Michael Upton Successful in Sheriff Court Appeal

Themis member Michael Upton acted for the successful defender and appellant in Wright v. Wright, in which on 27 November the Sheriff Appeal Court held that it is a necessary condition for there to be an obligation that two persons are party to it, and so where there is no debtor, there is no debt.

The pursuer sought to call up a standard security granted by the defender for a debt of £210,000 that had been owed to her by a company. Before the action was raised, the company had been wound up and dissolved. The defender argued that the dissolution of a company extinguished its debts and, a security obligation being accessory to the primary obligation it secured, once there was no debtor and no debt, nothing was secured, so the security could not be called up. The Sheriff disagreed, holding that although the debts or obligations of a dissolved company were unenforceable unless or until the company was restored to the Register of Companies, they were not extinguished by the company’s dissolution, but remained extant, so that a third-party standard security for the obligations remained enforceable.

However, on appeal the Sheriff Appeal Court reversed the Sheriff, holding that where the debtor is a company and the company has been dissolved, there is no debt, so where a security was granted for the debt, there is no longer anything for the security to enforce. The Appeal Court accordingly dismissed the pursuer’s action.

The judgment is available here.