Decisions upon the act 5th Parliament 1696, declaring Notour Bankrupts.
Subject_3 SECT. II.
What sort of Alienation falls under the sanction of the act 1696.
Robert Sym, Trustee for Jackson's Creditors v. George Thomson
Date: 6 July 1758 Case No. No 201.
A Scotch merchant went into England and executed, in the English form, an assignment of debts due to him there, in favour of one of his creditors. Returning to Scotland he was rendered bankrupt within 60 days. The assignment reduced, as made in fraudem legis.
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Jackson, a considerable merchant in Dalkeith, had due to him in the north of England debts to the amount of above L. 800.
In October 1752, finding his circumstances desperate, he went, with Thomson, one of his creditors, for a few days into the north of England; where he granted to Thomson an assignment, in the English form, of the above debts; and then both returned together to Scotland.
Within sixty days after this assignment, Jackson became notour bankrupt, in terms of the law of Scotland.
Robert Sym, acting as trustee for the other creditors of Jackson, brought a reduction of this assignment, as granted fraudfully to their prejudice by Jackson.
Pleaded for the trustee for the creditors, The assignment was an offence and fraud at common law. When a man becomes bankrupt, equity points out, that his creditors should all get their shares of his effects, according to the merits of their respective debts. The statutes of bankruptcy in England bring in all creditors equally. The same is the law of Holland and France; and indeed of all commercial nations. The statutes of Scotland, the acts of sederunt, the decisions of the court, have all, for a long time, been favouring the equality of creditors: but, in the present case, this equality has been broke, and a fraudful preferene granted to one creditor to the prejudice of all the rest.
2do, The assignment is reducible on the act 1696. That act proceeds on a narrative, “That notwithstanding the acts of Parliament already made against fraudful alienations by bankrupts, in prejudice of their creditors; yet their frauds and abuses are still very frequent.” Here the narrative makes no distinction whether the fraudful alienation has been made in Scotland, or has been made in a foreign country: all it regards is, whether a fraud has been committed, and whether it can come under an act of Parliament in Scotland. This statute goes on, and enacts, or rather declares, “That all and whatsoever voluntary dispositions, assignations, or other deeds, which shall be found to be made and granted, directly or indirectly, by the foresaid dyvor or bankrupt, either at or after his becoming bankrupt, or in the space of sixty days before, in favour of his creditor, either for his satisfaction or further security, in preference to other creditors, to be void and null.” Here the statute makes no distinction, whether the assignation by the bankrupt, to the prejudice of his creditors, be granted in Scotland, or granted in England. The only thing it inquires is, whether it was an assignation granted by a bankrupt in prejudice of his creditors? It saves no sort of assignations, for it includes all and whatsoever, granted directly or indirectly; and declares them to be void and null: after which, a court cannot make that distinction which the statute hath not made. It cannot save assignations, to the prejudice of creditors, granted by a bankrupt who has passed over the border for a little, when yet the statute hath declared all and whatsoever assignations, and granted directly or indirectly, by such a person, to such purposes, to be void and null. In a statute correctory of fraud, if courts chuse to go beyond the letter of the statute, it ought to be in the way of extension, and not of limitation. They ought to correct fraud, not to open a door to it; to assist the common law, not to show the deficiencies of it; to void all fraudulent assignations, instead of supporting any upon a distinction not founded in the express letter of the statute.
And in this view, the reduction of the assignment in question is founded in the spirit, as well as the letter of the statute. For as the statute is intended to bar alienations granted by a bankrupt in prejudice of his creditors; so every case contrived to cover such frauds, falls under the meaning and purview of the statute; the case in hand would fall under the spirit of the statute, even though the words of it had not been so express as they are. Though the words all and whatsoever, directly or indirectly, had not been there, they ought to have been supplied by interpretation: and now that they are there, they cannot be frittered down by a contrary interpretation; they may be extended, but they cannot be limited.
3tio, The consequences of a contrary doctrine, if established, would be exceedingly hurtful both to Scotland and England: it would open a door for infinite frauds to the bankrupts of both nations; who would then have nothing to do but to step over the border, grant their fraudful preferences, as they pleased; and then, when they returned to their own country, they and their favoured creditors would be safe, and righteous creditors disappointed.
There is no making a distinction betwixt the retrospect of the statute 1696, and the consequence of it. For if the court should find, that the retrospect of it should not have effect in the present case, then, upon the same principles, the first time the point came to be tried, it would be found, that the consequence of the statute could not bar a similar assignment; the effect of which would be, to enable a bankrupt in Scotland, after he was declared to be a bankrupt, to grant in England fraudful assignments, similar to the present one. The refusing to give force to the retrospect of the statute, is but a step to the refusing to give force to the consequence of it. The one must follow the other; and therefore, by the decision sought by Thomson, the act 1696 is not only to have no retrospect as to fraudful assignments made out of the country, but is even to have no effect as to preferences out of the country, granted after the bankruptcy is ascertained and notour: And, in consequence of this, one having obtained a cessio bonorum, might, upon his getting out of prison, go into England, and convey his effects, as he pleased, without those to whom he granted his preferences being accountable therefor.
Answered for Thomson, The equality of creditors is a mere speculative point; it is but at best the conclusion of abstract reasoning. The Roman law preferred creditors according to the priority of their diligence; there can be no breach of morality in a creditor's getting payment of his fair debt the speediest way, or the most secret way that he can.
The words of the act 1696 are indeed general; but so are those of all general laws; and it was never intended, that this law, though general in its effects in Scotland, should have effect over debts due by persons in England, and payable in England; nor is there any instance where a mere positive institution, a retrospect too, the creature of a statute, and not of the common law, should be the rule for deciding differences concerning such debts.
‘The Lords reduced the assignation, and remitted to the Lord Ordinary to proceed accordingly.’
Act. J. Dalrymple, Brown, Lockhart.Alt. Geo. Pringle, A. Pringle, Advocatus.
Fol. Dic. v. 3. p. 55. Fac. Col. No 116. p. 211.
