Book reviews

THE LAW OF CORPORATE INSOLVENCY IN SCOTLAND (3rd ed)

AUTHORS: JOHN ST CLAIR AND LORD DRUMMOND YOUNG

PUBLISHER: W GREEN

ISBN: 0 414 01508 8

PRICE: £140

GREENE AND FLETCHER: THE LAW AND PRACTICE OF RECEIVERSHIP IN SCOTLAND (3rd ed)

AUTHORS: IAN FLETCHER AND ROY ROXBURGH

PUBLISHER: TOTTEL

ISBN: 1 84592 1992

PRICE: £110

In 2001 the World Bank stated, as its first principle for the legal framework for creditors’ rights, that: “A modern credit-based economy requires predictable, transparent and affordable enforcement of both unsecured and secured credit claims by efficient mechanisms outside of insolvency as well as a sound insolvency system. These systems must be designed to work in harmony”.

The Department of Trade of Industry has reported a marked increase in the level of insolvencies in the second quarter of 2005 With recent predictions that the business cycle is moving towards a depressed phase, it is timely that the Scottish practitioner has been provided with updates of two of the leading insolvency textbooks.

St Clair and Drummond Young is the broader in scope, addressing all of the various corporate insolvency regimes. It does so in a lucid and informed way. Both of the authors have significant practical experience in the insolvency field, an essential ingredient for a successful treatise in this area. They consistently deploy that experience with a highly impressive sureness of touch.

In many ways, this work is at its most valuable in highlighting the background to the development of insolvency law in Scotland and analysing the philosophical and political drivers which have led the law to its current state. The authors’ discussion of the growth in importance of the “rescue culture” (pages 18-20) is instructive, particularly in identifying the reasons behind the introduction of the “prescribed part” (which ringfences a percentage of funds in a realisation under a floating charge to ordinary creditors). Scottish practitioners are perhaps less exposed to successful rescues than our southern colleagues and therefore tend to be very cynical about the indiscriminate use of the “rescue culture” badge. This section is therefore valuable as it explains the purpose of the law as well as its detail.

That bane of the practitioner’s life, the Human Rights Act of 1998 is also scrutinised adeptly. The review of that flawed statute’s impact on the creditor’s rights of inhibition and arrestment is very valuable. Given that one of the authors has also been involved in the leading cases in this area, it is no surprise that the discussion is very well informed.

The authors’ exposition of the detailed rules relating to insolvent liquidation, administration, receivership, etc, is well organised and logically deployed. But the value of this book is in its very intelligent scrutiny of the problems that have arisen in relation to the practical application of these various regimes.

The importance of the new administration regime as relaunched by the Enterprise Act 2002 is at the core of this book. The authors’ discussion of the comparison of the rights of floating charges created pre- and post-15 September 2003 is excellent. Their analysis of the changed mindset of an administrator under the new regime (page 125) is also prescient although, in practice, it is hard to identify any enthusiasm on the part of administrators to put the clear blue water of independence between them and the floating charge creditors. From the reviewer’s experience, the new rules for procuring the out of court route into administration are unwieldy, bureaucratic and potentially dangerous. Focusing the regulation of the system on the courts rather than the Registrar of Companies is highly unsatisfactory. Given that the system is still in a somewhat fledgling stage, it is hardly surprising that the authors do not make much of these changes, but perhaps in a future edition these day to day frustrations could be put under the microscope.

St Clair and Drummond Young do not simply outline the various insolvency procedures; they also analyse significant legal issues arising in insolvency including directors’ liabilities, diligence and challengeable transactions. Like many practitioners, I have found these chapters among the most valuable in the book. They are frequently consulted and this revised and updated text is an indispensable tool in the insolvency lawyer’s bxx.

This is a superb book for academics and practitioners alike. Its broad compass, logical arrangement and seasoned and perceptive commentary easily justify its acquisition by all those who have even a passing interest in the subject. It is certainly a must-have for all commercial lawyers.

