Losing your inhibitions

In a minute or two I will tell you about filling saddlebags with gold, smacking the horse's rump and galloping off into the sunset. First, the background to the story: Scottish builder Karl Construction trying to get £500,000 on the final account for a shopping and residential development in Glasgow for Palisade Properties.

Karl got the hump when Palisade wouldn't pay up that whopping balance. So they did two things. First they began a traditional High Court Action. Then they went for the saddlebag law that has been used in Scotland since 1469: they issued a "warrant for inhibition".

Now let me issue a word of caution here; I haven't got a clue how the Scottish legal system works. First, they use ever such long words, they even use Latin, and finally, those Scottish lawyers are ever so clever. All this business of "inhibitions" or "arrestments" is way beyond me; so let's take it steady, shall we?

People have always argued over money. The real worry for the bloke said to be owed money is that the debtor is a scoundrel and is either taking steps to dissipate his assets or contemplating skipping the country "in meditatione fugae". He could cram a small fortune in gold coins into that saddlebag and vanish.

Inhibition is a court order that freezes the property of the defender. In Palisade's case, this meant that the whole of its stock in trade was clamped, unsellable, locked up, it could stop sales entirely. Karl as "inhibitor" now had an immediate preference for its debt over any other debts contracted by Palisade after the date of inhibition. Crippling, yes?

Palisade would now have to make tracks to the court to get the inhibition recalled or lifted, which is hard work. Worse was to have to buy a bond or security for the sum in dispute, so that the defendant could then keep trading.

But this time, Palisade took a look at human rights law. It is pretty powerful stuff. Article 1 says: "No one shall be deprived of his property or possessions … except in the public interest and as provided by law." Scottish (and English) law has to comply with this. So, said the judge, he would see if this old gold-and-saddlebag law was in accord with the newfangled Human Rights law. Palisade had been slapped with the inhibition, which could last perhaps two years if the quarrel took that long to come to trial. This measure was clearly depriving Palisade of their possessions meanwhile; so article 1 would release the inhibition. No, said Karl, Palisade is caught by the second part of the article: it is in the interests of the community to lock up the sums in dispute.

The judge said his job was to look for a fair balance between those two opposing interests. The aim of the inhibition is to ensure the assets are eventually available to meet a possible win of Karl Construction in the eventual trial. On the other hand, it was crucial to maintain a positive cash flow in Palisade as with any well-managed business. The judge then looked at how article 1 is applied in Belgium, Denmark, France, Germany, Italy, and Luxembourg, Netherlands, and even England. The English courts, for example, would secure sums in dispute only if there was a real risk that the defendant might improperly remove or conceal his assets so as to defeat the plaintiff's claim. It isn't enough that the defendant is in financial straits, there has to be some fancy footwork, something fishy going on. Scotland, said the judge, was "seriously out of step with the general trends of contemporary legal thought in this area." He said it was no longer good enough to automatically serve up an inhibition. In future Karl would have to come to court. Then it would have to show a prima facie case for a debt, not a probable debt or contingent debt. Next it would have to show that there was a specific need for this freezing order, for instance significant risk of insolvency or taking steps to conceal or dissipate assets (the saddlebag of gold). Finally, in future the plaintiff applying for the inhibition must give an undertaking to pay damages for any loss that they cause in consequence of the order. And with that, the judge took away Karl's inhibition and set Palisade free. The judge then climbed on his horse, smacked his rump and, as the horse galloped away, the saddlebags fell off.