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SHERIFFDOM OF TAYSIDE CENTRAL AND FIFE AT DUNDEE
[2025] SC DUN 23
DUN-B331-24
JUDGMENT OF SHERIFF GREGOR MURRAY
in the cause
INGRID GRAY AND CATHERINE DEENEY OR SWEATON
Pursuers
against
THE ACCOUNTANT IN BANKRUPTCY AS THE DAS ADMINISTRATOR
Defender
Act: MacRae, GFM Law
Alt: MacEwan, Anderson Strathern
Dundee, 13 February 2025
The Sheriff, having resumed consideration of the cause:
i)
sustains, in part, the pursuers' plea-in-law and repels the defender's pleas-in-
law;
ii)
allows the appeal;
iii)
remits the application for approval of a Debt Payment Programme by John Cape
dated 17 April 2024 to the defender to review and reconsider;
iv)
finds the defender liable to the pursuers in expenses as the same may be taxed;
allows an Account thereof to be given in and remits to the Auditor of Court to
tax and report.
2
NOTE
Statutory background
[1]
The defender is the DAS Administrator for the purposes of the Debt Arrangement
and Attachment (Scotland) Act 2002 and The Debt Arrangement Scheme (Scotland)
Regulations 2011.
[2]
In that capacity the defender assesses applications by debtors to approve a Debt
Payment Programme ("DPP"). Approval of a DPP entitles a debtor to reschedule payment
of debts over an extended period, prevents creditors from taking enforcement action and
freezes interest, fees and charges.
[3]
The Regulations provide that DPP applications must be prepared by reference to a
standard test, known as the Common Financial Tool, under the supervision of a Money
Adviser.
[4]
The Regulations oblige the defender to approve applications in defined
circumstances and in others oblige it to decide whether to grant approval. In the exercise of
those functions, it must have regard to the following Regulations:
"25.-- Approval by the DAS Administrator
(1)
Where approval cannot be given...the DAS Administrator must approve a
debt payment programme that is fair and reasonable.
(2)
In determining whether a debt payment programme is fair and reasonable,
the DAS Administrator is to have regard to--
(za)
where the debtor is an individual, the Common Financial Tool;
(zb)
where the debtor is an individual, any statement and evidence
required under regulation 20(2B) to satisfy the DAS Administrator in
applying the Common Financial Tool;
(a)
the total amount of debt;
(b)
the period over which a programme will operate;
(c)
the amount (if any) by which it appears to the DAS Administrator, on
the basis of such information as the creditors and the debtor have provided,
that the value of any land owned by the debtor exceeds so much of the total
amount of debt as is secured by way of a standard security over any interest
in that land;
(d)
the method, and frequency, of payments under a programme;
3
(e)
an earlier proposed programme that was not approved;...
(h)
the extent to which creditors have consented (deemed or otherwise) to
a programme;
(i)
any comment made by the money adviser; and
(j)
an asset of a debtor that could be realised to pay debts to be included
in a programme.
(3)
In determining whether a debt payment programme is fair and reasonable,
the DAS Administrator may have regard to any other factor that the DAS
Administrator considers appropriate.
(4)
Approval under paragraph (1) may be made subject to a condition under
regulation 28.
28.-- Discretionary conditions
(1)
A debt payment programme on approval under regulation...25...may be
made subject to one or more of the conditions specified in paragraph (2).
(2)
A specified condition is that the debtor must--
(a)
realise, and distribute amongst the creditors the value of, an asset of
the debtor...
(c)
be bound by any other reasonable condition intended to secure
completion of the programme..."
[5]
Finally, the Regulations provide that a creditor may ask the defender to review a
decision to approve a DPP and may appeal any review decision to a sheriff on a point of
law.
Relevant facts
[6]
The pursuers hold decrees for payment of around £293,000 against John Cape. The
amounts due include a principal sum, interest, expenses and a sum awarded under
Chapter 27A of the Ordinary Cause Rules. The pursuers are Mr Cape's only creditors.
[7]
Mr Cape then consulted BDO LLP in its capacity as a Money Adviser. On 9 and
17 April 2024, it submitted two DPP applications on his behalf to the defender. Copies form
numbers 1-6 of the pursuers' first inventory.
