increasingly, creditors, such as high street stores and financial institutions, actively encourage debtors to do so.²¹⁵ Some of them now often produce literature directing them to this facility. The CRU research noted that a third of their study sample of commercial creditors had at that time offered some sort of money advice to customers in difficulty.²¹⁶

4.122 Free money advice services, where voluntary repayment programmes can be arranged either in person or by telephone, are widely available from the not-for-profit sector and local authorities. The money adviser will obtain details of the debtor’s income and liabilities, will seek to maximise income through available benefits and will work out a programme for payment in discussion with the debtor. This will be based on available surplus income after deduction of sums required for basic needs. It necessarily involves applying standard criteria, as well as a degree of value judgement on the part of the adviser, having regard to the individual and family circumstances, and common sense. For example, a modest sum for the upkeep of a companion pet cat might be considered a reasonable deduction but the stabling fees for a horse would not. Where possible a modest sum for future essential outlays, such as replacing a cooker or washing machine, and unexpected eventualities, such as illness or a death in the family, would be taken into account. The balance remaining would be allocated in a programmed schedule amongst all creditors. Some debts will be regarded as priorities to be paid first according to standard criteria. Agreement is sought from individual creditors and arrangements set up for payment and disbursement.

4.123 Voluntary repayment programmes are now commonly administered using electronic payment distribution systems for receiving debtors' payments and distributing them to creditors. Money advisers arrange a payment distribution mechanism suitable for the debtor’s circumstances. Some money advice organisations run their own payment distribution mechanisms, ²¹⁷ while others use externally provided systems.²¹⁸ These are now commonly set up on line or can be arranged by correspondence or telephone. Facilities for debtors to make payment currently include standing order or cheque where the debtor has a bank account. For those who do not have a bank account, postal order or cash deposits can be made at purpose-designed PayPoint ²¹⁹ terminals accessible in local outlets such as grocery shops and garages. It is understood that expansion of methods of payment is being explored and that telephone and internet banking, direct debit and other places to pay, e.g. post offices, may also become available. Payments made by debtors are on a no-cost basis with the full amount of debtors’ payments being allocated towards reduction of their debt.

4.124 Payment to the creditor is usually made by a single monthly electronic bank transfer incorporating various debtors’ payments. Participating creditors fund the service by deduction of an administrative charge from payments distributed to them, ranging from 9% to 15%. This pays for some money advice services, including preparation of debt management plans and ongoing case management, and the payment distribution system.

4.125 These arrangements do, of course, mean that creditors are accepting a reduction in the value of the full debt owed to them. Individual creditors will weigh up the costs and benefits of doing so for them. It is understood that the reasonable prospect of creditors receiving some payment on a regular basis weighs favourably in the balance against the uncertainty and cost of pursuing court and enforcement action in competition with other creditors. It is considered to be cost-effective and convenient, particularly for large creditor entities who receive payments from many debtors, as it can mean a reduction in their own administration costs for recovering bad debt. Large creditor entities tend to form the majority of creditors paid under voluntary arrangements and occasional small creditors may be included in the plan with no contribution being deducted.

4.126 These facilities have developed to satisfy an unmet need. They operate on the basis of many of the principles envisaged by the Scottish Law Commission applying up-to-date electronic technology on a streamlined basis. They are regarded by the advice sector as operating successfully, subject to the significant difficulties addressed in the following paragraphs.

4.127 Although limited, the statistical information which is available tends to support this. The charity, Consumer Credit Counselling Service Scotland, reports that, since opening in Scotland in 1996, it has given advice on debt problems to more than 12 000 people and has arranged more than 4000 voluntary debt management plans for Scottish clients totalling £25 million of debt.²²⁰ In 2000 throughout the UK, the Consumer Credit Counselling Service (CCCS) arranged over 6000 new plans bringing their total number of active plans to over 12 000.²²¹ CCCS reported that a survey by a major retail lender showed that 95% of CCCS plans were still working after six months, compared with 65% of plans arranged in house and 50% of plans offered by fee-charging companies.²²²

4.128 No statistics are collected of the numbers of plans set up or their success rate by Money Advice Scotland, for individual money advice agencies, or Citizens Advice Scotland, for individual citizens advice bureaux. Citizens Advice Scotland reported that during 2000 they dealt with 160 000 debt cases involving around £70 million of debt, which was a £10 million increase on the previous year.²²³ These figures are for all advice given, whether for single or multiple debt cases, and only a proportion of them would have involved setting up a voluntary repayment programme. These advice agencies tend to be consulted by those in poverty as well as those with disposable income.

4.129 So why can’t current arrangements continue as they are without a statutory framework? The principal limitation to voluntary repayment programmes are that they do not prevent creditors, who hold court orders or other authority to enforce, from proceeding to do diligence. Neither do they prevent them from petitioning for sequestration, where conditions for apparent insolvency apply. A repayment programme can, thus, be rendered ineffective by a single creditor unwilling to participate when enforcement jeopardises the debtor's continued ability to keep making payments to other creditors. This affects the success and effectiveness of voluntary repayment programmes as a remedy for both debtors and creditors. The principal advantage of a statutory debt arrangement scheme is that it would ensure compliance by all creditors by stopping diligence whilst an arrangement is ongoing.

