Caveats are documents lodged with the Scottish courts which act like an early warning system for court actions in which interim orders are sought. Interim orders are orders which the pursuer in a court action asks to the court to grant in their favour at the beginning of proceedings.
In some cases they are effectively asking for judgement in their favour to be made in advance, before any actual evidence is led by the parties. Common interim orders include :
- Interim interdict – an order no prevent a party from doing something i.e. trespassing on a piece of land or selling property;
- Implement or delivery – an order to deliver something or to carry out a certain process or operation which the target is legally obliged to perform;
- Payment on the dependence of an action – i.e. where a party seeks to extract payment from a debtor at the outset of court proceedings on the basis it believes that the debtor is disposing of or hiding assets from its creditors;
- The appointment of liquidators to a company in financial difficulty or the appointment of a trustee in bankruptcy to an individual.
Usually applications for interim orders in Scotland are heard by a judge without the party against whom the orders are being sought present. This gives the applicant a distinct advantage as the target of the application does not get the chance to set out their side of the story to the court or raise any issues with any technical faults which may be present in the application.
However If the company or individual who is the target of the interim order has a caveat lodged at the court in which the application is being applied for, that party’s solicitors will be notified of application’s existence before its determination and will be given the opportunity to oppose the application in court.
Caveats come in to their own when lodged on behalf of companies which are subject to petitions for winding-up. If a caveat is lodged on behalf of a company and a petition for that company’s winding-up is lodged, the caveat will be triggered. Usually this affords the company one last chance to either dispute the sums contained within the petition or come to some sort of payment arrangement with the petitioning creditor.
Crucially the caveats will delay the advertisement of the petition in the press meaning that it will generally not become public knowledge that such an application was made in the event that matters are resolved to the petitioning creditor’s satisfaction at this very late stage.
It should be added that in these circumstances the caveat acts like a final line of defence, allowing for an opportunity to pay of dispute the sums contained within the winding-up the petition. The caveat cannot defeat an application for the winding-up of a company or the bankruptcy of an individual in and of itself. It simply buys time.
PEACE OF MIND
If a business or an individual believes they are going to be subject to a court action containing an application for interim orders or insolvency proceedings, then it is wise to immediately lodge caveats in the court in which such orders will be sought. Often we will advise our clients to maintain caveats as a matter of course.
MBM'S CAVEAT SERVICE
If this is a service which you are interested in, please contact a member of the Dispute Resolution Team on 0131 226 8200.
Iain McDougall, Senior Solicitor, Dispute Resolution