[8]
The first application disclosed Mr Cape had a £300 monthly surplus of income over
expenditure. It proposed Mr Cape pay £200 monthly to his DPP for an unspecified period
4
and that the balance of the debt be paid by 1 June 2027, when Mr Cape anticipated he would
have sold land he owned in Kirriemuir and "other property" which would enable the whole
debt to be paid.
[9]
The pursuers objected to the first application by submitting, inter alia, that Mr Cape
owned a number of apparently valuable cars and other heritable properties which could be
sold to satisfy the debt.
[10]
The second application proposed Mr Cape contribute £200 per month to the DPP for
an unspecified period and that it be made subject to the undernoted Regulation 28
discretionary condition, which would enable the whole debt to be repaid by 1 June 2027. It
also responded to the pursuers' original objections. Mr Cape had never owned the cars.
While he owned and rented out 12 properties, they afforded him a limited income as they
were subject to mortgages. BDO had verified those points and Mr Cape's assets, income and
expenditure.
[11]
The pursuers lodged numerous objections to the second application, only some of
which are relevant to these proceedings: the DPP would last for an excessive period;
Mr Cape had not identified or valued the properties he owned; the equity in them exceeded
the debt to the pursuers and the application made no provision for payment of sums
secured over them; sequestration of his estates would allow the debt to be repaid more
quickly; weight should be attached to Mr Cape's previous failure to account to the pursuers
for rent he collected for them, his conviction for embezzling a sum from them and his
conduct, which caused the court to order him to pay substantial additional sums.
[12]
Notwithstanding, on 1 May 2024 BDO sent a letter to the pursuers advising them
that the defender had approved the second application. A copy forms number 8 of the
5
pursuers' first inventory. The approved DPP bound Mr Cape to both pay £200 per month
into the DPP and to the following discretionary condition:
"Mr Cape has received an offer to purchase a piece of land he has for sale in
Kirriemuir. The land is being purchased with the intention of providing a local town
hub for the people of Kirriemuir. An application is in process for funding through a
grant from the Scottish land fund. This kind of sale does generally take longer than
normal, but emails confirming the proposed purchase and price are on file. I n
addition to this, Mr Cape plans to sell a property at Thorter Row, Dundee in
April 2027 (when current tenancy finishes) which has equity of £142K (value of
property £320,000 with a current mortgage of £178,000). Property sale, after selling
expenses, along with the sale of land will provide enough funds to repay the debt in
full by over 1/6/2027. Should the sale of land in Kirriemuir fall through for any
reason, further property will be sold to endure (sic) the debts are paid in full by all
1/06/2024 (sic)."
[13]
On 8 May 2024, the pursuers asked the defender to review its decision to approve the
DPP. In their request, which forms number 9 of their first inventory, they maintained many
of the grounds relied upon in the second objections and expanded upon the reasons for the
debt having accrued.
[14]
On 6 June 2024, the defender confirmed its original decision. A copy of its letter to
that effect forms number 10 of the first inventory. In it, the defender maintained its decision
to approve the DPP was fair and reasonable as: BDO had vouched Mr Cape's assets, income
and expenditure; while Mr Cape owned several tenanted properties, the equity in them was
unknown; in any case, the rent received formed Mr Cape's only income; the discretionary
condition allowed him to pay the whole debt within three years, which was a reasonable
period having regard to the amount due; if the discretionary condition was not met, the DPP
could be revoked; it was not clear that sequestration would enable his debts to be paid any
earlier; the nature of the debt was irrelevant.
[15]
On 19 June, the pursuers appealed the defender's review decision to this court.
6
Procedural background
[16]
The pursuers crave the court to quash the defender's decision on review, to revoke
its original decision to approve Mr Cape's DPP and to substitute a determination that it was
not fair and reasonable.
[17]
They aver that in reaching its decision: the defender failed to take into account
relevant factors, including the background to the case, the reasons for the debt; the defender
failed to obtain information on the equity in the rental properties or to take it into account;
the defender's decisions were plainly wrong and/or were taken as a consequence of either
misdirection in law, misunderstanding of or misuse of material facts, took into account
irrelevant considerations and failed to take into account relevant considerations.
Consequently, the DPP was not fair and reasonable.
