Scottish Court of Session Decisions

Subject_1 BANKRUPT.
Subject_2 DIVISION III.

Decisions upon the act 5th Parliament 1696, declaring Notour Bankrupts.
Subject_3 SECT. I.

Circumstances which infer Notour Bankruptcy.

Creditors of Agnes Hamilton, Relict of Campbell of Rachan,
v.
The Representatives of James Henry

Date: 9 February 1743
Case No. No 173.

Found, that a minute of sale, executed by a person, who had, six months before, been in jail, but then liberated, and the debt paid and discharged, did not fall under the act 1696.

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The said James Henry entered into a minute of sale with the said Agnes Hamilton and two others, whereby they disponed to him a house in Edinburgh; and one of the articles was, That Henry should be allowed to retain as much of the price as should pay him two debts due by one of the disponers. Agnes Hamilton's creditors brought a reduction of the minute, upon the act 1696, alleging, That she was bankrupt at the date thereof; and, for verifying their allegeance, condescended on this fact, scil. that she had been incarcerate about six months before the minute of sale, in the tolbooth of Edinburgh, in virtue of a caption, at the instance of John Miln.

Answered: That the debt due by Agnes to John Miln was paid and discharged, and she liberated six months before the deed under challenge was granted: This being the case, the cannot be reputed a notour bankrupt, unless she shall be held to be such upon one of the three joint grounds, which the law requires, without the concurrence of either of the other two. The statute supposes, That, at the time of granting the deed, the granter is a dyvour, or bankrupt, in terms of the description therein laid down. This must be admitted with respect to one of the requisites in the act, viz. insolvency; that must come down to the date of the deed under challenge, as it would be absurd to suppose, that a reduction could proceed on this statute, of a deed granted by a person solvent; or that an anterior insolvency, which may have happened twenty or thirty years before, should have any influence to set aside a deed granted by a man who is at the time in good circumstances.

In the second place, There was no partial preference granted by Agnes to her anterior creditors, which can fall under the law, the debts for which retention of the price is allowed being due not by her, but by one of the other disponers.

Replied for Agnes Hamilton's Creditors: That the payment of the debt in the caption cannot influence the case, if the bankrupt was once imprisoned thereon, or eluded the diligence by any other of the qualifications in the statute; for sure the payment of the debt cannot hinder the fact to be true, that she was imprisoned thereon, or fell under any other of the qualifications respecting the diligence. And it is a mistake to suppose, That the remedy introduced by the statute was only intended for the behoof of the party at whose suit the diligence proceeds; as every creditor whatever may take the benefit thereof, in order to reduce the deeds granted thereafter; and if the defender's gloss on the act were to hold, it might be cancelled, as the party who gets a voluntary right from a bankrupt would have no more to do, in order to secure that right, but to take off the creditor who used such diligence, by payment of his debt, perhaps a mere trifle, a few days before taking the deed. With respect to the second point, it was answered, That it would be absurd, if a deed in satisfaction, or security of any debt of the bankrupt's should be voided, and yet a gratuitous deed, in favours of the creditor of another should subsist: Besides, when the bankrupt aliens any of his effects to a creditor of his own, that debt is thereby satisfied, and his remaining effects left open to the rest of his creditors; whereas, when he does the like to a creditor of another, it is downright profusion, and his own creditors altogether thereby prejudged.

The Lords found the act of Parliament did not take place.

C. Home, No 227. p. 370. *** Kilkerran reports the same case:

In August 1728, William Henry purchased a house in Edinburgh from Agnes Hamilton; and, by the bargain, Henry was to have retention out of the first end of the price of a debt of L. 50 or 60 Sterling, owing to him by William Hamilton of Little Earnock, her brother.

In the ranking of the creditors of the said Agnes Hamilton, it was objected to this retention, That she was, in terms of the act 1696, bankrupt at the date of the minute of sale, and therefore could not consent to such, retention, which was to give a partial preference to Henry in prejudice of her creditors; and for instructing the bankruptcy, the fact condescended on was, that upon the 17th February 1728, being about six months before the minute of sale, she had been imprisoned in the tolbooth of Edinburgh, in virtue of a caption, and was at the date of the minute insolvent.

It was answered, 1mo, That the objection was not competent upon the act 1696, in so far as the debt, to the preference whereof the alleged bankrupt had consented, was not her own debt. 2do, Not relevant, in respect it was not alleged that the was in prison at the date of the minute; and it was averred and not contradicted, that the debt was paid and discharged a few days after the imprisonment.

The Court being of different sentiments upon the construction of the act of Parliament, some, that although it might not be enough in this case to allege insolvency at the date of the minute, yet that it was relevant to infer bankruptcy, that the person was insolvent at the date of the imprisonment, and continued to be insolvent at the date of the minute, although the debt had been paid before the minute; and others, that in order to infer bankruptcy in terms of the statute, it was necessary to allege that the imprisonment had also continued at the date of the minute; they, after the case had been heard in presence, “Found, that the debt upon which the imprisonment proceeded being paid, and so the person not under caption at the time the deed quarrelled was granted, the case did not fall within the act of Parliament 1696;” and separatim, “Found that the deed not being in favour of any of the granter's creditors, the same falls not under the act 1696; reserving to parties to be heard with respect to the act 1621.”

It was thought by a great majority of the Court, that the three requisites of bankruptcy, diligence by horning and caption, insolvency, imprisonment or absconding, &c. must all concur at the time of granting the deed; and that to find otherways were to put an absurd construction upon the statute: For that by the same rule that a deed granted after one had been imprisoned and insolvent, should not be exempted from falling under the statute by the superveening payment and liberation before granting of the deed, neither should it be exempted from falling under the statute by solvency superveening before the granting of it; and that it could not be supposed that the legislature could have intended that any execution whatever, that may have followed upon a debt which may have been twenty years ago discharged, should be a ground of reducing a deed granted of yesterday.

Nor was it thought any good answer to this, that where the deed quarrelled is granted within 60 days before the bankruptcy, it is reducible, though all the requisites do not concur at the date of the deed: For ita jus scriptum est, although none of them should have occurred at the date of the deed; whereas a deed granted after the debt on which the diligence proceeded is discharged, is not, in terms of the statute, granted by a bankrupt.

And as to the other point, however strange it may at first view appear, that one should have power to prefer the creditor of another, who could not prefer his own, yet such is the very letter of the statute, that deeds are only reducible which are granted in favour of the granter's creditors. (Referred to in Section 8th of this. Division.

Fol. Dic. v. 3. p. 54. Kilkerran, (Bankrupt.) No 3. p. 49.