Gratuitous alienation, illiquid claims and the solvency defence. Gillian Thompson,Accountant in Bankruptcy-v-(1) Stella Rae Sneddon and (2) The Keeper of the Registers of Scotland

28 January 2008

On 18 January 2008, Lord McEwan issued his opinion in the case of The Accountant in Bankruptcy -v- Sneddon. His Lordship's opinion discusses whether illiquid claims fall to be included as a liability for the purposes of the statutory defence of solvency to an action for reduction of a gratuitous alienation.

The Pursuer, Permanent Trustee on the Sequestrated estate of the defender's son, raised an action in terms of Section 34 of the Bankruptcy (Scotland) Act 1985 for reduction of a disposition of heritable property by the debtor in favour of the defender. The first defender pled the s.34(4)(a) defence that at the time of the transaction, the debtor's assets exceeded his liabilities. The issue before the court was whether a counterclaim against the debtor should feature in the balance sheet test where decree had not passed against him until months after the alienation in question. Answering this question in the affirmative, Lord McEwan granted decree against the defender.

Euan Duthie of Axiom appeared for the Pursuer. Lord McEwan's opinion can be found at the undernoted link:

http://www.scotcourts.gov.uk/opinions/2008CSOH11.html