Commentary on Provisions(1) Modification of the Bankruptcy (Scotland) Act 2016 Section 8 – Gratuitous alienations: right acquired in good faith and for value
30.Section 98 of the 2016 Act includes provisions relating to gratuitous alienations. A gratuitous alienation is the voluntary disposal of a debtor’s asset by the debtor to another person for no value or less than full value (e.g. a debtor gifting a car to a friend to put it beyond the reach of creditors). This can be challenged (see section 98(2) of the 2016 Act) and, on a successful challenge, the court must grant decree of reduction, or for such restoration of property to the debtor’s estate, or such other redress, as may be appropriate. The intention behind section 98(7) of the 2016 Act is that, where a court does grant a decree, the decree is not to affect any right acquired by a third party where those parties undertook the transfer in good faith and for value through the transferee (for example, if the transferee has granted a lease of a property to a third party). However, section 98(7) refers to the wrong subsection. It should refer to section 98(5) which obliges the court to grant a decree, and not the exceptions which would prevent the court from granting such a decree. This section fixes that cross referencing error so that section 98(7) now refers to subsection (5) (rather than subsection (6)) of section 98.