MacMillan v T Leith Developments Ltd [2017] ScotCS CSIH_23 (10 March 2017)

MacMillan v T Leith Developments Ltd [2017] ScotCS CSIH_23 (10 March 2017)

The court held that inhibition is not 'effectually executed diligence' for purposes of Insolvency Act 1986 s.55(3)(a) and s.60(1)(b), following Lord Advocate v Royal Bank of Scotland as binding precedent due to legislative re-enactment and settled practice. However, inhibition confers priority over debts incurred after its registration, even if covered by a prior floating charge, under common law principles.

Citation
[2017] ScotCS CSIH_23
Parties
Pursuer and Respondent: David MacMillan; Defenders and Reclaimers: T Leith Developments Ltd (in receivership and liquidation)
Jurisdiction
Scotland
Judgment Date
10 March 2017
Procedural Posture
Reclaiming Motion (appeal) / Court of Session, Inner House, Opinion
Outcome
Declarator granted that inhibition affects post-inhibition debts; not an 'effectually executed diligence' under the statute.
Legal Topics
Floating Charges, Diligence, Inhibition, Statutory Interpretation, Priority of Creditors
Insolvency Property Law Commercial Law Floating Charges Diligence Inhibition Statutory Interpretation Priority of Creditors

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Parties

David MacMillan

Pursuer and Respondent

T Leith Developments Ltd (in receivership and liquidation)

Defenders and Reclaimers

Procedural Posture

Reclaiming Motion (appeal) / Court of Session, Inner House, Opinion

Legal Issues

  1. 1 Whether inhibition constitutes 'effectually executed diligence' under Insolvency Act 1986 s.55(3)(a) and s.60(1)(b)
  2. 2 Whether inhibition provides priority over debts incurred after its registration in competition with a floating charge holder

Ratio Decidendi

The court held that inhibition is not 'effectually executed diligence' for purposes of Insolvency Act 1986 s.55(3)(a) and s.60(1)(b), following Lord Advocate v Royal Bank of Scotland as binding precedent due to legislative re-enactment and settled practice. However, inhibition confers priority over debts incurred after its registration, even if covered by a prior floating charge, under common law principles.

Court Disposition

Declarator granted that inhibition affects post-inhibition debts; not an 'effectually executed diligence' under the statute.

Orders

  • Pursuer's first plea-in-law repelled; inhibition not effectually executed diligence under Insolvency Act 1986.
  • Pursuer's second plea-in-law sustained; declarator granted that all post-inhibition debts are affected by inhibition.