Commission happy with effect of Sharp v Thomson
17 Dec 07
Report proposes "no attachment without registration" to protect innocent buyers
The House of Lords decision in Sharp v Thomson no longer carries a threat to subvert Scots property law, according to the Scottish Law Commission.
The 1997 decision allowed the buyer of residential property to complete their title in preference to a receiver appointed after the price had been paid. At one stage the case was interpreted in a way likely to cause difficulties wherever someone was appointed to realise the assets of another, whether an individual's bankruptcy or a company's receivership or liquidation, because it would not be known whether someone would come forward who would claim to have acquired the property being realised.
However a later case, Burnett's Trustee, has the effect, according to the Commission, of confining Sharp to company receiverships, and the way forward should be to increase the statutory protections to innocent buyers against the risk of a company becoming insolvent before a sale is completed.
In its report, commissioned by the previous Scottish Executive, the Commission therefore recommends, among other matters:
- that a receiver's appointment takes effect when a notice of attachment is registered in the register of floating charges, and not before;
- that an attachment following the appointment of an administrator takes effect when a notice is so registered;
- that in any other case a registered floating charge shall not attach any property until a notice of attachment is also registered;
- that a petition or resolution to wind up a company be notified to the Registrar of Companies and the Accountant in Bankruptcy forthwith.
Professor George Gretton, the commissioner leading the project, commented: "The law's now fairly good at protecting a buyer against the risk that anindividual seller might be insolvent. It's less good where the seller's a company. And yet nowadays companies are often involved in conveyancing transactions. It's time the law recognised that fact, which is why we're making these recommendations to the Scottish Government."