Scottish Court of Session Decisions

Subject_1 BANKRUPT.
Subject_2 DIVISION I.

Reduction of Alienations made by Bankrupts where the Reducer has done no Diligence.
Subject_3 SECT. III.

Alienations in favour of Conjunct and Confident Persons.

George Bean, Deputy Sheriff-Clerk of Aberdeen,
v.
Rachel Strachan, Daughter of William Strachan senior, Merchant in Aberdeen

Date: 1 August 1760
Case No. No 37.

A person insolvent discounted bills, and paid a debt to his sister with the cash. She was ignorant of his insolvency, and did not know how he came by the money. Although he was rendered bankrupt within 60 days, the payment found good.

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William Strachan junior, merchant in Aberdeen, being debtor to his sister Rachel Strachan in a bond for L. 240, * and finding his affairs in a desperate situation,

* See Executors of M'Commie against Strachans, 29th July 1760, Fac. Col. p. 440. voce Legacy in this Dictionary.

he, in the beginning of September 1754, was advised by a friend, whom he consulted on the occasion, to raise money by discounting bills which he then had, and to apply the proceeds for payment of his sister's bond, which had been granted for her proportion of her father's effects.

Accordingly, by the assistance of his ordinary agent, who did not know his real situation, he got bills discounted to the amount of L. 272 Sterling; and with that money he paid his sister the principal and interest due on the above bond, and on a separate note, amounting together to L. 260 Sterling: But it did not appear, that he then explained to her the state of his affairs, or that she knew in what manner he had raised the money.

This happened on the 2d of September, and immediately thereafter William Strachan absconded. On the 14th of that month he was apprehended on a warrant of the Sheriff, at the application of his creditors; and horning and caption were, within the sixty days, raised against him. On the 16th of September he granted a disposition omnium bonorum to trustees for behoof of his creditors; to which almost all of them acceded, (particularly George Bean, a creditor in about L. 50,) and received a dividend far short of paying their debts.

George Bean afterwards used arrestment in the hands of sundry persons, particularly of Rachel Strachan; against whom he insisted in a furthcoming, upon this ground, That she had improperly received payment of her bond from her brother when bankrupt. Upon a proof, the facts appeared as already stated.

Pleaded for the pursuer, Rachel Strachan lived in family with her brother, before and at the time of his bankruptcy, so could not be supposed altogether ignorant of his affairs; and the method taken for giving her an unjust preference, by getting bills discounted, and then paying over to her the money, when he well knew he was utterly insolvent, and within sixty days of his notour bankrutcy, was a fraudulent device, which must be presumed to have been contrived between them for eluding the effect of the act 1696. Therefore such transaction between conjunct and consident persons is challengeable or reducible at common law, and as falling within the spirit and intendment of both the acts 1621 and 1696.

Answered for the defender, That her ignorance of her brother's situation is as clearly proved as a negative can be; and it is also proved, that she had no concern in the discounting the bills. The payment made to her is therefore not challengeable at common law, as the actio Pauliana was only competent against creditors who were participes fraudis with the bankrupt; and did not debar lawful creditors from taking payment, even when they knew their debtor to be lapsus; l. 6. § 6. 8. et l. 10. § 16.ff. Quæ in fraud. cred.

It is lawful for every creditor to take his payment when he can get it, and the fraud of his debtor cannot hurt him. Again, the first alternative of the act 1621 only relates to gratuitous alienations; and the second to voluntary payments, or conveyances made after diligence is done against the debtor. This case falls within neither of them, as the defender was an onerous creditor, and no diligence had been done against the debtor at the time. Besides, by the payments mentioned in the act, it is thought, are to be understood, conveyances of nomina, or other subjects in solutum; and not those made in ready money. Nor does the act 1696 extend to this case; for although the word deeds in it has been found to extend to the delivery of goods, which is a species of alienation; yet payment in cash being a natural extinction of the debt, cannot be recalled. Nor can the debt be revived by the debtor's afterwards becoming a notour bankrupt; 26th January 1751, Forbes contra Brebner, infra, h. t. The annulling such payments would be in effect destructive of all commerce.

‘The Lords found, The payment made to Rachel Strachan, the defender, does not fall within the act 1696; and therefore assoilzie the defender, and decern; but find no expences due.’

Act. Burnet. Alt. Rae, Ferguson. Fol. Dic. v. 3. p. 48. Fac. Col. No 243. p. 444.