Paying statutory interest on a recall of bankruptcy

On 4 April 2019, Sheriff Holligan issued a judgement following a Remit by the Accountant in Bankruptcy in the sequestration of VCY.


The issue for Sheriff Holligan was whether or not, in circumstances in which a debtor sought recall of sequestration on the basis that they had paid their debts in full, it was necessary that they also pay statutory interest.


Having heard arguments on behalf of the Accountant in Bankruptcy and HMRC, Sheriff Holligan was not persuaded that statutory interest is included in the word "debts" as it appears in section 17 Bankruptcy (Scotland) Act 1985 (section 30 of the Bankruptcy (Scotland) Act 2016).


Sheriff Holligan did emphasise the discretionary nature of recall and that he could foresee circumstances in which recall of sequestration without some payment of interest might be inequitable as regards the interests of the creditors, for example, where recall is sought a long time after the commencement of the sequestration process. He reserved his opinion as to whether it would be open to the court, in the exercise of its discretion, to refuse recall in order to avoid an inequitable outcome.


It should be noted that the matter has been put out for further procedure and that the time for any appeal has not yet expired. A further update will be issued by the AiB once the matter is finalised.