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Ah, But There’s a Caveat…

 

caveat

Most people will be familiar with the word “caveat”.  Usually, it means that a great sounding offer has a ‘catch’.  However, it also has a specific meaning in a legal sense.

A caveat is a document that can be lodged at Scottish courts and acts as an early warning system for you.  To understand the importance of caveats, it is worth briefly mentioning the concept of “interim orders”.  These are orders granted by a court before the Defender is even aware that there is a court action.  There are a variety of interim orders, but the most common ones tend to be an interim interdict (to prevent a Defender from doing certain things), or an interim arrestment (to freeze money). 

Either of these can be incredibly damaging for a Defender.  While there is usually a way to ask the court to recall the interim order, by that point the damage may be done. 

If a Defender had a caveat lodged, the court would not grant any interim order without first letting the Defender’s solicitors know about the action, and fixing a hearing for the Defender’s (and the Pursuer’s) solicitors to attend and argue about why the interim order should not (or should) be granted.  An obvious and common example is where a person leaves their employment and begins to work in a similar area.  This may, on the face of it, be a breach of certain conditions of the previous employment contract.  The first the former employee might know about this is being served with court papers, and interim interdict, essentially preventing them from working.

Another area where caveats can be worth their weight in gold is in company liquidations.  If a company owes £750.00 or more, and certain procedural steps have been complied with, it may be hit with a “liquidation petition”, i.e. a court action seeking that the company be liquidated. 

One of the powers the court has when the creditor first sends the papers to court, and before the company knows anything about it, is to appoint a “provisional liquidator”.  Similar to interim orders, the first that the company might know about this is after it has happened – and the directors have potentially lost control of the company.  Even if no provisional liquidator is appointed, if the court lets a liquidation petition proceed (a very low bar indeed) it will be advertised in the national press.  This could have the effect of the company’s bank freezing accounts, other companies ceasing to do business with it, and generally make the company’s continued trading very hard. 

A caveat would allow the company’s solicitors to get in front of a Sheriff/Judge before any of this happens.  If the debt is due, it may enable payment without the world at large knowing about the problems.  If it is not due, it may allow for the petition to be thrown out before it gets started.

Caveats can also be used where Confirmation (Probate) is being sought in relation to a deceased person with assets in Scotland.  If there is a dispute regarding, for instance, the deceased’s will, it can be important to resolve that issue before assets are distributed.  Without the caveat the Sheriff would be unlikely to be aware of any dispute, and Confirmation would most likely be granted without a hearing.

At Miller Samuel Hill Brown LLP we have experience of dealing with caveats and interim orders, and can offer a fixed fee service to advise and lodge caveats.    

 

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