Scottish Court of Session Decisions

Subject_1 DECISIONS of the LORDS OF COUNCIL AND SESSION. Collected By JAMES BURNETT, LORD MONBODDO.

William Elliot
v.
-

Date: 7 March 1768

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This was a case concerning bankruptcy in terms of the Act 1696. An heritable bond was granted after the act of bankruptcy, but for a new contraction, not in security of an old debt. With respect to this, the Court had no difficulty, that it did not fall under the Act; but there was another heritable bond, which was granted prior to the bankruptcy, also for a new contraction, whereupon infeftment was not taken till after the bankruptcy. Concerning this bond there was some difficulty; but it carried, without a division, that it did not fall under the Act. The great difficulty arose from that clause of the Act which declares that, in the matter of bankruptcy, all heritable bonds are to be considered as of the date of the infeftment upon them; but these words are to be understood secundum subjectam materiam, that is, of bonds in security of prior debts, concerning which only the Act speaks. If, therefore, the bond in question had been a bond of that kind, at whatever time before the bankruptcy it had been granted, it would have been considered as of the date of the infeftment, and so would have been reducible ; but as it was for a new contraction, the Act does not relate to it.

And here the whole system of our bankrupt laws may be shortly observed: If a man, being insolvent, dispones any subject to any person who is not his creditor, gratuitously or without a just price, the same is reducible at the instance of his creditors; but such reduction does not in my opinion operate by itself a preference to the creditor-reducer, but only brings back the subject to the common fund of payment to be affected by the diligence of every creditor. 2do. If it be a disposition omnium bonorum, though in favour of a creditor, it is reducible at the instance of the other creditors, but only to the effect of bringing in the disponee pari passu with the other creditors. 3tio. If the insolvent person dispones in favour of a trustee for the behoof of all his creditors, it is now established that this disposition is also reducible upon the first part of the Act 1621, as being in prejudice of the creditors, by restraining them from doing legal diligence, and obliging them to submit to the administration of a trustee whom they did not choose; and in a late case this was carried so far, that though the trustee was chosen with the consent of the creditors, and had actually gathered in the effects by virtue of the trust-right, yet a creditor who had not acceded was allowed to arrest in the trustee's hands, and by that diligence to get to himself a preference over the creditors who had acceded to the trust-right; which at once puts an end to all such rights, as it makes the trustee chosen by some of the creditors, only a factor for ingathering the effects for the behoof of the creditors not acceding to the trust: and so much with respect to the first part of the Act 1621, which relates not to the disposition of any particular subject to a creditor for payment or security of his debt. This is provided for by the second part of this Act, which relates only to alienations either for payment or security in favour of one creditor, in preference of the more timely diligence of others; and the effect of the reduction at the instance of the creditor who has done the diligence, is to take the subject altogether from the creditor who had been preferred by the partial favour of the debtor. This I think is clear from the words of the Act of Parliament 1621, though the decisions seem to point otherwise. Thus stood the law before the Act 1696, which so far extended the second part of the Act 1621, that though no diligence had been done by any creditor, yet if the insolvent person granted any deed of security in favour of any of his creditors within 60 days prior to his notour bankruptcy in terms of that Act, the same is reducible at the instance of any other creditor, to the effect, as the Act says, of being rendered void and null; which I think has been very properly interpreted by the decisions to mean that the person who gets such disposition is not even to come in pari passu with the creditors who have affected the subject by diligence. Nor do I think that the action of reduction will of itself give a preference to the creditor-reducer, but he as well as the other creditors must do diligence to effect it. It is to be observed that the Act of Parliament 1696 does not relate to payment made to any creditor in money, and therein it differs from the Act 1621; but if it be any subject conveyed by deed, though it be given in solutum, or in satisfaction, as the Act expresses it, such deed is reducible upon the Act, as it has been very properly interpreted by the decisions.