4.130 Another difficulty with voluntary arrangements is that they cannot regulate legal effects between the participating parties and third parties. For example in order to prevent a debt becoming unenforceable due to prescription, a creditor, although receiving voluntary payments, may wish to obtain decree to protect his position should instalments cease before the full amount is received. The need to do so incurs cost to creditor and debtor as well as using court time.

¹⁷⁵ 1987 Act, s92(3)(b)(i).
¹⁷⁶ Scot Law Com No 177, para 5.31.
¹⁷⁷ Para 4.54.
¹⁷⁸ Para 4.61.
¹⁷⁹ It has been noted that "‘Wrongous’ has been objected to as a barbarous word, but it is the traditional term," Stair Memorial Encyclopaedia , Vol 8, para 123, fn 1.
¹⁸⁰ Wilson v Mackie, (1875) 3 R 18.
¹⁸¹ Stair Memorial Encyclopaedia , Vol 8, para 123.
¹⁸² 1987 Act, s95.
¹⁸³ Wolthekker v Northern Agricultural Co., (1862) 1 M 211.
¹⁸⁴ Maher & Cusine, para 12.01.
¹⁸⁵ Ibid, para 12.06.
¹⁸⁶ Ibid .
¹⁸⁷ Ibid .
¹⁸⁸ Stair Memorial Encyclopaedia , Vol 8, para 123.
¹⁸⁹ Douglas v Fife Regional Council , 1991 SLT (Sh Ct) 57.
¹⁹⁰ See generally Walker, Delict , Vol 2, pp 862-874.
¹⁹¹ Stair Memorial Encyclopaedia , Vol 8, para 124.
¹⁹² Ibid , citing S P Davies & Co. v Brown and Lyell, (1867) 5 M 842.
¹⁹³ Maher & Cusine, para 12.20, citing Anderson v Ormiston and Lorain, (1750) M 13949.
¹⁹⁴ Stair Memorial Encyclopaedia, Vol 8 , para 124, citing Stewart, pp 763, 806.
¹⁹⁵ Maher & Cusine, para 12.22, citing Stewart, p 822 and, inter alia , Troup v Hendry, (1906) 22 (Sh Ct) 271.
¹⁹⁶ Ibid , paras 12.23-12.24.
¹⁹⁷ Dramgate Ltd. v Tyne Dock Engineering Ltd., 1999 SLT 1392 (2000 SC 43); Emerald Airways Ltd. v Nordic Oil Services Ltd., 1996 SLT 403.
¹⁹⁸ Stair Memorial Encyclopaedia, Vol 8, para 123, fns 6, 7.
¹⁹⁹ Scot Law Com No 95, ch 4.
²⁰⁰ Ibid , para 4.33.
²⁰¹ Ibid, para 4.32, from the Cork Report, para 272.
²⁰² See excerpt in Annex A.
²⁰³ Study of Debtors, p 30.
²⁰⁴ No statistics are available to verify this.
²⁰⁵ Scot Law Com No 95, para 4.2.
²⁰⁶ Scot Law Com No 177, p 76, para 5.61.
²⁰⁷ Scot Law Com DP No 110, paras 7.53-7.65 and question 7.13.
²⁰⁸ Scot Law Com No 177, p 75, para 5.58.
²⁰⁹ Justice and Home Affairs Committee, Stage 1 Report on the Abolition of Poindings and Warrant Sales, Vol 2, p 132.
²¹⁰ Debt Arrangement Scheme, A Proposal by Citizens Advice Scotland , 23 August 2001.
²¹¹ Money Advice Scotland Spring Journal, incorporating Conference 2001 , awaiting publication.
²¹² Debt Enforcement in Scotland , contributed by representatives of the Sheriff Court Users Group and the Scottish Consumer Council, December 2000.
²¹³ Published 18 July 2001.
²¹⁴ Op. cit. notably from the research Study of Debtors , Study of Individual Creditors and Study of Commercial Creditors .
²¹⁵ Study of Commercial Creditors, ch 8, p 96, para 21.
²¹⁶ Ibid , ch 4, p 44, para 40.
²¹⁷ e.g. CCCS Scotland and their Scottish Debtline, www.cccs.co.uk , www.scottishdebtline.co.uk and Payplan www.payplan.com
²¹⁸ e.g. Money Advice agencies and Citizens Advice Bureaux use the Paylink Trust, see infra.
²¹⁹ www.paypoint.co.uk , operating in association with the Paylink Trust, see infra , currently have over 8 400 outlets in UK.
²²⁰ Press release, 24 July 2001.
²²¹ Managing Debt , Review of the Year , The Foundation for Credit Counselling, (2000).
²²² Ibid.
²²³ CAS response to DTI consultation Tackling Loan Sharks and More , September 2001.

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