Greene and Fletcher have always taken a more specialist approach, focusing purely on the law and practice of receivership in Scotland. To that extent, to paraphrase the well known advert, this book “does exactly what it says on the tin”. Lawyers involved in receivership, whether acting for the receiver or for those dealing with him, will have profited from frequent references to it. The new edition, which adopts much of the framework of the previous well-tried formula, has been significantly updated and continues to be a mine of excellent information and practical comment. In my view, the authors’ approach to the development of the law of retention of title was always the most useful of all the textbooks and that continues to be the case (chapter 5). The book is also strong on the rights of third parties in a receivership. The discussion of the Paramount case (pages 142-143) is very helpful.

The work also includes some useful styles, although the reader should treat these as very much a starting point as, in practice, most practitioners will have to draft or contend with a far more complicated set of documents. The skeletons suggested by the authors are nonetheless helpful. The styles bolster the practical, hands-on approach of this book. It is direct, well argued and lacking in pretension. That is why it is so often used day to day.

The book has one unusual feature, perhaps a drawback. It purports to focus purely on receivership and is therefore relevant only in relation to charges created before 15 September 2003. The authors concede in the preface that “as the years pass, the importance of receivership jurisprudence will be become less and less relevant in the development of insolvency law in Scotland”. In doing so, they immediately acknowledge that this work will fall into desuetude before too long as old-style floating charges are either enforced or discharged. It would have been extremely helpful – and indeed appropriate – for the authors to inject into this valuable work their thoughts on the role of the administrator under the new regime and the interface between the rights of the floating chargeholder and the other classes of creditor. It seems curious to publish a book which is, in essence, a little lopsided and contains inbuilt obsolescence, whilst leaving important issues such as the introduction of the prescribed part for others to address. For that reason, it is important that those involved in insolvency do not regard Greene and Fletcher as the final word on the rights of a floating charge creditor. That said, this remains an excellent contribution. All libraries will however need to be complemented by a more general work. There is none better than St Clair and Drummond Young.

Together, these two works provide an invaluable resource for practitioners. There are few areas of the law in Scotland that are so well served, and I happily recommend both. What is encouraging is that they both provide conclusive evidence that the insolvency system in Scotland (for all its faults) meets the World Bank’s strictures. That is a comfort and will hopefully facilitate a stronger Scottish economy in the future.

Andrew F Sleigh, Burness LLP, Glasgow

L IS FOR LAW – Studying Scots Law (3rd ed)

AUTHOR: HECTOR MACQUEEN

PUBLISHER: TOTTEL

ISBN: 0 406 97425 X

PRICE: £25

The third edition of this very useful text continues to provide a wealth of information about the study of Scots law. Written in a supportive, almost conversational style, this book has masses of information to advise and guide those embarking upon the study of law. It is practical and reassuring, and covers the very broad spectrum of what is involved in the study of law in Scotland in the 21st century. In addition to offering a route map through the process of legal education in Scotland, it provides very effective guidance on private study and on the role of skills acquisition in a rounded legal education. Hence it refers to the opportunities for counselling clients either in role play or in legal advice clinic, noting in paragraph 9.25 that through the latter one can learn a lot about the world “as well as about the …” (the missing word is no doubt intended to be “law”).

Not only is this a most helpful guide for the intending student, it has much to offer those whose interests coincide with students of law – the parent or partner (often financial supporter) of the law student, and also potential employers. As a practitioner who spends most of working life now in the university context I am repeatedly struck by the (mostly affectionate) memory that practitioners have of their days at university, and the chasm that exists between that recalled experience of any more than a decade ago and what is now included in the study of Scots law. While debates will always go on as to what should be taught within a law degree in a Scottish university (and the book makes wise comment on this topic in paragraph 3.18), we owe it to all students of law, and particularly the subset of those who will be entrants to the profession, to be informed as to what and how they do currently have to learn. The objective, well informed source on this is Professor MacQueen’s text.

Margaret L Ross, Solicitor, Senior Lecturer in Law, University of Aberdeen