[18]
In response, the defender pleads in law that the pursuers' averments are irrelevant
and inspecific and, in any event, its decision was fair and reasonable. In support, the
defender inter alia avers that the DPP provided for repayment by Mr Cape of the debt in
question to the pursuers as his sole creditors.
[19]
I heard submissions at a substantive hearing on the appeal on 27 January 2025. No
evidence was led as the relevant facts were agreed, on record or informally.
[20]
Parties agreed that the court could not allow the appeal simply because it would
have reached a different decision on the application. The pursuer required to show that the
defender did not exercise, or wrongly exercised, the discretion conferred on it by the
Regulations, misdirected itself in law, misunderstood or misapplied material facts, took into
account irrelevant considerations, failed to take into account relevant considerations or
exercised discretion wrongly (Macphail, Sheriff Court Practice (4th Ed), 18.159 160;
7
Liquidator of Bon-Accord Supplies v the Accountant in Bankruptcy, unreported, 11 September
2019, Aberdeen Sheriff Court at 43)).
Pursuers' submissions
[21]
In the context of the case, the defender ignored or attached insufficient weight to
relevant factors in the exercise of the discretion that Regulation conferred on it.
[22]
Paragraphs (za), (zb), (a) and (e) of Regulation 25(2) required the defender to have
regard to Mr Cape's statements of income and expenditure, the Common Financial Tool, the
debt due and his earlier application. There were substantial differences between the income
and expenditure figures in each application. The £200 monthly instalment was a random
amount. The three year term was a random period. It appeared Mr Cape could not afford
to pay the instalments or to maintain payment. The amount due to his sole creditors was
significant. The pursuers would not receive the full benefit of the instalments, as
Regulations 5(3) and 17(2) compelled the defender to deduct 2% and 20% administrative
charges from them. The defender ignored or attached insufficient weight to those factors.
[23]
The defender failed to have regard to its Regulation 25(2)(c) and 25(2)(j) duties to
consider the equity in Mr Cape's heritable assets and to have regard to any assets which
could be sold to pay the debt. No reasons were given to explain those failures. As 12 of the
13 properties remained unidentified, the pursuers could not ascertain their values or any
equity in them. As paragraph 4 of the application provided that "the equity position of the
debtor's property has to be ascertained", it was impossible to assess what the defender had
taken into account.
[24]
The defender failed to consider some or all of the rented properties being sold, with
or without vacant possession. Mr Cape was entitled to bring the tenancies to an end by
8
intimating that he wished to sell the properties with vacant possession. Alternatively, there
was a market for the sale of tenanted properties. The context was analogous to that
considered by the Sheriff in Alexander v The Accountant in Bankruptcy, unreported,
11 September 2019 at paras 48 to 49.
[25]
The defender also failed to take account of, or attached insufficient weight to the
uncertainty about the Kirriemuir land, as its sale depended upon an unidentified interested
party obtaining a grant from the Scottish Land Fund to purchase an unidentified property.
[26]
The factors in Regulation 25(2), the discretion conferred by Regulation 25(3)
confirmed and as the defender accepted on page 2 of its review decision, Mr Cape's DPP
required to be fair and reasonable to everyone, not just him. On the information provided, it
appeared it only considered the application from Mr Cape's perspective. It was
unreasonable to expect the pursuers to wait three years in the hope two assets might be sold.
The DPP deprived them of the ability to do diligence on their decrees or to sequestrate
Mr Cape. It was not certain that the DPP would be revoked if Mr Cape failed to maintain
instalments or did not timeously sell the Dundee and Kirriemuir properties.
[27]
In the circumstances, the pursuer's pleas should be sustained. If the court was not
prepared to quash the decision to approve the DPP, the matter should be remitted to the
defender for reconsideration.
Defender's submissions
[28]
The defender's agent adopted her written submissions.
[29]
Regulation 25(2) narrated 12 separate considerations which the defender required to
consider. Regulation 25(3) was a mopping up provision which permitted it to have regard
to any other factor it considered appropriate, a condition which was necessarily narrower
9
than one which permitted consideration of any other factor. If such factors pointed to a DPP
being fair and reasonable, the defender was bound to approve it. No discretion was
afforded to it in granting approval.
