In FF v AFMS Ltd [2020] SC GLA 31, the sheriff dismissed as incompetent a petition for liquidation which had been served and advertised. The circumstances were very unusual. The statutory demand on which the petition was based had been signed by a person designing himself as a solicitor whose name was on the role of solicitors in Scotland but who did not have a practicing certificate and who was not a commercial attorney. The statutory demand was served on AFMS, not AFMS Ltd. The petition for liquidation was duly signed and lodged electronically by the same person. A warrant was granted for service and advertisement. An application was then made for the appointment of an interim liquidator as a matter of urgency. On reviewing the papers, the sheriff noted that the statutory demand had not been served on the company and so was invalid. He became concerned and following inquiry, the true status of the person signing the statutory demand and the petition as set out was discovered. The sheriff noted that the statutory demand was not paid or disputed, perhaps because the recipient ignored it as being wrongly addressed. No caveat was lodged, although in his view, a prudent debtor company might have done so. The petition was not defended, but whether this meant that there was no objection to the appointment of a liquidator was not for the sheriff to speculate, and in any event, since the statutory demand was not served correctly on the defender, everything which flowed from that was incompetent. The petition would therefore be dismissed. As it was not defended, no expenses were awarded as due to or by either party. The petitioner would therefore be free to make a new attempt to recover his debt.
The sheriff noted that the case raised public protection issues and considered the remedies open to a wrongly convened defender in such circumstances, although he observed that whether an award of damages could truly compensate for the reputational issues arising from an advertised but incompetent liquidation petition was quite another matter. He therefore ordered a copy of his note to be sent to the signing party, the pursuer on whose behalf he was acting, the defender, the proposed liquidator who had consented to act, the Law Society and the Lord Advocate.
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25 September 2020
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