[30]
The defender's review decision showed it had regard to various regulation 25
considerations. It summarised the pursuers' original objections and the further information
BDO provided in response. It considered the proposed discretionary condition. It
addressed a number of points: the Regulations enabled an error or imbalance to be
corrected; it had no investigatory powers; the defender was not obliged to share the
information BDO supplied with the pursuers; it required only to consider information
supplied in relation to equity; the common financial tool was correctly applied; plainly,
consideration was given to the heritable properties owned by Mr Cape; both the
discretionary condition and the three year period afforded to Mr Cape were reasonable; his
lack of engagement with the pursuers was not relevant; if Mr Cape failed to comply with
the discretionary condition, the DPP would almost certainly be revoked; in that event,
interest would be reapplied; as he had, to date, paid every £200 monthly instalment, the
amount was self-evidently reasonable.
[31]
The pursuer's averments did not attempt to engage either with the original
determination or the review. They did not analyse either. They did not attempt to identify
errors of law. As the point was not pled, the pursuer could not argue that the defender had
failed to provide adequate reasons for its decision. To simply list a number of circumstances
which might form a basis for a case based on error in law was irrelevant. That the pursuers
disagreed with the defender's decisions was also irrelevant.
10
[32]
In article 8, the pursuers did attempt to plead a relevant case. Those averments, read
broadly, argued the defender failed to properly consider (a) annex C to the application, (b)
the background to the debt and (c) the value of Mr Cape's heritable properties.
[33]
The information in annex C made it plain that the pursuer's objections were
considered. The defender and BDO correctly applied the Common Financial Tool.
Regulations 3(1)(b) and (2)(a) provided that so long as his payments were not in arrears,
Mr Cap's mortgage instalments for the residential tenancy properties were irrelevant. The
three-year period of the DPP, interest, the potential revocation of the DPP and the
reapplication of interest were all taken into account. Mr Cape's conduct during the court
action was irrelevant, as it was inappropriate to consider it. In any event, the legislative
provisions governing personal insolvency debt solutions did not provide for such
considerations to be taken into account.
[34]
If the appeal was refused, expenses should be awarded. If the appeal was upheld,
the court should refer the issue back to the defender for reconsideration (Chas Stewart
Plumbing and Heating Engineers Ltd v the DAS Administrator, unreported, Perth Sheriff Court,
9 June 2017 at 58 60; Liquidator of Bon Accord Metal Supplies Ltd at 59).
Assessment of submissions
[35]
I agree an appeal such as this should not be upheld simply because the court would
have reached a different decision from the defender. Similar conclusions were reached in
Bon-Accord Supplies and Chas Stewart Plumbing and Heating.
[36]
The context to the appeal is clearly disclosed by the productions. After the pursuers
objected to the first application, BDO provided considerable further detail in the second
application on Mr Cape's finances and responded to the pursuer's objections.
11
[37]
Against that context, all but one of the pursuers' submissions fall to be rejected.
[38]
Regulation 20 obliged BDO to both state in the second application that Mr Cape's
proposed payments accorded with the Common Financial Tool and to send the defender
any supporting evidence or explanation. As the pursuers did not specify in what respect
BDO was said not to have done so, their submission on the point must be rejected.
[39]
I reject the pursuers' submissions about Mr Cape's income and expenditure. Both
applications were prepared and submitted by BDO as his Money Adviser. It obtained,
considered and vouched Mr Cape's assets, income and expenditure in advance of
submitting the second application. In terms of Regulations 3(1)(b) and (2)(a), his mortgage
payments for the rented properties fell to be disregarded. As BDO had seen evidence that
Mr Cape had never owned the cars, their existence was irrelevant.
[40]
The defender did not err by failing to have regard to the effect of the deductions it
made from the instalments. They are not among the factors which Regulation 25 obliges the
defender to have regard. The defender is statutorily obliged to deduct those amounts. It has
no discretion to vary or waive them. It follows it was not appropriate for the defender to
have regard to them for the purposes of Regulation 25(3).
[41]
I accept the defender's submission that the reasons for the debt were irrelevant to
consideration of the second application. Again, they are not among the Regulation 25(2)
factors which the defender required to consider. Nor was it appropriate for the defender to
have regard to them in terms of Regulation 25(3). The debt was a consequence of familiar
circumstances - Mr Cape's failure to satisfy a court decree and charge. It was not suggested
the £2,000 he was said to have embezzled formed part of the DPP. A notable proportion of
the debt was a procedural penalty imposed by the court.
12
[42]
I also accept that in most respects, the defender had regard to the size of the debt.
The amount is obviously substantial; the defender's agent confirmed that Mr Cape's DPP
covers one of the highest sums considered under the Act. However, again in context, the
defender balanced that relevant factor against three others a DPP would afford Mr Cape
relief from enforcement; BDO had independently vouched his assets, income and
expenditure; finally, approving the DPP was at least likely to enable the whole debt to be
paid in full in a relatively brief timescale.
[43]
I reject the pursuers' criticisms of the instalment amounts and their term. Mr Cape's
monthly surplus of income over expenditure was the result the application of the Common
Financial Tool to his vouched finances. The amount of the instalment represented the
majority of the surplus. It was clearly reasonable. As Mr Cape has maintained payment to
date, it was clearly affordable. The length of the term was clearly related to the timescale
described in the discretionary condition. In turn, the duration of that was directly linked to
the uncertainty about the proposed sale of the Kirriemuir land.
[44]
The pursuers' remaining submissions raise issues of more substance. Read short for
the purposes of the analysis below, they argued that the defender failed to have regard to
two relevant issues: first, the amount of equity in the 11 residential tenancy properties as
required by Regulation 25(2)(c) and, second, whether some or all of the properties could be
sold immediately, with or without vacant possession, to satisfy the pursuers' debt, as
required by Regulation 25(2)(j). The defender's response, again read short, was that it could
not have regard to the equity in all but one of the properties as that information was not
provided to it, as it has no investigatory function and as it must rely on information
provided to it by others.
13
[45]
I accept the Regulations confer no investigatory function or power on the defender.
In the context of this case, I also accept that Regulation 25(2)(c) required it only to have
regard to information about the equity in Mr Cape's heritable properties if it was provided
by the pursuers or by him.
[46]
There is no suggestion the pursuers provided any information. However, the
productions show Mr Cape, through BDO, provided the defender with a good deal more
information than it had regard to.
[47]
The debt due to the pursuers amounted to £293,000. The second application
effectively proposed Mr Cape pay that sum in full before 1 June 2027 via a discretionary
condition obliging him to sell the Kirriemuir land and the property in Thorter Row, Dundee,
failing which, if the Kirriemuir sale could not be completed timeously, Mr Cape would be
obliged to sell "further property" to meet the balance.
[48]
The following points arise.
[49]
In the second application, BDO vouched that there was £142,000 of equity in Thorter
Row. It follows that for the remaining balance to be paid from the sale of the Kirriemuir
land, there must have been equity in it of at least £151,000. However, if that was not sold by
June 2027, the "further property" proposed to be sold must have had additional equity of at
least the same amount. As such, the defender ought to have had regard to the fact that
Mr Cape disclosed equity of at least £444,000 in the Kirriemuir land, Thorter Row and the
"further" properties.
[50]
Regulation 25(2)(c) obliged the defender to have regard to that equity.
Regulation 24(2)(j) obliged the defender to have regard to have regard to selling some or all
of Mr Cape's properties, as they were assets which could be sold to satisfy the only debt
proposed to be included in his DPP.
14
[51]
However, the defender did not do so. No submission was made to that effect.
Moreover, it stated in the review letter that "it is not known if any of the other properties
have any equity". As such, it erred in law by failing to have regard to relevant factors when
it reviewed the second application. Its decision to confirm Mr Cape's DPP was arguably not
fair and certainly not reasonable for that reason.
[52]
For completeness, I reject the defender's submission that the pursuers' case is
irrelevant - in Article 8, the pursuers aver that the defender's decision was not fair and
reasonable having regard to Regulation 25(2) and failed to take the equity in Mr Cape's
heritable properties into account.
Decision
[53]
As the defender failed to have regard to Regulation 25(2) factors when it reviewed
and confirmed its original decision to approve Mr Cape's DPP, the appeal must succeed.
[54]
As the court should not substitute its own decision for that of the defender and that
would be the outcome if the court rejected Mr Cape's DPP entirely, as the pursuers sought, I
have granted orders allowing the appeal and remitting the second application back to the
defender to review and reconsider.
[55]
Expenses follow success.
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